“Having rested for half a year to absorb the 16 companies it acquired in 2007, Google is hungry again.”
Moscow — Search engine giant Google Inc. said on Friday, that it had signed a deal with Rambler Media, the British-registered owner of Russia’s Rambler Internet portal, to purchase ZAO Begun, a Russian contextual advertising company, for $140 million.
The agreement to acquire ZAO Begun, a Russian contextual advertising service, marks Google’s first openly exposed acquisition since it bought mobile blogging service Jaiku last October.
“With the acquisition of Begun, Google aims to offer advertisers with a wider network of sites on which to place ads.”
Google said the deal highlights its commitment to improve the services it offers its users, partners and advertisers in Russia. The company anticipates that the purchase will boost its advertising reach in the fast-growing Russian market. Google claims that the $140 million acquisition will allow its advertisers to reach a larger group of websites in the region and allow for better targeting of ads on Russian sites.
“The overall industry will benefit from this transaction as there is a high potential for synergies,” declared Begun’s general director Alexey Basov.
“It brings together Google’s creative technology and Begun’s six years of successful experience in building advertising and dealer networks and direct sales in Russia.”
Under the deal, search queries made on Rambler’s home page and through Rambler Search function will be enhanced by Google, while Rambler will display Google ads alongside search results.
“This agreement demonstrates our dedication to investing in Russia, where online advertising is currently experiencing rapid growth,” Mohammad Gawdat, Google’s managing director for emerging markets, said in a statement.
“This agreement will result in better search results and more relevant advertising for our Russian users and publishers.”
Rambler currently owns 50.1 percent of Begun, but will buy the remaining 49.9 percent from Bannatyne and then sell the entirety to Google for $140 million in cash, the company said Friday. With $69.9 million of the $140 million being attributable to Bannatyne, affiliated with the Finam group of companies, Rambler expects to receive a net gain of around $50 million.
The move symbolizes an expansion of Google’s attempt to penetrate the Russian market, where portal Yandex still dominates search. Begun has more than 40,000 advertisers and includes more than 143,000 Russian-language sites in its partner network, Rambler said.
Rambler, the only listed Russian Internet firm, said it would use the proceeds from the sale to finance its investment program and potential acquisitions.
Rambler expects income of between $100 million and $110 million and margin on the basis of earnings before interest, tax, depreciation and amortization (EBITDA) of 20-25 percent.
That compares with the incomes of $69.1 million, which included results of Begun, consolidated since August 2007, and an EBITDA margin of 11 percent in 2007.
Rambler sees the internet advertising in Russia is on the rise at an annual 50 percent and expects the market size will exceed $1 billion in 2010 in terms of revenues.
“On the advertising side, Rambler will make use of Google’s AdSense for Search and AdSense for Content programs.”
The company said that it expects the transaction to close by September of this year and begin allowing users to purchase ads within the Begun website network.
Google’s acquisition of Begun and its association with Rambler Media represent an apparent attempt to challenge Yandex’s lead in the Russian search market. In many ways, what Google is trying to do with Rambler Media and Begun in Russia is analogous to what Microsoft has been trying to do with Yahoo in the United States.