JP Morgan Cazeneuve has a note out today on the Russian internet and its two biggest companies, Yandex and Mail.ru Group. The rating is “overweight” on both.Yandex is the “Russian Google”, a search engine with two-thirds marketshare in Russia and strong marketshare in other former Soviet Union countries. Mail.ru is a very big portal. JPM thinks both are going to do very well, and Mail.ru is better because it’s less expensive.
Here’s the interesting part, however: JPM thinks the online advertising market in Russia is going to grow a lot more than people think. Most people expect it to grow linearly, but that’s not what happened in other markets, JPM notes. What happens is that when online audience reaches a tipping point, advertising budgets switch en mass. Right now online advertising is only 11% of total advertising in Russia, which certainly leaves a lot of room for growth.
Photo: JP Morgan
That, JPM says, is why it’s worth owning Russian internet equities. If the online ad market in Russia grows faster than most people expect, Yandex and Mail.ru will do very well indeed. Or, You Know, The Russian Government Could Just Steal Them →