Doing Business in Russia

Doing Business in Russia

Last month I was at a MASMI client event in Moscow, presenting on Social Media Research and Marketing.

MASMI had good reason to celebrate, as it marked the 10th anniversary of its “Online Monitor” the largest online panel in Russia. Like the country itself, Online Monitor is huge, a survey of over 70,000 Russians per wave, that is run twice a year.

Not surprisingly then, for a survey of this magnitude, there was a large turnout, with 50 clients from sectors including financial services, FMCG, Telecoms, and the Russian press.

The Russian market has enormous potential for social media marketing and research. Given its stage of development in adopting social media, these are very exciting times for potential suppliers – but just how much do we know about the country itself?
Its population is around half that of the United States, at just over 140m. In terms of size, however, it is almost twice the size of the US - a truly vast territory, spanning 9 time zones (more than any other country). So while its vastness is certainly an issue for the distribution of goods and services, one could argue that the internet is a perfect medium for overcoming huge geographical distances.

Like many geographically large countries, population tends to cluster in a few major cities, and in Russia this is Moscow and to a lesser extent St Petersberg (Russian cities and towns by population) .    Around 11.5 million people live in Moscow – one of the most northerly cities in the world.  Based on Forbes 2011, Moscow had 79 billionaires, overtaking New York as the city with the greatest number of billionaires in the world. No wonder some prominent Russian businessmen are routinely flanked by armed body guards!

Internet penetration is growing rapidly and is now at 43% - and when considering Moscow, the figure is much higher, at just over 65%. This offers a potential market of around 7.5 million people. Already, e-commerce is starting to become mainstream, with shoes and clothes in particular, being particularly popular online.

In tandem with the growth of internet penetration social media is also booming. VKONTAKTE (meaning “in touch” in Russian) is the Russian Facebook and is the third most visited site in Russia. English speaking Russians are also opening pages in the western Facebook. Even though it is not their first language there are already over 4.5m users (click here for furhter usage statistics) and they’re a key demographic for advertisers - 65% of all users are in the 18-34 age band.

The economy is currently booming too as its fortunes are closely linked to the price of commodities, especially oil. And as oil prices are currently on a high, the economy is performing relatively well.

However it’s not all plain sailing for western companies who wish to do business in Russia. The retail banking sector has not been a happy hunting ground for foreign banks. The international banking crisis has put paid to the boom which had previously seen the sector double in size every two years. As a result, both Barclays and HSBC have announced plans to pull out of their retail banking investment in Russia.

Finally, if you are planning a launch or client event in Moscow, a word of warning – accommodation is not cheap! In Moscow, a normal room at the Holiday Inn (by no means in the luxury category) will set you back US$400/night.  Even for a 3 star hotel on the outskirts one has to pay $120/night.

In terms of social media and its applications, Russia has huge potential. Moscow clients are now asking the same questions about social media as their western counterparts: what social media strategy should they be adopting and how can they leverage it for success? While individuals may still have a natural reticence about sharing their views on the internet, it would appear that as with so many other aspects of life, they are coming round to Western thinking.

I’d like to thank all of those who looked after us so well in Moscow and until the next trip so goodbye or до свидания.

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