Yandex has doubled revenue and net income

Preservation of the growth rate of Internet users became the main outcome of 2005 for the Russian Internet. Today internet users amount to 20% of the total population in Russia. It is notable that in the fall Internet grew faster than in the spring. In total, audience of the Russian language segment of the net grew by 25%.

Yandex business grew in line with the growth of internet advertising market in Russia. According to experts, total volume of this market reached $100 million. Search and media advertising segments grew as follows: around $60 million advertisers spent on media advertising (+71% year-on-year), with the remaining $40 million going to search (+120% year-on-year).

"A year ago we forecasted a doubling of the market. This is what has happened, — says Arkady Volozh, CEO of Yandex. — Internet advertising grew faster than other types of advertising. If in 2004 advertisers spent a little over one percent of their budgets on the Internet, in 2005 they are already spending 2%. However, today only around five advertising dollars is spent on every Internet user in Russia — while in the USA this figure is more than $120. This means we have a lot of growth potential".

In 2005 Yandex has opened a representative office in Ukraine and launched a program of business cooperation with partner sites (Yandex Advertising Network). Context advertising, which generates 80% of the company’s revenue, was unified. Now all text ads are sold with payments based on the result (number of click-thoughs) and are placed though the Yandex.Direct system. From the new services, the following can be noted: Yandex.Adresa (business directory with city map integration), Personal Search (a software product, designed for searching mail, documents and other files stored on user’s personal computer or on a local area network) and a new version of Yandex.Money (universal payment system) which is fully integrated into the portal.

Yandex is the largest Russian portal offering key internet services to its users. In December 2005 Yandex showed 1.3 billion pages to 22 million users, 80% of whom live in Russia. Over the past year these numbers increased by 40% for users and 50% for page views (in December 2004 Yandex showed 850 million pages to 16 million users). Yandex share of traffic generation to Russian Internet sites has also increased from 58% in 2004 to 62% now.

Yandex was incorporated in March of 2000 and turned profitable in the third quarter of 2002. The main business model is advertisement sales. Yandex financial statements are audited by Deloitte&Touche for six years.

Relevant links:

FOM Internet audience statistics:

• http://bd.fom.ru/report/map/d051060

Monthly Yandex audience:

• http://stat.yandex.ru/?Age=m&sort=5

Traffic generation shares of search engines:

• http://www.liveinternet.ru/stat/ru/searches.html?slice=ru;period=month

Expert estimates of Internet advertising market volume:

• http://company.yandex.ru/press/2005/11-30_02.xml
• http://company.yandex.ru/press/2006/03-13_01.xml
• http://company.yandex.ru/press/2005/11-14_01.xml
• http://company.yandex.ru/press/2005/11-30_01.xml

* Unaudited results

Contacts:

Elena Kolmanovskaya, Chief Editor

Dina Litvinova, Head of Yandex PR

Phone: +7 495 739-70-00

Fax: +7 495 739-70-70

E-mail: [email protected]