Ecosystem of ecosystems: an overview of Group's strategy

Throughout its 20-year history, Group has been evolving and adapting in response to the Russian Internet's development – sometimes following trends, other times setting them. This has allowed us to maintain a lasting position as Russia’s leading Internet company, all the while growing our market share. However, change alone is not enough – it needs to be properly managed. That is why I am here to share how and by what principles Group transforms.


Every big and successful company has its own system of beliefs and values, and ours is based on a constant drive to change for the better. Group has always been a B2C-focused company, recognising (and sometimes predicting) user needs and developing online services that address them.

It used to take decades for people’s behaviour patterns to change; now it takes a couple of years. Our ability to grow and become better each day is what made us the largest company in the Russian segment of the web in terms of user base.

We started out in the late 1990s with an e-mail service, the main online communication tool at the time. As the Internet evolved, social connections were migrating from the real world into the virtual one, and we were there to lead the way in the new social networking segment. Once we spotted the demand for Internet entertainment, we came launched gaming services.

The age of e-commerce brought with it new challenges. It was not until the 2010s that it properly took off in Russia, and we made sure to get our teeth into it, securing a foothold in all the main verticals (classifieds, food tech, mobility, and marketplace-based e-commerce) through M&As and own start-ups. We still prioritise all of these areas and continually develop them, both with strategic partners and on our own.

E-commerce is an essential building block of a truly comprehensive ecosystem, one that affords new ways to interact with users. Group now uses its web capabilities to satisfy offline needs such as ordering lunch, getting from point A to point B, andbuying the essentials. What starts as a tap on the phone ends up as a real taxi or pizza delivery at your door.

On our way to the top, we have laid firm groundwork – our product range covers most user needs online, and can adequately navigate users through their daily digital journey.

Now, we can concentrate on cementing our position and focus on tying our ecosystem together through loyalty programmes, payments systems, ID system, etc. Group does not intend to rest on its laurels – we see great potential when it comes to fintech and further digitisation of the offline world, as well as AI-based products and B2B. The latter will see us using our existing products to streamline the activities of small, medium and large businesses.

Our development story has been perfectly logical and cyclical: we create distribution platforms and provide technology, and new services spring up from there. When we added games to the e-mail service and the portal, the communitainment strategy was born. Once e-commerce found its way into social networks, it transformed into what we call e-commerce 2.0. And the expertise we have acquired over 20 years makes it possible for us to create AI-based products and B2B solutions.

Values → model Group is not a mono company. We utilise every opportunity for growth, creating some products and acquiring others through M&As and investments. As a result, there are several corporate cultures united under the Group umbrella.

We do not have the anchor service. For many years now, Group has been comprised of equally important divisions: VKontakte (VK) and Odnoklassniki (OK), the MY.GAMES gaming brand, the e-mail service, and media projects. Recently their ranks have been joined by Delivery Club, Youla, Pixonic, and the BOOM music streaming service; we also hold stakes in the GeekBrains and Skillbox learning platforms, and Citymobil taxi aggregator.

Each of those has its own self-sustained ecosystem, its own identity and unique value proposition. Take VK – it is a social network that is also a messenger, an entertainment hub, a payment system, a music service, a streaming platform and a content-producing factory. Group is not just an ecosystem that can be equated to, or competes with, VK, our email service, or any of its other constituents.

Some compare us to an investment fund, but it somewhat misses the mark. We are not strictly a B2C company either. Group cannot be put in a box.

The best description I can give for Group is an ecosystem of ecosystems. The company’s task is to support the seamless operation of all divisions and achieve synergies between projects, connecting them though a unified infrastructure and service offerings.

This task can be broken down into three sub-tasks.

  1. Searching for new growth areas and charting their development (what is more effective – to invest in a promising start-up, to launch own project, or to join efforts with a strategic partner).
  2. Strategic management of all projects.
  3. Creating an overarching infrastructure and shared products that weave all ecosystems into a single network that benefits each participant (sales, processing, infrastructure, ID system, shared loyalty programme). Group is a B2B brand, HR brand, and IR brand first. In B2C, our products’ brands take centre stage, while we take a back seat or support them as a “soft umbrella” or a co-branding partner. Even services that Group launches from scratch become independent businesses or ecosystems.

Values → model → strategy

People and their needs are at the centre of our ecosystem. By connecting them and the business, we ensure productive interaction. Group’s strategy seeks to accomplish this mission by adopting the following principles of operation.

1) Search for new avenues

Behind these simple words is constant strategic work researching user needs, the state of domestic and global markets, and promising new players.

When looking for new development vectors, we assess hundreds of factors, take into account thousands of nuances, and review tens of thousands of assumptions. Through all of that, however, there are six main criteria.

  1. Positive effect. The new product or technology should change people’s lives for the better, making them more comfortable. We want technology to serve people.
  2. Potential coverage and market size. Group is a big company, and we only invest in things that are sure to benefit our development in some way.
  3. Barriers to entry. We need to be able to create moats around the business that eliminate potential entrants. Markets that may have more than three key players are of little interest to us.
  4. Complementarity with Group. The service should hold value for the company and vice versa.
  5. Economics. Group goes long: we are prepared to invest a lot and wait for a return. Still, we expect to have a clear idea of how a business at least breaks even.
  6. Team. We make a point of having products managed by an energetic and ambitious team fuelled by the entrepreneurial spirit.

If the business meets all of the foregoing criteria, we will venture into the new market. Any other factors are just temporary difficulties rather than serious obstacles.

2) Support to our businesses Group does not manage its products directly. We focus on strategic development rather than operations, which we normally oversee indirectly depending on the stage of the business life cycle. At the early growth stage, we engage in operations management more actively, but as soon as the business feels steadier on its feet, we become much less involved in its day-to-day activities.

We have built the following standard model for the relationships between the Group and its business units (BUs): the BU is in charge of the product, while budget is also the responsibility of the BU and, partially, of the centralised functions (e.g. commercial). The BU’s goal is to get the budget and strategy approved by the corporate centre. Then it is free to make its own decisions necessary to achieve KPIs.

We pay special attention to keeping the entrepreneurial spirit alive in the BU management team as we consider it the top leadership quality which we seek to nurture and inspire.

At Group, a head of business must feel like its founder. A founder is not only (and not necessarily) an individual that actually started it. For us, it is rather a person who puts his or her heart and soul into the product and assumes full responsibility for its management and development.

3) Use of shared solutions and infrastructure for all projects

We seek to be flexible in integrating business ecosystems into Group. In our relations with businesses, we place a strong emphasis on creating a favourable environment for the project rather than blindly following the procedures.

Solid foundation

There is an essential package, which includes the back office functions (finance, legal, IR, administration, security, infrastructure, integration with corporate HR, and procurement).

Creating support services for each business makes no sense at all. This is not only about cutting costs, though, with this approach, savings prove to be substantial. The teams need to focus on their product and business and not to get sidetracked or distracted from their main target.

The commercial function is also part of the essential package. We see a great advantage in having a one-stop-shop sales function that handles all major transactions and coordinates sales at the Group level. We are also working to merge our advertising technologies into a single business line to offer advertisers more convenience and boost their returns from the platform traffic.

On top of that, we are able to stage large-scale and effective promotion campaigns for our new services. The success of Youla, Pandao and Delivery Club is in no small part due to the effective traffic exchange.

Our services also share the payment infrastructure that enables our businesses to accept payments efficiently and at a low fee.

In the near future, an important driver will be the use of the corporate Group ID and data consolidation. What's more, we plan to launch a shared loyalty programme.

The ecosystems that are part of Group will benefit from the scale and joining forces at the group level. Each new member helps Group make better decisions, which, in turn, serves to strengthen its own position.

The ultimate goal is to create as efficient a platform as possible to accelerate the development of the existing services and launch the new ones.

Flexible integration

When it comes to the rest of the functions, Group is flexible. The degree of integration depends on the service’s development stage and the team's expertise.

BU heads have extensive powers similar to those of a standalone company’s CEO. This is our tactics of choice as we believe that in any internet company it is the team that adds value, and the traditional bureaucratic leadership style characteristic of classical industries does not work well for the talent.

In some cases, business processes should be integrated with the central functions as tightly as possible, while in others, it is better to step aside and not to interfere.

Some businesses find it easier to outsource marketing functions to the centre and focus on the product development instead. Others prefer to have in-house teams.

For some of them it is enough to consult with experts from other business units to get going with the project, while others may need a more powerful support.

In certain circumstances, Group’s IT solutions may give a boost the product’s technological platform. At other times, the business may benefit more from its own solutions tailored to a specific purpose.

At Group, we encourage technology exchange, but try to be reasonable at the same time. We do not want unification just for sake of it.

An example of the right collaboration is the recent launch of voice calls at Youla powered by the OK technology. Thanks to the shared expertise, Youla became Russia’s first classified platform to market this solution.

Search is working on recommendation systems for other BUs, giving them access to its vast expertise, which would be virtually out of reach for a hypothetical startup. For instance, its team developed a recommendation system for Pandao.

Values→ model → strategy → fast growth

The result speaks for itself. The success of our approach is proven by the performance of the acquired and launched services.

2006 saw the emergence of VK and OK that later became part of Group. In 2010, OK registered 20 million users a month, with the number hitting 71 million in recent years.

In 2014, Group became the sole owner of VK with a monthly audience of 66 million. Now it is used by as many as 97 million people.

The operating results keep improving, too. For example, after its acquisition in 2016, Delivery Club expanded the geography of its own delivery service from 5 to 22 cities, while also increasing the total number of cities where it operates from 41 to 120.

We are witnessing a unique moment as the online and offline worlds are merging. Given the overlapping interests and expertise of the leading players, the new Internet cannot emerge without strategic partnerships. Group has entered into two landmark transactions. Together with Alibaba Group, we will be developing e-commerce, while Sberbank will help us create an O2O platform focused on food and transportation. Partnerships with major strategic actors will give our businesses much more than just an impetus for further growth.

We are confident that partnership with AliBaba will help us gain access to its unparalleled network of merchants and world-class expertise in building marketplaces. Through our collaboration with Sberbank, we will be able to penetrate the unique ecosystem of one of the world’s most advanced banks and reach out to its 93 million retail customers.

We are not introverts: openness is part of our mindset. We believe that partnerships will benefit us in the long run.

Values → model → strategy → fast growth → ecosystem of ecosystems Group is an ecosystem of ecosystems. We are building the framework that will help hundreds of our diverse businesses, from niche products to recognised market leaders, develop and grow as efficiently as possible.

While growing and evolving each year, we remain fast, flexible and entrepreneurial. We do not want to leverage a single brand for the whole variety of our original services, such as email service, VK, OK, Citymobil and Youla. We are definitely not a monobrand company.

We use a hybrid model to position ourselves, which means keeping individual brands for flagship products and using our corporate brand for investment activities and operations.

Our corporate brand is a soft umbrella – it does not replace the product brand, but remains within sight of it. This is our current and future philosophy, our principles that define our business and help us fulfil our mission to improve the quality of life by making technology friendlier and more accessible.