Russian Government Will Probably Control Foreign Investors in Internet Projects

Yesterday Russian President Medvedev stated that the government of the country would be watching foreign investors coming to the internet market closer - and would also be investing in the industry itself (probably to compensate for the decrease in the number of foreigners that will want to invest in such conditions).

It is more than understandable that the Russian internet market is quite an appealing one as the internet population is growing at incredible rates (faster than anywhere else in Europe) and advertisers are quite willing to pay to reach the eyes of the internet users as they often represent the young and economically active part of the country’s population - those that are willing to spend money and have resources for it.

Besides, there is another important aspect: Russians are rarely willing to use international services and prefer to stick to local analogues - even if they are mere clones of the same international (usually US-originated) internet products. As a result of this trend, we have plenty of online businesses that don’t work on any innovative idea of their own and prefer to exploit the experience of their foreign predecessors which means that you don’t even have to create something unique to start an internet business here - some investment in development and marketing is enough. This serves as an additional stimulus to growth of our local internet projects - and the investments involved in such projects as well.

And since the Russian segment of the internet is already a large-scale business - valued at $5 billion before the financial crisis - and the money is the first reason why internet matters and deserves close attention already. But another aspect is probably even more important: since internet is a media business with everyone getting the voice online, it is important for the government to know who controls this powerful media field.

Of course given the actions of Anti-monopoly Service of Russia when they blocked the acquisition of Begun by Google, this additional promise to keep a closer eye on what’s going on in the internet business sounds more than disturbing. Of course there is no big problem about a certain level of regulations when it comes to an important industry that influences both the welfare and minds of many citizens, but as far as I know, we will hardly have anything that will resemble transparent and understandable criteria for how exactly investors will be let in or blocked from entering the local market - and this is exactly what makes it disturbing as this can be used as a good reason for censorship at some point in time.

It is interesting that internet is getting more and more attention from local authorities here in Russia with our President constantly demonstrating his affection towards the world wide web and even advising the ruling party to build stronger presence online to better communicate with voters where they are.

And while the authorities are pretty active online with the President having a video blog (with comments enabled which shows how serious it all is) and the ruling party launching a new site to fight bureaucracy by letting people report improper behavior of officials online to make it easier to cope with such events, it will be more than intriguing to see how the authorities will act in terms of regulating foreign investors. But right now unfortunately I can’t help but wonder how many foreign investors will be brave enough to dare to get to the Russian internet market with their money now that they are aware of this approach.

Via (in Russian), image credit