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Russia Tries Rebranding Itself As A Digital Economy
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Russia Tries Rebranding Itself As A Digital Economy

For about as many years as any close Russia watcher can remember, Vladimir Putin, the figurehead and the conductor of the Russian economy, has at least paid homage to Russia becoming the tech power he thinks it should be. Two years ago or so, at an investor conference run by VTB Capital, he asked a standing-room-only crowd at the Crowne Plaza in Moscow why his country isn’t creating the next Huawei. That’s China’s Cisco rival. Of course, that may be because Russians didn’t spy on U.S. tech firms well enough or require them to partner with Russians in tech transfer deals, but the point remains: for a country that was the first to launch a human into space and has all these expat tech geniuses running around the planet making cryptocurrencies and search engines, Russia really has no tech leaders. Outside of Kaspersky Lab, in fact, Russia has little (if any) recognizable consumer brands doing business in an economy fast becoming dominated by 0’s and 1’s.

 

Some think the Russians have the chops.

“We believe Russia’s internet incumbents are capable of fending off international competition from the likes of Google and Facebook,” say Goldman Sachs analysts led by Vyacheslav Degtyarev in Moscow. That was back in October in an equity research report titled “Russia’s Internet Champions Position to Keep U.S. Giants at Bay.” For Goldman, the main reason they can keep the Americans at bay is that the market is largely ignored by the U.S.

Which is why Facebook clone Vkontatke got so big. It’s now owned by London-registered, Russian-run, Mail.ru. VK was created by Pavel Durov, another one of those Russian expats floating around from Parts Unknown to Dubai, making web applications like Durov’s popular messenger Telegram. Venture capitalist Tim Draper is a Telegram investor.

Yandex is another key player in the internet-based business world. They’ve beaten Google to everything from search to GPS to taxis. (They’ve got Uber beat in Russia by a ratio of two to one, according to Goldman.) “Their first mover status will allow them to maintain and even strengthen their position,” Vyacheslav believes.

 

There are only three countries in the world where Google is not No. 1: South Korea, China and Russia.

“In order to be competitive in today’s world, we must be receptive to innovative ideas and technologies that make a difference in people’s lives and determine the future of the country, and the world,” Putin said on May 25 at the St. Petersburg International Economic Forum. He talked about the government’s new digital-policy initiatives geared towards building end-to-end digital solutions in public administration. They’ve reportedly earmarked $53 million to develop the digital economy, including IT infrastructure like blockchain, cybersecurity, and research and development.

Their biggest bank, Sberbank, is getting in on the blockchain revolution. And artificial intelligence. They have actual robots, like Japan. It’s a gimmick for sure, but it is also a testament to Russia’s wish to be more than metals and mining, oil and gas. This has been a perennial wish now for Russia and one U.S. investors have heard since the late 1990s. But now, with the companies springing up in Russia today, they are finally seeing honest-to-God private sector companies being built that look like something out of Silicon Valley.

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