Anatomy of an App Store: Russian search leader Yandex launches app store

Yandex, which looks a lot like Google, is getting in on the Russian mobile app market at an opportune time.

App stores, like Google Play and those from Apple and Amazon, emerged so quickly that few understand much about them other than that they distribute free and purchased mobile apps. Russian search leader Yandex announced its intention to enter the app store business at the Open Mobile Summit in San Francisco this week. A late entry, Yandex’s App store for Android highlights the purpose and function of a mobile app store.

Russia, like the rest of the BRIC countries, lags behind the West in smartphone adoption, making this app store debut timely. The 12 million Android smartphones forecasted to be sold next year in Russia, a country of 143 million, is a tiny fraction of total worldwide shipments. In anticipation of a growing Russian smartphone market, Yandex is using its market position and brand assets to win a share of the mobile app store business and extend its dominant share of the Russian search and advertising into mobile.

Yandex looks a lot like Google. It leads with and earns most of its $1 billion of annual revenues from search. Like Google, it has a portfolio of email, personal apps, maps and cloud to attract consumers and to complement search. Like Google, Yandex has chosen Android to be the content standard for its app store platform.

Yandex has partnered with a number of Android smartphone manufacturers, such as Pocketbook, Text and Q to preload Yandex mail, personal apps and maps, including its native Yandex app store app. Yandex has a relationship with MegaFon, one of the three largest Russian mobile carriers, to serve as the MegaFon app store and share revenues.

Russia is a very different market than North America. Russian consumers spend an average of $15 per month on mobile voice and data services from prepaid accounts. Yandex integrated its App store to the MegaFon’s carrier billing system so consumers can pay for the apps from prepaid balances, increasing revenues and replacing the carrier revenue stream of value-added services such as ringtones lost as consumers transition to smartphones. Carrier billing is critical for success because few Russian consumers have credit cards, and bank account payment systems used in western economies aren't available.

With 61% of the Russian search market and 51% of the mobile search market, Yandex is in a unique position to understand the mobile apps that consumers search for and how to attract consumers to the Yandex app store.

With anchor apps such as "Angry Birds" and "Cut the Rope" and access to the inventory of the Opera app store, Yandex has a base of salable apps and is seeking to expand its inventory of Russian and English language apps.

Yandex represents the mobile opportunities in international markets where a motivated brand has resources such as a base of personal application usage, search analytics and promotion and localized payments to enter and grow in the mobile apps business. In this case, Yandex stands to gain a new revenue stream from mobile apps while improving its mobile search and advertising capabilities.

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