Thursday, November 07, 2013

(BN) In Russia's Bizarro World, Google Is an Underdog in Search and King in Music

(Bloomberg ) Google is having a tough time getting people to use its search engine in Russia, but the company has found a way to draw a crowd there: by putting on a free concert.

Dozens of young people lined up outside Arma17, a nightclub in downtown Moscow, to attend the YouTube Music Awards last week. Russian pop, punk and rap musicians performed on stage at the event under a banner promoting Google's online video website. While Google organized similar concerts in London, New York, Rio and Seoul, the Moscow gathering is of particular importance as the company tries to attract listeners in a country known for its copyright violations.

Unlike most places in the world, local Internet players rule in Russia. Yandex's search engine has 62 percent of the Russian market, compared with 27 percent for Google, according to researcher The homegrown social network Vkontakte, comprised mostly of Russian speakers, is more popular than Facebook in the region, and it's adding 130,000 users a day, according to George Lobushkin, a VK spokesman. Google+ is barely on the map.

Google's YouTube is a different story. The site's world dominance in music videos is no exception in Russia. While Google doesn't disclose its sales in the country, music is one of the top three sources of revenue for YouTube there, said Kirill Litovinsky, YouTube's content partnership manager in Russia.

The $96 million market for online video advertising in Russia is tiny compared with the U.S.'s $4 billion, but it's expected to grow. Video-ad revenue in Russia is estimated to increase to $152 million next year and reach $233 million by 2015, according to a report by East-West Digital News.

A universal truth is that Internet companies can charge more for professionally produced content. That's partially why Google is emphasizing music over cat videos on YouTube. Many popular bands in Russia have their own channels on the video site, where they show ads and get a cut of the revenue.

While Russia has local online cinemas similar to Netflix, YouTube stands out. It's the largest online video service in Russia with 50 million users. The site's main competition in the country is illegal streaming and downloads. That comes mainly from VK, according to the International Intellectual Property Alliance, which defines the social network as Russia's "largest single distributor of infringing music."

Piracy isn't seen as shameful act in Russia, as it's been portrayed elsewhere in the world. In many circles, it's actually kind of cool. With the Moscow concert, Google is trying to demonstrate that YouTube is cool, too. The company hopes to boost its popularity among music fans in the country with these types of events and by encouraging new bands to post their songs on YouTube.

"I am glad that TV is disappearing, and music content is limping over to the Internet," said Igor Lobanov, leader of alternative-rock band Slot. "On the Web, it's all fair. When you post a song, user hit count shows whether it's good or not."

That's one feature VK doesn't have.

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