Monday 26 September 2016

Russia: Google Who?

Ronald Reagan shared a joke during one of his many, presidential press briefings. It goes like this.

In the Soviet Union, the wait period for a new car is 10 years. So one day, a guy goes into the car dealer, orders a car he likes and he pays the dealer for the car. The dealer says to the guy, “Ok, come back in 10 years to collect your car.” The guy buying the cars says, “Should I come in the morning or the afternoon?” The dealer looks perplexed and says, “What difference will it make in 10 years?” The guy says, “Well, the plumber’s due in the morning.”

In some ways, there still remains a degree of scepticism in Russia as it pertains to “Made in Russia.”

Two examples will illustrate the point.

There’s a consumer appliance brand in Russia called Bork. They produce beautiful, brushed- aluminium blenders, food processors and so on. There’s also a fine shoemaker called TJ Collection. Contemporary and stylish footwear. Bork sounds German, yet it’s Russian. TJ Collection sounds English, yet it’s Russian. Russians simply don’t prefer things that they themselves produce. In the case of Bork and TJ Collection, the solution was to simply give the brands  ‘foreign-sounding’ names.

Now, it’s a different story when it comes to the Internet, mobile, social media, and so on. In these cases, Russians strictly prefer their own. Russia’s Internet penetration is approximately 54 percent, or 74 million users. It’s now the largest Internet market in Europe, and it’s still growing. There are 227 million mobile phones in use, or approximately 1.6 mobile phones for every Russian. And whilst Google, Facebook and SAP are here, they lag far behind Yandex, Vkontakte and 1S. Why?

Three phenomena likely contribute to the phenomena.

First, Soviet Russia. It was known for its state-administered economy, both industrial and agricultural. Unemployment was virtually non-existent as the State put every able-bodied individual to work. One of the downsides to the model was that the incentive to work, incentive to innovate and incentive to ensure quality were rather limited. The average factory worker’s perspective was often “Why should I break my back building this particular thing? Or making it better? It’s fine as it is, and what are they going to do, fire me?”

Yet, as it concerned investment in mathematics, engineering and the higher sciences, things were very different. The Soviets didn’t ignite the space race and acquire nuclear technology by chance. Much was invested in unlocking the full potential of Russia’s best and brightest. There remains today a rich and robust tradition of science and engineering in Russia. And, this includes the computer sciences.

Second, Post-Soviet Russia. The early years were marked by rampant privatisation, the associated rise of organised crime, corruption and ultimately the collapse of the Russian economy. After this painful beginning, things began to settle down. Presidential stability, steady increases in per capita income and the ability to properly leverage Russia’s vast natural resource wealth led to the emergence of a modern and vibrant Russia. Within this context, Russia’s new generation of best and brightest took a more enterprising approach. Unlike the workers of the past, they realised that innovation produced competitive superiority. And money.

And whilst the world’s media tends to focus on Russia’s petro-chemical wealth, what’s less well known is Russia’s thriving eConomy. Russian-born search engines, social networks, software and ecommerce solutions all hold considerable, leading share positions. Yandex.ru is Russia’s leading search engine. Mail.ru is the leading email provider. Vkontakte, the largest social network. Ozon.ru and Avito.ru, Russia’s version of Amazon and Craigslist, respectively.

Third. Utility. Indeed language is the most obvious reason Russians prefer Russian versions of online utility. But language is not the dominant factor influencing Russian choice. Quite simply put, as far as Russians are concerned, the Russian versions are better.  A few simple examples.

  • Yandex maps. Far superior to Google maps in terms of mapping of the Russian Federation. Why? The company has preferential agreements with the Russian government. The mapping is more-frequently updated; it better displays Russian shops, restaurants, cash machines and so on. Not to mention a uniquely valuable traffic overlay, which anyone who drives in Moscow will tell you is worth its weight in gold. Alexa ranks Yandex as the world’s 20th most-used site.
  • Vkontakte. Originally it was a Facebook clone. Though, one distinctive feature was that it allowed users to upload audio and video rich content to the site. Whilst some maintained that copyrighted material and rights were being infringed, the Russian Supreme Court ruled otherwise. The social network grew rapidly. In Russia, it’s between 8 and 10 times larger than Facebook. Alexa ranks Vkontakte as the world’s 25th largest site.
  • Ozon. This is Russia’s version of Amazon. Ecommerce represents a lower percentage of total transactions when compared to Western economies. That said, ecommerce is booming in Russia, and Ozon’s well out in front. Ozon has a better understanding of Russian logistics and payment preferences. This alone puts them ahead of their Western counterparts.

What’s the takeaway? The important insight? Perhaps it’s about possessing advanced understanding of Russian platforms? No, it’s really about advanced understanding of Russians. Whether one’s developing a branded-community for Facebook or Vkontakte, success or failure will hinge on understanding Russian social behaviour. Understanding the Russian consumer, the Russian environment in which he or she lives, works, shops, dines and so on are the drivers of success. The birthplace of Dostoevsky (and the Dostoevskian) exploits of Russian suffering, fatalism and yet exuberance. A magnificent culture and people, each of which requires a unique approach. Particularly for those of us in marketing.

I’ll end with another joke about modern Russia.

Two oligarchs have finished a brisk workout in the gym, and they’re enjoying a chat in the sauna. They discuss business, and then they chat about their latest acquisitions. The first oligarch says to the second, “I bought a pair of Rolls Royce Phantoms to match my new pairs of Italian shoes.” The second one says, “Nice, I bought a penthouse in Boston for my son who’s entering Harvard next year.” Back to the first oligarch who says ‘I bought a rare bottle of Cognac for $25,000.” The second oligarch says “You idiot, I know where you could have bought the same bottle for $50,000.”

Brian Lee leads the Russian digital practice.

Image credit: josef.stuefer

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