In the aftermath-analysis about what exactly happened in the Facebook IPO, and what it might mean for the future, here’s one side-effect to the east of Nasdaq: Vkontake, the top social network in Russia, which shares a shareholder with Facebook, Mail.ru, has decided to delay its own IPO.
The news was confirmed by the company’s CEO Pavel Durov on Twitter. In Russian, he tweeted, in answer to a Russian journalist’s question about the planned IPO date, “It’s not planned. The IPO of Facebook has destroyed the faith of a lot of private investors in social networks and the IPO of VK has now been postponed indefinitely.”
The news appears to be the first big decision taken by Durov after, according to Reuters, 40 percent of Mail.ru shareholders voted in favor of Durov making key decisions about Vkontakte. Now, although Durov will be in the driving seat, he will collaborate with Mail.ru on “a range of issues facing Russian internet companies amid increasing global competition.” Together the two own 52 percent of Vkontakte.
The original plan had been for Vkontakte to list sometime this year or next. That was before the Facebook listing — which failed to achieve a “pop” after being listed at $38. It is currently trading at just above $30.
Vkontakte currently has 110 million users, with about 70 percent of those in Russia.
While it might look like Mail.ru’s stepping back from control at Vkontakte may also be linked somehow to the performance of Facebook on the public market, that may not be the case.
The Reuters story notes that in fact Mail.ru has been trying to get full control for ages and offered to pick up a majority share that would have valued the company at $3.75 billion, but it was rebuffed by Durov and other founders. “Mail.Ru has made no secret historically that it would like to take control of VKontakte,” Renaissance Capital media and IT analyst David Ferguson told the news service. “This has not happened, as the price expectations are a million miles apart.”
Dmitry Grishin, the CEO of Mail.ru, last month told TechCrunch that the company was focused on three key content areas: gaming, mail and social, with monetizing coming primarily from advertising and virtual goods. One-third of the company’s revenues come from gaming, Grishin said. The company has been working on exporting its games outside of its existing footprint, but this is still a new strategy: right now revenue outside of Russian-speaking markets, Grishin said, is “close to zero.”
In Russia, sites like Yandex and Vkontakte have respectively come to dominate search and social networking, leaving world-wide leaders Google and Facebook in challenger positions. “The competition is too strong,” explains Grishin.