• Proposal to create single state-led operator for all classifieds
  • Measures designed to remove foreign interests from industry
  • Marketplaces and trade associations highly critical of new law

Russia could be nationalizing its classifieds industry. The country’s parliament, the State Duma, has approved an amendment to a current law on advertising that may create a single state monopoly for all classified listings.

Could it happen? In usual circumstances, it would be unthinkable. But with an ongoing war in Ukraine, anger against Western economic sanctions, and a general atmosphere of a clampdown by the Kremlin, the current political landscape in Russia is highly unpredictable.

Cutting unfriendly capital, protecting personal data

The amendment was initially proposed in July. In a first reading, the lower house of Russia’s parliament approved an amendment of the country’s law on advertising, ruling that digital outdoor advertising and internet private listings must be placed through a single operator.

The said operator will verify all content, control the technical processes and strive to protect the personal data of Russian citizens. This essentially means the complete removal of all other classified businesses from the market.

It’s a strange move to throw both outdoor ads (billboards, posters, and so on) and classified ads into the same basket. This suggests the officials behind the proposal have a poor understanding of the advertising market, placing two entirely different business models under one umbrella.

The logic behind the proposal is one that permeates the political sentiment in Russia today — policies against perceived foreign propaganda and countermeasures against Western sanctions.

Viacheslav Volodin, chairman of the State Duma, summarized the measures as necessary to downgrade the impact of economic sanctions and protect Russian interests against the spread of false information.

“Firstly, we must not offend our domestic companies. Secondly, companies from unfriendly countries must understand that they will not be able to make money in our country from citizens and enterprises, and then use it to support the economies of their countries that have imposed sanctions against Russia, finance the purchase of weapons, and send them to the territory of Ukraine,” he told the parliament.

Dissolving foreign ownership in classifieds

The government’s disgruntlement comes largely from the strong foreign presence in Russian classifieds, and the growing focus by the Kremlin to keep personal data away from outside forces.

Several leading marketplaces have a legacy of foreign backing in Russia, including:

 

  • Avito, the largest classified business in Russia. Parent company Prosus is in the process of selling the multivertical business, which is currently operating as an independent entity run by the local Russian management team.
  • HeadHunter Group, the leading recruitment marketplace in Russia (HH.ru). U.S.-based investment bank Goldman Sachs holds a 14% shareholding in the business.
  • Goldman Sachs holds a similar stake in Cian Group, which operates Cian.ru, one of the leading real estate marketplaces in Russia.

Artem Kiryanov, chairman of the economic policy committee and author of the draft law, called the current market situation a “monopoly.” He cited an estimate that companies with foreign interests represent around 75% of the Russian classified market. Apparently, a state monopoly is much more preferable.

Strong pushback from the industry

Understandably, the Russian classified industry pushed back.

Some 60 companies have signed a letter criticizing the law, across both outdoor advertising and classified segments.

The Association of Internet Trade Companies (AKIT), the body typically representing the interests of internet advertisers, has been defiant in its objection to the proposal.

“Classified services have been developing around 20-30 years. They have grown across decades, trying to build various functionalities. In order to recreate something similar, it will take at least 10 years,” Artyom Sokolov, AKIT president, told the media.

Avito also published a response, countering many of the arguments used to back the proposal. The company stated that it’s a Russian business, with its data stored in Russia on Russian servers, with no risk posed to local users. It also underlined its importance as an employer and taxpayer, while mentioning that its ultimate parent is South Africa-based Naspers (majority shareholder in Prosus), a country that has not imposed sanctions on Russia.

Even SberBank — the state-owned banking giant with a growing presence in classifieds through property marketplace DomClick, job vertical Rabota.ru and auto marketplace SberAuto — has publicly criticized the proposal.

At a meeting on July 28, representatives of Avito, internet giant Yandex, e-commerce marketplace Ozon and internet search engine Rambler demanded that classifieds are excluded from the new legislation.

The existential threat to the entire Russian classified industry has unified rivals, both with foreign and state interests.

The draft amendment will be read a second time later this month — on August 13. It is expected to be more in-depth. Russia-based classifieds hope it will be radically different, removing them from the bill or offering a less-damaging alternative.

No Russia-based marketplaces contacted by the AIM Group were willing to discuss the proposed law at this time.

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