Is the latest move on the Internet portal front more than just an attention-grabbing gimmick? And if there really is some substance to it beyond the carefully planned and carried out PR action how should it be interpreted?
At first glance, this cannot but look like big news: NIKoil, one of Russia's premier investment companies, signing a cooperation agreement with high-profile Russian portal Port.ru. Add to that the fact that NIKoil announced an investment in Port.ru.
The trouble is, the only thing that is known for sure is that an agreement was signed. All the rest is pretty vague. The investment? No sum of money was disclosed. A majority share or substantial share, a minor share? That was not revealed either.
For that matter, even the real nature of this investment, at least to this day, is in question. During the press conference at which the agreement was announced, NIKoil President Nikolai Tsvetkov mostly talked about an investment that NIKoil "will make" until, pressed by a journalist, he said NIKoil "had made" an investment but said it might invest further. This was sufficiently imprecise for many journalists reporting on the event to write about the transaction in the future tense only.
The content of the agreement at least, the part that has been made public also seems to lack substance. What, exactly, will NIKoil and Port.ru do together ? Hard to say. And the few hints that were given all raise questions.
Cooperation is to be carried out in several fields. One of them is business-to-consumer (B2C) activities something that seems to make sense, since Port.ru is a portal comprising almost entirely B2C Websites.
According to Tom Adshead, an Internet analyst with investment bank Troika Dialog, the portal has a couple of plusses going for it. "Port.ru is a well-structured company, and although it is heavily based on its free e-mail service mail.ru, it has a wide range of services, including e-shops," he said. "Furthermore, it has a wide audience and should be able to convert this into money, in time."
But, given that, even in the West, B2C dot.coms are going bankrupt one after the other, one can ask what their fate will be in Russia, where the number of Internet users and the consumer market are notably underdeveloped.
According to Tsvetkov, NIKoil and Port.ru are also to cooperate in business-to-business (B2B). But, although Port.ru's general director, Yevgeny Goland, said the portal is going to develop its activities in B2B for now, it has no experience there. The same is true of online financial and banking services, an area Tsvetkov also mentioned.
And what should be said, then, about common development of new online technologies, something Tsvetkov referred to several times? "NIKoil seems to be looking for a technological partner, but Port.ru is not that; it doesn't have technological staff," said Nikita Korzun, now chief of Arrava's Internet department and who, until November 2000, was vice president for development with Port.ru. "This agreement can work only if NIKoil finds another, technological, partner in addition to Port.ru."
In fact, according to Andrei Vakulenko, general director of the Internet Incubator, a company that nurses pre-seed Internet projects, NIKoil is in the process of negotiating with several other large Internet companies, particularly in the technological field, as well as in the area of online financial services.
So, all just a PR stunt? "This is certainly a great PR operation for Port.ru," said Korzun. But there may be more to it. Until now, Port.ru hasn't had large funds available for its development, unlike Rambler or ru.net Holdings, said Andrei Bespalov, a senior analyst with investment bank IFC Capital. With this agreement, it has finally found an important offline partner. That is, of course, if NIKoil's investment is for real, and reasonably substantial.
What about NIKoil? Until this week, it was totally absent from the Internet economy. And, according to Tsvetkov, being there is what matters: "E-business is one of the most important factors in economic globalization. We can't be late. Otherwise, in three or four years, we won't be competitive anymore."
Does that sound like the crazy investors who were ready to put money into just about any Russian Internet project until the NASDAQ crashed last year? Yes, but with a difference: Tsvetkov is deeply aware of the fact that ru.net is in a down period, and he even predicted more crises ahead. More important, he has no illusions about making fast money. He said he didn't expect to turn a profit with Port.ru before five to seven years. And he thinks NIKoil's financial reserves are large enough that it can afford to wait that long, an opinion IFC Capital's Bespalov agreed with.
Why did NIKoil choose Port.ru, then? According to Vakulenko, by cutting expenditures, which includes laying off staff, Port.ru has so far been taking the right steps to survive the crisis all dot.ru companies are facing.
Another possibility is that there may not have been many options available among leading Russian portals. "Investment company UFG already has a stake in ru.net Holdings, and so has investment company Russian Funds in Rambler," said Troika Dialog's Adshead.
Finally, when Tsvetkov said NIKoil couldn't afford to be late, he may have been thinking about very concrete competition. NIKoil is close to oil giant LUKoil, which, until now, didn't have any serious Internet structure. On the other hand, one of LUKoil's competitors, oil company Yukos, has its own Internet branch, Sibintek, and also has a stake in IT company Arrava.
(E-mail dot.ru at email@example.com.)