Hello! This week our main story is about ex-journalist Tonia Samsonova pulled off a major feat when she successfully sold her Russian media start-up to Yandex. We also look at new U.S. sanctions on Evrofinance Mosnarbank, one of the last remnants of Soviet foreign banking, the reinstatement of Ivan Kolpakov as chief editor at a leading independent media outlet (he resigned a few months ago amid a sexual harassment scandal), and the major new acquisition by Rostelecom, Russia’s state-owned mobile operator.
Internet giant Yandex buys former Russian journalist’s media start-up
This week, Tonia Samsonova, a former reporter for radio station Ekho Moskvy, sold her media company The Question to Yandex. The deal was not huge: neither side gave a figure, but market participants estimate Yandex paid a few million dollars (The Question’s English-language equivalent, Quora, which has 30 times more monthly users, was recently valued at $1.8 million). Nevertheless, it is an important precedent: for the first time in many years, someone disproved the theory that it is impossible to sell a media project in Russia.
- The Question is a question and answer service. Just after it was launched in 2015, Samsonova hired a small team who called experts to write thought-provoking answers to questions posed users. Now, most answers come from users, and experts give answers via their own profiles. It makes money through selling privileged access to clients and running its own advertising service. The Question’s annual revenue is estimated to be up to $1.2 billion.
- Samsonova has describes how she experienced all the travails of the classic start-up. She came up with the idea when she was 28 years old while living in London with her three children and husband. Next, there was a painful search for investors. She said: “at meetings with businessmen I passed out cards and asked them to write down how much money they were prepared to invest in The Question. All of the cards were handed back to me blank.” In the end, though, she found investors including Luxoft founder Anatoly Karachinsky. The Question “took off”, but almost fell apart a year later because of managerial mistakes: Samsonova opened a London office (in addition to an office in Moscow), but found she couldn’t pay competitive local salaries. The company closed its London office and eventually emerged from its self-made crisis.
- In 2018, Yandex introduced its own service for accessing expert advice, Yandex.Znatoki, which has very similar concept to The Question, and Samsonova immediately began the talks that ended in the sale. Samsonova and the project’s 30 employees will now join Yandex. Some believe Samsonova rushed into a deal and that the company would have been worth much more a year from now. Investor Karachinsky says he made a 25% return on his investment in The Question.
Why the world should care
New media projects can be profitable and attract buyers, even in Russia. This is the most important — and most unexpected — conclusion from the story of The Question.
U.S. sanctions may destroy the last vestige of the USSR’s foreign financial empire
The U.S. has imposed sanctions on the Russian-Venezuelan bank Evrofinance Mosnarbank, which was used by state-owned Venezuelan oil company PDVSA. Now, the Russian shareholders of Evrofinance Mosnarbank (state-owned banks VTB and Gazprombank both own 25 percent) are urgently trying to give their stakes to the Russian state property agency. If the bank does not survive, its end will mark the final chapter of the famous Moscow Narodny Bank (MNB) that for 70 years was the Soviet Union’s main financial arm in the West.
- Evrofinance Mosnarbank is one of the last pieces of the global financial empire once controlled by London-based MNB. Founded in 1919, MNB was used in the 1920s and 1930s to sell gold and other precious metals seized from ‘enemies of the people’ to foreign buyers. The proceeds from such sales helped to finance a significant portion of the Soviet Union’s industrialization.
- After the Second World War, MNB became a tool of Soviet foreign policy. The bank opened offices in Beirut and Singapore, through which Moscow financed its allies in the Middle East (for example, Yasser Arafat) and Asia. In the early 1980s, the Soviet Union even tried to use a banking acquisition by MNB to penetrate Silicon Valley. At the same time as all this, MNB’s work was also mired in a series of corruption scandals.
- In the 1990s, one popular theory in Russia was that, just before the fall of the Soviet Union, the Communist Party had used MNB to secretly sent secret billions of dollars to the West in an attempt to keep it safe.
In the 1990s, MNB continued to operate as the foreign trade agent for Russian banks, and in 2005 it was divided into two entities. The London bank was sold to state-owned VTB and merged with VTB Capital (currently downsizing due to sanctions and Brexit). But the main Moscow subsidiary of MNB became a bank for trading oil with Venezuela, and a Venezuelan state fund took a 49.9% stake.
Now this part of MNB’s history is over. However, trade with Venezuela will not suffer: one week ago, the accounts of Venezuelan companies with MNB were transferred to another bank, Russian Financial Corporation, which is already under Western sanctions.
Why the world should care
The story of Evrofinance Mosnarbank shows that the Russian state’s businesses are divided into two distinct parts — the part already under sanctions (which has nothing to lose), and the part seriously afraid of sanctions. After the U.S. announced the sanctions, it was only a matter of days before VTB and Gazprombank were ready to divest from Evrofinance Mosnarbank.
The chief editor who resigned in a Russian ‘#MeToo moment’ is reinstated
A #MeToo scandal at independent media outlet Meduza — among the first Russian media outlets to write extensively about women’s rights — has taken an unexpected turn: Ivan Kolpakov, the former chief editor who resigned over sexual harassment allegations, has been given his old job back. The announcement was made by Meduza’s founder and CEO, Galina Timchenko, who said her decision was supported by Meduza’s other editors and the new board of directors (whose names have not been made public). “I do not know another professional who is better equipped to take on the goals and challenges ahead,” Timchenko said of Kolpakov’s re-appointment.
The incident that led to Kolpakov’s resignation took place during Meduza’s corporate party last year when Kolpakov, who was drunk, grabbed the bum of the wife of one of Meduza’s employees, saying: “You’re the only one at this party I can harass and get away with it.” Meduza said in an a subsequent statement there was no reason to doubt the woman’s account. Kolpakov, however, described it as an “ugly prank” that he refuses to classify as harassment. He resigned, in his words, to “put an end to the crisis” that engulfed Meduza when the incident became public. At the time, the then-board of directors (whose names are also not public), found that there were no grounds to fire Kolpakov.
Since the scandal began, more than ten key employees at Meduza have left; four people announced their resignations in the last two weeks alone. Moreover, Meduza’s website traffic has fallen slightly: according to Similarweb data, in January and February the site had a 8.4 million fewer views than the previous two months.
Why the world should care
Russia first ‘#MeToo moment’ took place last year when sexual assault allegations were made against Leonid Slutsky, a senior lawmaker. Despite a public outcry and an attempted media boycott of the Duma (strongly backed by Meduza), Slutsky remains in his post. The situation at Meduza is different, but Kolpakov’s return means the outcomes look very similar.
Russia’s state-owned mobile operator swallows a major competitor
While Russian politicians have been discussing the creation of a ‘sovereign internet’, the state has unveiled a giant, new mobile operator. This week, state-owned Rostelecom finally gained control of Tele2, Russia’s fourth largest mobile operator, which had 40.6 million subscribers in 2017. The value of the deal is secret, but estimates suggest Tele2 was sold for up to $3.6 billion. Rostelecom should now have revenue in excess of $7.6 billion. While one can only speculate on the political benefits of the deal, it’s easy to predict the negative consequences for the mobile communications market, one of Russia’s most competitive and fastest growing sectors.
- Tele2 is a Swedish company that entered Russia in 2003. From the beginning, the company positioned itself as a low-cost operator with much cheaper tariffs than its competitors. Subscribers remember Tele2’s viral commercials: the company was marketed with the help of invented gangster characters called Tony Bonelli and Sunny Pudding. The commercial, filmed in the style of The Godfather, went like this: Sunny shoves Tony into a safe and asks why he didn’t call. Tony admits it was too expensive, before the commercial ends with the inevitable catch line: “Tele2 – always cheaper!”.
- In 2013, state-owned bank VTB bought the Russian operations of Tele2 and gradually sold over half its stake to other investors, including Rostelecom. Talks on the purchase of VTB’s remaining stake began again in 2017, but were halted, possibly because Tele2’s financial results worsened. Then everything came together: Tele2’s revenues grew by 16.2% in 2017 and by almost the same amount in 2018.
- Before this week’s deal, Rostelecom already owned 45% of Tele2, and to gain control it was necessary to come to an agreement with the other shareholders. The majority of these are close to the state: half of the remaining shares was owned by a bank partially owned by VTB, a smaller stake was held by the owner of metals giant Severstal, Aleksei Mordashov, and the remaining 10% was held by the owner of the Rossiya bank, Yuri Kovalchuk, who is a part of President Vladimir Putin’s inner circle.
Why the world should care
Mobile communication, the internet and banking services are three sectors that have grown in a genuinely efficient way, with obvious results. In Russia, card payment services are almost universal, card-to-card transfers are so popular that they can even be used to pay taxi drivers or buskers, 4G networks are widely accessible and communications cost far less than in the West. This is all possible because of competition: even major state-owned banks have to fight for clients. The sale of one of the leading mobile operators to the state is, therefore, a worrying sign and might lead to the emergence of a monopoly, higher tariffs, and less innovation.
Anastasia Stognei contributed to this newsletter. Translation by Tanja Maier, editing by Howard Amos.
This newsletter is supported by the Investigative Reporting Program at UC Berkeley