Is Yandex, Russia's Marquee Tech Company, In Trouble? One Former Board Member Says Yes.

March 25, 2022

It’s Russia’s Google, a multibillion-dollar, homegrown technology company that dominates the country’s e-commerce, offering everything from search engine results and food delivery to car sharing and an online marketplace.

Yandex is a bellwether for Russia’s high-tech economy in the 21st century.

Now, with Russia bombarding Ukraine and the West pounding Russia with crippling sanctions, the company’s future is in doubt.

On March 7, Yandex announced the resignation of two board members, quoting them as saying “our hearts are with the entire team in these challenging times.” A week later, the deputy executive director resigned, after he was hit with European Union sanctions. Then Yandex announced it was looking to sell two of its most visible content divisions to focus on its other businesses.

Western sanctions, meanwhile, have led to the company’s shares being frozen on U.S. stock exchanges. That in turn has led shareholders to seek repayment on bond guarantees, but the company says it doesn’t have the $1.25 billion to cover that amount.

The now-untradable stock is down nearly 80 percent from November, when Russia’s military buildup on Ukraine’s border first started grabbing public attention, wiping away more than $20 billion in market capitalization.

“The future of Yandex depends on the future of Russia, not the other way around,” Esther Dyson, a well-known American technology consultant and investor who was one of the two board members to resign earlier this month, said in an interview with RFE/RL.

Tonia Samsonova, who ran a question-and-answer service called Yandex.Q, resigned in protest earlier this month, accusing the company of censoring the Ukraine war from its search engine and news service, which garner millions of daily views.

As President Vladimir Putin’s government seeks to enforce loyalty and silence opposition to the war, Yandex risks becoming “an engine of propaganda” for a “dictatorship,” she said.

'You, My Former Colleagues, Are Also Responsible For This'

The Kremlin had been cracking down on independent journalism and media companies for years, using a “foreign agent” law to tar, then punish a number of publications, broadcasters, and individual journalists.

After the February 24 invasion of Ukraine, authorities took further steps, criminalizing independent war reporting by making the dissemination of “deliberately false information” about the use of the armed forces punishable by prison time. It is also illegal to discredit the military.

Russian media, including some of the most well-known independent outlets, fell into line. Some prominent organizations were shuttered; journalists began fleeing the country.

Yandex’s homepage is a major portal for Russian-language news and, like with Google in the West, a major driver of traffic to other news outlets. Yandex News draws an estimated 30 million Russian users.

Headlines, however, began guiding readers to official, state-run, or state-allied media companies. Searching Yandex News for the words “war” or “invasion” yielded no results.

On March 1, a former head of Yandex News, Lev Gershenzon, published a letter on Facebook in which he all but accused his former co-workers of complicity with the Russian state by hiding news of the war.

“The fact that a significant part of the Russian population may believe that there is no war is the basis and driving force of this war. Yandex today is a key element in hiding information about the war. Every day and hour of such ‘news’ is human lives. And you, my former colleagues, are also responsible for this,” he wrote.

Reached by RFE/RL, Gershenzon, who left Yandex in 2012, declined to comment further, saying only that “if they had listened to me, and did what I suggested, this wouldn’t [have] happened.”

“I said what I wanted to about this whole situation. I think it is enough,” he said in a message.

On March 18, Yandex announced it was looking to sell Yandex News as well as Yandex Zen, an infotainment channel, and instead focus on developing other businesses such as advertising, taxi services, e-commerce, self-driving cars, and other ventures.

Dyson, who had been one of the longest-serving Yandex board members, declined to give further details of what led to her resignation, which occurred after what one other person described as a contentious board meeting in February.

“In the current political environment in Russia, it has become impossible for the team to continue to provide a free and open platform for information for the Russian public without breaking the law and putting the company and its employees at risk,” the company’s March 7 statement announcing their resignations said.

Dyson also declined to describe internal deliberations that occurred surrounding the news and search engine features.

“Now you get more and more propaganda results before you get search results,” she said. “First you have the advertising, then the propaganda, then you have the news. You cannot get that information [about the war] on Yandex anymore.”

Asked if there was an order or edict issued, either by the company or by a government entity, Dyson declined to answer directly.

“It's not like suddenly the sun sets and the next morning, it all changes. It happens, like all these things, somewhat gradually,” she said. “It was kind of before the invasion of Ukraine but after the discussion of the invasion…again, things don't happen overnight, you sort of have a sense they're happening.”

The other board member who resigned, Ilya Strebulaev, a finance professor at Stanford University in California, declined to comment.

Yandex did not respond to multiple e-mails from RFE/RL seeking comment. A receptionist who answered the phone at the company’s Moscow headquarters said there would be no immediate comment and there was no immediate response to questions submitted by e-mail.

“My father was in denial after the war began,” Samsonova, a former Moscow-based reporter whose question-and-answer service was bought by Yandex in 2019 and renamed Yandex.Q.

She told RFE/RL that three days after the invasion, “I went to Yandex.ru to see the top five news items. There was nothing [about the war]. I just realized there is no way that he, who does not speak English, could know about the news, about the war.”

On March 2, Samsonova, who had been negotiating her exit from the company for several months, resigned “in connection with the fact that Yandex does not publish on its home page Yandex.ru information that Russian forces are bombarding Ukrainian cities and killing innocent people.”

“I consider today’s actions of the company to be crimes and [they are] accomplices in the invasion and war,” she wrote.

'Not What Yandex Was Designed To Do'

Before the war, the screws were already tightening at Yandex, which currently employs around 18,000 people, most of them at its headquarters in Moscow.

Three years ago, the Kremlin sought to change its governance structure, and essentially seek a veto over its board. A compromise plan resulted in the government getting two board seats and a “golden share” -- which gave the state “the power to block transactions and temporarily remove Yandex’s management if it deems it in the national interest,” according to the Financial Times.

The effort also coincided with the prosecution of Michael Calvey, an American investor who made a prescient $5 million seed investment in Yandex two decades ago. The prosecution of Calvey, who ended up getting a 5 1/2 year suspended prison sentence for embezzlement, spooked the business community, both Russian and foreign.

Yandex's revenue -- driven in large part by advertising -- could plummet with Russia's economy headed for its sharpest contraction since at least the early 1990s. Economists say Russia’s gross domestic product could decline by 15 percent this year.

Yandex’s other businesses outside of “content” continue to generate substantial revenues for the company. Yandex Eats, for example, is a leader in food delivery and like its Western counterparts -- Uber Eats, Grubhub, Deliveroo, Frichti -- it flourished during the COVID-19 lockdowns imposed in Moscow and other Russian cities.

Yandex Eats was in the news this week after hackers accessed and leaked a database containing thousands of names and addresses across Russia. Regulators said they were investigating.

The sale of the news division is inevitable, Dyson said.

“As an outsider, I would say the sooner they can do it [the better.] And by sell, I mean ‘sell’ in quotes,” she said. “It will be sold.”

“If the content is going to be representing the government, it might as well be owned by the government. Or by people close to it,” she said.

“I don’t have questions about the company itself. I have questions about its ability to…[keep] providing real information,” Dyson told RFE/RL. “I hung on as long as I could,” she said.

Samsonova predicted that Yandex would continue operating in Russia even as the government further restricts the free flow of information.

“Yandex will remain in Russia, it won’t go anywhere,” she said.

“But whatever Yandex is now -- there is a building, there are accountants, engineers, mergers-and-acquisitions people -- this is not what Yandex was designed to do,” she said.

“What will Yandex be during a military dictatorship?” she said. “It will be an engine of propaganda.”