For a scientist who climbed a classic Soviet career ladder, Arkady Volozh has shown a remarkable ability to adapt to ever-changing circumstances and a highly developed flair for new business opportunities.
It all began when Volozh, a top student in applied math at the Gubkin Oil and Gas Institute, got his first job assignment. It was not at the Russian Academy of Sciences, as he had expected, but at the Computing Center of the All-Union Research and Development Institute of Pipeline Construction. This “failure” turned to an advantage, as it gave the budding scientist “total freedom,” plus a wealth of experience working with large volumes of data.
Like many in the computing arena, Volozh took advantage of new freedoms in the late 1980s and became one of the founders of a cooperative to import computers and trade them for agricultural products. At that time, a PC was worth a fortune in Russia, so when Volozh left the cooperative in 1989 with two computers as his “stock portfolio,” he said he “felt like a millionaire.” In actuality, the analogy may not be too far from true. He used the computers to help him buy his first apartment for just $3,500—real estate that is now worth dozens of times that modest investment.
Volozh continued to work in computer sales, and was a co-founder, with American Robert Stubblebine, of CompTek. But by 1993, the firm began to branch out beyond simply buying and selling PCs. “Computers had become consumables — an inalienable part of our lives here — like TVs or tape recorders,” Volozh said. “So we took up more serious things, like networking equipment, wireless networks, computer telephony, and whatever constitutes the material basis of the Internet.” Today, CompTek is one of Russia’s largest distributor of networking and telecommunication equipment, including the largest supplier of Cisco Systems’ routers.
But Volozh’s first love was always software. And this leD him, in March 2000 to create the ündex (Yandex) search engine and internet portal. For years, the portal operated at a loss, but it was one CompTek could afford. “Losses were not huge, so it was a pity to close it down. We realized that what we were doing was unique. ... And it turned out that it came in handy: in 1997 we applied these technologies to our network.” And in 2000 Ru-Net Holdings invested over $5 mn for a 1/3 ownership stake in Yandex.
Today, Yandex.ru is one of the top visited websites on the Russian internet. Like Yahoo or Hotmail in the West, it offers a search engine, email and a range of services, from news to web hosting. “It’s like a newspaper plus free services,” Volozh said. “We have about 3 million visitors per month to the site … You won’t find many Russian newspapers with such print run today. This just helps one understand what the internet is in Russia today. Our search system responds to 1 million requests per day. It is still not much as compared to the West — 50 times less than, say, Yahoo. But, mind you, one-and-a-half years ago we had only 30,000 requests a day.”
Volozh said he expects Yandex to grow another 50-100% this year, but that, even so, his company faces an uphill battle trying to sell ads in this new medium. Today, Volozh said, “total ad dollars earmarked for the internet is just 0.3-0.5% of all ad spending in Russia. This compares with 2% in Europe and 4.5-5 % in the US.”
“If we are capable of explaining to clients in Russia that Internet advertising is worth something, and if its portion of ad dollars grows to just 1.5%, that would be a tripling of the market.”
For his part, Volozh is doing what he can to use Yandex to promote greater awareness in Russia of the internet, notably in this spring’s popular Internet Search Championship (see page 6). “The internet has become a universal reference source: you can find articles on a person, you can find out a bus schedule, anything!” he said. “So we decided to tell people about it and demonstrate what can be achieved via internet. At the first stage, we asked 1,000 participants to respond to not so obvious information requests, for example, “find the name of a female elephant in Kiev zoo.” They have to know how to ask the right question the right way on the internet … the best 100 participants qualified for the second round, when the assignments got more complicated ... In the finals, eight finalists will sit together in the Time Online internet cafe in the Manezh trade complex.
Volozh seems to have placed his bets well. The internet is fast becoming the buzz word in Russia that it has long been in the West. According to Volozh’s estimates, in mid-2001 there were 3.5-4 million active internet users in Russia, up from just 1.8 million in 1999.
Meanwhile, CompTek continues to operate profitably and is a $20 million company. Yandex, Volozh said, “will bring profits by the end of 2001 or maybe starting from the year 2002.”
But it takes 14 hour days to stay ahead of it all, making his family his main hobby. “I have reached an agreement with my family,” he said. “I work 14 hour days during the work week, but then I spend weekends with them.”
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