Russia Net usage may provide opportunities

IDG News Service

Recent studies show Internet use is skyrocketing in Russia, with more than 350,000 new Web surfers every month. Record PC sales, a surge in Russian Internet content and increased investment in infrastructure are all driving the growth.

But analysts say Western companies have failed to catch on to the potential of the Russian market.

“In the next one to two years, there’s going to be strong demand for services and content on the Russian Internet and there’s a great potential market here for foreign companies,” said Jason Smolek, a senior consultant at J’son & Partners, a Moscow-based high-tech consultancy.

“A company could get in on the ground now with a minimal investment and in a couple of years be a leader in this market. It’s anyone’s game.”

A study released this week by Russkiye Fondy, a Russian investment fund and shareholder in search engine, showed the number of Russian adults who have used the Internet at least once in the last six months has jumped from 8.8 million in September to nearly 12 million now. That puts Internet penetration in Russia at about 11 per cent of the population, about the same as in Hungary and Romania, but far lower than in Western Europe and North America.

J’son & Partners offers more conservative figures, saying the number of Internet users reached 10.2 million in April, up 2.7 per cent from March.

Still, no one doubts that Internet use is taking off in Russia.

“When you’ve got growth in PC sales of 20 per cent a year, a lot more people are going to be using the Internet,” Smolek said. “There’s also more and more content available in Russian and Russians are going online specifically for that.”

So far, growth has been largely limited to major cities, such as Moscow and St. Petersburg, whose populations together account for more than 50 per cent of Internet users.

But experts say Internet usage will grow as the ability to connect spreads to Russia’s regions. The government and private partners are spending US$2.4 billion by 2005 to develop Internet use across the country under the Electronic Russia program. Deputy Economic Development and Trade Minister Andrei Sharonov predicted Wednesday that the number of Internet users in Russia will hit 20 million by 2005, Russian news agency ITAR-TASS reported.

Smolek said that with all the attention being paid to the emerging technology market in China, investors in the West are missing an opportunity in Eastern Europe.

“Senior management in Western Europe and [North America] has to realize that this market should be a priority for them,” he said. “If they want to invest in e-commerce or in providing Internet content, now is the time to do it.”