VK financials (formerly Mail.ru Group)

2023: Revenue growth of 36%. VK Tech revenues grow fastest

In 2023, VK's revenue reached 132.8 billion rubles, an increase of about 36% compared to the previous year. At the same time, the largest growth was shown by the VK Tech division (technologies for business) - plus 67.5% on an annualized basis with a final result of 9.7 billion rubles. Such data are reflected in the financial report published on March 21, 2024.

It is noted that the main source of growth in VK indicators was revenue from online advertising, which increased by 40% in 2023, amounting to 79.7 billion rubles. Revenues from online advertising of medium and small businesses increased by 42% compared to 2022, from advertising integrations in their own content, shows of partners and bloggers - 2.5 times. Adjusted EBITDA (profit before interest, taxes and depreciation) in 2023 amounted to 495 million rubles.

In 2023, the average daily audience (DAU) of VK services increased by 13% compared to 2022 and reached approximately 76 million users. At the same time, the length of time spent on the company's resources on an annualized basis rose by 6%: the figure averaged 3.4 billion minutes per day.

In the VK Tech segment, the main growth drivers were cloud platform services VK Cloud (revenue growth of 75.4% compared to 2022) and communication solutions (VK WorkSpace plus 68%). Revenue from sales of HR services in 2023 increased 3.1 times. EBITDA Segment profitability rose 7.1% yoy to 27.2% in 2023. Adjusted EBITDA reached 2.6 billion rubles, an increase of 127.2% on an annualized basis.

The revenue of the Ecosystem Services and Other Areas segment amounted to 23 billion rubles in 2023. The loss on adjusted EBITDA was recorded at 3.5 billion rubles. This segment includes the Mail.ru Mail and Mail.ru Cloud services, as well as the RuStore app store and the VK Play gaming platform.^[1]

2022

Revenue growth by 19% to 97.77 billion rubles

In 2022, VK raised 97.77 billion rubles, which is 19% more than a year earlier. The main source of this growth was online advertising revenue, which increased by 29% compared to 2021.

The drivers of the development of the advertising direction were:

• performance formats, which grew by 59% yoy;
• Medium and Small Business (SMB) segment with 2.1 times year-on-year growth.

The main share of revenue fell on the segment "Social networks and content services." Revenue in this segment in 2022 reached 75.1 billion rubles, which is 22% more than in 2021. The fastest growing segment of VK was Technologies for Business. Over the year, it grew by 83% in annual terms, to 5.8 billion rubles.

The Educational Technologies segment showed revenue growth of 4% in 2022 to 11 billion rubles. At the end of December 2022, the number of registered students of VK educational platforms increased by 28% year-on-year and reached more than 13 million.

VK's losses in 2022 amounted to 2.93 billion rubles, which is 80.8% less than losses a year ago (15.3 billion rubles). At the same time, in the reporting for 2021, the holding reported a net profit of 12.43 billion rubles and revenue of 125.75 billion rubles.

Taking into account the significant transformation of the business and in order to improve the quality and transparency of the Group's financial statements, VK brought into line with the existing assets the provision of generalized financial information by segment, starting from the fourth quarter of 2022, the company explained.

As of the end of 2022, users of VK services, according to the group's own data, make up more than 90% of the Runet's monthly audience. By the end of 2022, the average daily audience of VK services was 73 million users.

Main results of VK for 2022

Write-off of 10 billion rubles due to depreciation of the share in the joint venture "AliExpress Russia"

On April 28, 2022, VK reported a write-off of about 9.87 billion rubles due to an impairment of its stake in AliExpress Russia due to economic uncertainty that affects the e-commerce market. The relevant information is contained in the holding's statements for the first quarter of 2022.

In particular, the company recorded an impairment of Goodwill in the amount of 4.47 billion rubles, which is part of the carrying amount of investments in the AliExpress joint venture. The AliExpress Russia joint venture was created by the Chinese Alibaba Group (owns 47.8% by the end of April 2022), VK (15%), USM International (24.3%) and the Russian Direct Investment Fund (RDIF, 12.8%).

In addition, VK wrote off 2.96 billion rubles due to the impairment of its stake in O2O Holding"" (including Goodwill's impairment of 1.57 billion rubles) - in connection with the decision to terminate the taxi service Citymobil"."

It was assumed that Citymobil would cease operation on April 15, 2022 due to the fact that its investors considered it impossible to further invest in the unprofitable company, but instead the owner of Taxovichkof and a number of other services, People & People announced that it would buy a technological service platform, brand and customer attraction channels. It is assumed that the transaction will close in the second quarter, its amount was not disclosed. The buying side has already announced that it intends to keep the Citymobil brand.

Net debt of VK excluding lease obligations at the end of March amounted to 54.3 billion rubles (70.7 billion rubles, including lease obligations). As of the end of March, the ratio of net debt to adjusted EBITDA in annual comparison was 2.46. The company's total net loss under IFRS for the first quarter of 2022 amounted to 54.9 billion rubles against 2.4 billion rubles of the total net loss a year earlier.^[2]

Technical Default Threat

• The Russian Internet VK holding, recently called, Mail.ru Group is on the verge of a technical default on $400 million bonds maturing in 2025 at 1.625%. The likelihood of this arose against the background of a complete halt in trading in global depositary receipts (GDR) of the holding on London Stock Exchange. March 15, 2022.

Trading GDR VK on the stock exchange has not been conducted since March 3, 2022. This is part of the anti-Russian sanctions imposed in response to a special operation in the DPR and LPR. Most of the restrictions were imposed by the United Kingdom and the United States.

The likelihood of a technical default is also increased by the rules for trading global depositary receipts. They state that in the event of a stop in trading for a period of 10 days or more, bondholders receive the legal right to request early repayment of debts. They can exercise this right in the case of VK on March 16, 2022.

The situation is very aggravated by the current geopolitical situation, multiplied by sanctions against Russia. If bondholders demand early repayment of all debts to them, then VK may not have enough money for this, which is a technical default.

According to the holding's estimates, as of March 9, 2022, it had at its disposal an amount equivalent to approximately $190 million. The holding kept 140 million of this money in foreign currency, but the problem is also that $80 million was placed outside Russia in order to "maintain the working capital of the holding's international business." And all this, taking into account the restrictions imposed on the treatment of the currency located outside Russia.

Due to uncertainty regarding the impact of restrictions on the ability to transfer funds from the company's Russian subsidiaries to its foreign holding company as part of recent capital control and protection measures in Russia, as well as the ongoing numerous changes in the regulatory framework, there is a possibility that that the issuer will not have sufficient liquidity in its holding company to finance payments, necessary for redemption, if the majority of holders decide to exercise the right to submit bonds for redemption, - indicated in the message VK.

VK is going to try to resolve the issue through negotiations with bondholders. The holding is going to start them in the very near future in order to "discuss possible alternatives to the exercise by bondholders of the right to tender for repayment."

At the same time, representatives of VK admitted that the likelihood of success of negotiations is still not 100 percent. In this case, and in the absence of an opportunity to pay off debts with bondholders, a technical default will occur^[3].

2021: Revenue growth by 18.2% to 125.75 billion rubles, net profit - by 24.7% to 12.4 billion rubles

VK Company Limited On March 3, 2022, it published audited statements in accordance with standards IFRS and segment statements financial data for the fiscal year 2021 ended December 31. The total segment revenue of the company increased by 18.2% year-on-year and amounted to 125,752 million rubles. with a forecast of 124-127 billion rubles. with a stable profitability of 25.3%. The aggregate segment indicator EBITDA increased by 18.2% yoy to RUB 31,802 million. Total net profit from consolidated subsidiaries increased by 24.7% year-on-year to 12,429 million rubles, TAdviser representatives said. VK

The total net loss of the company, taking into account key strategic associates and joint ventures, amounted to 6,486 million rubles. in 2021 against 1,959 million rubles. in 2020. Including:

• Joint venture "O2O": 14,423 million rubles. in 2021 against 10,573 million rubles. in 2020;
• Joint venture AliExpress Russia: 4,392 million rubles. in 2021 against 1,350 million rubles. in 2020;
• Учи.ру: 66 million rubles. in 2021;
• Umschool: 34 million rubles. million rubles. in 2021.

Net debt of VK excluding lease obligations at the end of December amounted to 35,389 million rubles (50,837 million rubles, including lease obligations), while 21.6 billion rubles were invested in the joint venture (JV) "O2O," 60.3 million - in the US dollars JV, AliExpress Russia as well as 4.7 billion rubles in and. online education games

Revenue Vkontakte for the year increased by 21.9% and amounted to 27.9 billion rubles. The average monthly audience social networks Russia in was 72.5 million, the daily audience - 47 million in the fourth quarter of 2021. According to the data, Mediascope VKontakte covers 76% of the Russian Internet audience every month, while 45% visit the platform daily.

The number of applications on the VK Mini Apps platform grew by 53% year-on-year in December to exceed 39,700, and the average monthly audience was 46 million users (+ 18% year-on-year). The monetization of gadgets and games on the VK Mini Apps platform is expanding, with app ad revenue increasing 300% year-on-year in the fourth quarter.

VK Calls Features have been improved in, and the augmented reality service now supports simultaneous calls with an unlimited number of participants, with the corresponding average monthly audience on VKontakte being 13 and 20 million users, including (Schoolmates OK) in December. Development Kit () software VK SDK Calls has also become available to third-party developers.

In the fourth quarter, the average monthly audience of OK in Russia amounted to 38 million users. The average monthly audience of mobile games exceeded 13 million users. The average daily audience of mobile games grew by 7% year-on-year in the fourth quarter, with penetration rates exceeding 10% of the average daily mobile audience of OK. The total payments to game developers in 2021 exceeded 3.2 billion rubles, of which approximately 40% fell on payments to mobile game developers. Total game advertising revenue grew nearly 4 times year-on-year in the fourth quarter.

The average monthly audience of the Moments service reached 27 million users in December (an increase of 2.2 times year-on-year), coverage exceeded 50% of the total average monthly audience of OK. The number of views reached 434 million (an increase of 4 times year-on-year), reactions - 46 million (an increase of 4.8 times year-on-year).

My.Games revenue grew by 10.5% in annual terms in 2021 (to 43.8 billion rubles). My.Games achieved its goal of doubling EBITDA compared to 5 billion rubles received in 2018, a year ahead of schedule, with EBITDA reaching 10.4 billion rubles in 2021. Average monthly audience rose 5.2% quarterly to 22.1 million in the fourth quarter.

In 2021, the revenue of the Educational Technologies segment (Skillbox Holding Limited, including Skillbox (100%), GeekBrains (100%), Skillfactory (63.75%), Mentorama (90%), Lerna (70%)) amounted to 10.4 billion rubles, which corresponds to the forecast.

The total number of registered students on the platforms exceeded 9.9 million users at the end of December (1.5 times more than in the previous year), of which 1.1 million new registrations during the quarter (excluding the effect of adding the combined number of registered students Mentorama and SkillFactory). The cumulative paying audience approached 349,000, 2.1 times the previous year, with nearly 48,000 new paying students joining the platform in the fourth quarter (excluding the effect of adding the cumulative number of paying Mentorama and SkillFactory students).

Yula remains the largest player in the New Initiatives segment. The service's revenue reached 3.8 billion rubles in 2021, which corresponds to the established plan of 3.6-3.9 billion rubles. Revenue growth was driven by an increase in the share of B2B sales. The average monthly audience of Yula grew by 18% on an annualized basis and reached 39 million in December thanks to the ongoing integration through VKontakte Announcements with the involvement of 195,000 VKontakte groups.

As of December, the VK Clips service totaled more than 11.3 million short videos (+ 223% year-on-year) from more than 2.4 million creators of unique content (+ 118% year-on-year). In December, users spent 103% more time watching Clips year to year, and the number of users who spend more than 10 minutes a day watching Clips increased by 135% over the same period.

The daily active audience of the Pulse service in the fourth quarter amounted to 9.8 million users (+ 74% year-on-year), and the monthly active audience reached 77.6 million users (+ 36% year-on-year). In the fourth quarter, the daily active audience of Relap amounted to 9.7 million users (+ 23% year-on-year), and the monthly active audience amounted to 114 million users (+ 6% year-on-year). Total revenue in 2021 amounted to 1.3 billion rubles (+ 124% yoy). The time spent per active user increased by 25% compared to the previous year to 13 minutes.

Total local turnover (GMV) of the AliExpress Russia joint venture (VK share - 15%) excluding services increased by 46% year-on-year to 306 billion rubles in 2021, while local business grew by 124% year-on-year to 110 billion rubles to 36% of the total GMV. The total number of orders reached 309 million in 2021, of which 204,000 (+ 220% year-on-year) - the average daily local orders in December. The number of active buyers exceeded 28.7 million in 2021, while the number of buyers of local goods increased 2 times compared to the previous year. The total number of sellers exceeded 400,000 (+ 69% yoy), with the number of Russian sellers increasing by 193% yoy to 102,500.

2020

Revenue growth by 21.2%, to 107.43 billion rubles, profit - 10 billion rubles

Mail.ru Group's revenue in 2020 reached 107.43 billion rubles, which is 21.2% more compared to 2019.

One of the catalysts for the tangible rise in revenues of the Mail.ru Group was the online education division (EdTech), represented by Skillbox and GeekBrains. In 2020, its revenue amounted to 6.1 billion rubles, significantly exceeding the target of 5 billion rubles. The reporting notes that the EdTech direction of the Mail.ru Group has become profitable in 2020.

The number of registered students in the GeekBrains and Skillbox projects by the end of 2020 exceeded 700 thousand, which is four times more than a year ago. The number of paying students increased by 103 thousand people in 2020 and amounted to 170 thousand, that is, increased 2.5 times over the past year.

Advertising revenue of the holding in 2020 rose by 5.3% and reached 39.15 billion rubles. Revenue of the MMO games segment during this time increased by 29.4%, to 36.79 billion rubles. The turnover of MY.GAMES, the holding's gaming subsidiary, was 40.7 billion rubles, which is 30.4% higher than a year ago.

Revenue from user payments for social services (Community IVAS) at the end of 2020 reached 18.34 billion rubles, which is 12% higher than a year ago.

Net profit of Mail.ru Group in 2020 decreased by 32.1% compared to 2019 and amounted to just over 10 billion rubles. The company explained this decline by the fact that the share of high-margin advertising decreased in revenue and the share of revenue from games that require high costs increased. Thus, advertising revenue for the year increased by 5.3%. The main contribution to this was made by VKontakte, whose revenue for 2020 increased by 14.9%, to 25.4 billion rubles. By the end of December, the number of users of the social network amounted to 73.4 million people.^[4]

Mail.ru Group's revenue from cloud services reached 1 billion rubles

Mail.ru Group's revenue from the cloud business in 2020 reached 1 billion rubles, having increased several times year-on-year. This was announced in March 2021 by Matthew Hammond, Managing and Financial Director of Mail.ru Group, during a conference call with analysts^[5]

We continue to see extremely rapid growth in the cloud direction and we are excited about that. It reached 1 billion rubles with growth several times a year, and we see that growth continues, - said Boris Dobrodeev, CEO of Mail.ru Group, during the call.

In the total turnover of the Mail.ru Group, which amounted to 107.43 billion rubles at the end of 2020, the share of cloud services is still small.

According to a preliminary estimate by IDC, announced in February, the market for public cloud services in Russia by the end of 2020 will exceed $1.2 billion. At the same time, the platform services segment (PaaS) demonstrated the greatest dynamics, which indicates the maturity of the Russian market, analysts^[6] note^[7]. This trend is also confirmed in the Cloud Solutions Mail.ru.

Rapid growth, especially among large customers, was shown in 2020 by platform services (PaaS), whose sales in Mail.ru Cloud Solutions soared 3.4 times, the company told TAdviser.

In addition, large companies have increased spending 28 times on cloud services for Big Data analytics (Big Data), 5 times on databases in the cloud (DBaaS), say Mail.ru Cloud Solutions. Also in 2020, many companies prioritized the development of their own development of IT products, which is why the sales volume of Kubernetes aaS from Mail.ru Cloud Solutions increased 7 times. As of the beginning of 2021, the company's portfolio contains more than 30 of its own platform solutions.

In Mail.ru, Cloud Solutions told TAdviser that in 2020, several large players in the grocery retail market and FMCG manufacturing companies joined their customers. Projects were implemented for Magnit, AUCHAN, X5 Retail Group, Burger King, as well as Philip Morris and Danone. In addition, among the largest customers are Rosatom, Invitro, Bitrix, 1C, amoCRM and others.

In 2020, Russian business rethought its attitude towards cloud technologies. Large companies began to develop their own cloud strategies, perceiving clouds not only as an infrastructure, but also as a platform with ready-made tools for easier and faster transformation of key business processes, they say in IDC.

The serious growth of its cloud business and comparable revenue at the end of 2020 was previously reported by and, Yandex for which this business is also new. The revenue of the cloud platform Yandex.Cloud increased 4.5 times and reached 1 billion rubles, the company reported in February 2021.

Cloud Solutions Mail.ru believes that the Russian cloud services market is in the stage of active growth.

With the increasing popularity of digital interaction with customers and an increase in demand for digital services, the positive dynamics of PaaS development will continue. In 2021-2022, the popularity of server-free computing, application interface management services (API Management), tools for product lifecycle management will grow, TAdviser said.

The capabilities for working with data using cloud databases, services for developing solutions based on artificial intelligence and Big Data analysis will also expand, Cloud Solutions added to the Mail.ru. MLOps tools will become available from the cloud, allowing you to effectively solve business problems by developing and implementing machine learning models.

In addition, the platform continues to develop the cloud application marketplace, expanding its portfolio with cloud versions of Mail.ru Digital Technologies products and partner services.

Capitalization $6 billion

2019

Revenue growth by 22.4% to 87.07 billion rubles

In 2019, VK's revenue (previously Mail.ru Group) reached 87.07 billion rubles, which is 22.4% more than a year earlier, and meets the expectations of the company itself (an increase of 22-24%). Most of the turnover fell on online advertising: the company earned 36.51 billion rubles on it, which is 22.6% higher than the result of 2018.

Revenue from user payments for social services (Community IVAS) in 2019 turned out to be 16.37 billion rubles, an increase of 9.1% on an annualized basis. Revenues from multiplayer increased by 20.1% to 27.99 billion rubles.

At the end of 2019, Mail.ru Group received a net profit of 15.65 billion rubles, which is 3.8% more than a year earlier.

The company's message emphasizes that the segments continued to grow "despite the difficult macroeconomic situation, as well as the effect of a high base for the company's advertising and gaming business."

It also follows from the financial statements that VKontakte's revenue in 2019 increased by more than 20% compared to 2018, when the turnover was measured at 18 billion rubles. From January to December 2019, the active monthly audience of the VK Mini Apps platform increased 14 times and amounted to more than 23 million users.

Food delivery service Delivery Club reported a 2.3-fold increase in revenue at the end of 2019, to a record 4.46 billion rubles. By the end of the year, the company had its own delivery of the service in 38 Russian cities, in total the company has more than 13.7 thousand partner restaurants.

The Mail.ru Group has the potential to accelerate revenue growth, but this will require additional investment in technology development and expansion of the product line, the group notes. The company plans to strengthen the ecosystem,  including by increasing the efficiency of cross-sales and closer integration of the company's projects.^[8]

In the top 5 European publishers of mobile applications with the highest revenues in the first half of the year

VK (formerly Mail.ru Group) took fourth place in the list of European companies - publishers of mobile applications with the highest revenues in the first half of 2019, according to the research company Unified Data AI (formerly App Annie), TASS News Agency of Russia reported on August 23, 2019.

At the end of 2018, as noted in the Mail.ru Group, the company took fifth place in a similar rating. Thus, Mail.ru Group is the only publisher based in Russia among the 10 most successful in the App Annie rating.

In addition to the Mail.ru Group, the top five include the Finnish Supercell, the publisher of the mobile game Clash of Clans the Irish , and Playrix, the developer of the game applications Gardenscapes and Homescapes. In third place in the rating is the the British Badoo developer of the same name for social networks dating, in fifth - the Polish Huuuge Games, which develops casual mobile games.

The App Annie rating takes into account company revenues from app downloads and internal purchases through the App Store and Google Play platforms.

Revenue of Mail.ru Group in the segment "Social networks and communication services" in the second quarter of 2019 compared to the same period in 2018 increased by 12.9% and amounted to 11.7 billion rubles. At the same time, in the segment of IVAS products (user payments on social networks), the growth amounted to 7.5%, to 3.9 billion rubles.

Total segment revenue of Mail.ru Group excluding food delivery service Delivery Club and esports business ESforce in the second quarter of 2019 increased by 22.9% compared to the same period last year and amounted to 20 billion rubles. According to the results of the first half of the year, revenue increased by 22.4%, to 39.5 billion rubles.^[9]

Gaming direction brought in more than a third of revenue for the first quarter

Over the past few years, the gaming business has become one of the key sources of revenue for the Mail.ru Group - as of May 30, 2019, it brings more than a third of revenue for the entire group. According to the results of the first quarter of 2019, the total revenue of the holding amounted to $304.20 million, while $102.44 million of them were brought by games. More than 67% of this amount The gaming direction has earned on the international market due to the active development of mobile games, 90% of the audience of which are located outside of Russia.

2018: Revenue growth by 32.5% to RUB 75 billion

Internet-Holding Mail.ru Group on March 1, 2019 published audited statements in accordance IFRS with and segment financial data statements for 2018. The total segment revenue of the company increased by 32.5% compared to 2017 to 75,260 million, and the rubles total segment indicator EBITDA increased by 13.9% to 22,222 million rubles, TAdviser representatives of the Mail.ru Group said.

Taking into account a one-time non-cash write-off in the amount of RUB 1,698 million in the second quarter of 2018, the company's total net profit for the reporting period increased by 6.4% compared to 2017 and amounted to RUB 14,099 million. Excluding this expense, net income rose 19.2%.

Balance of cash in accounts as at 31 December 2018. amounted to 11,723 million rubles. As specified in the company, the main indicators are presented in accordance with the aggregate segment financial data of the Mail.ru Group and differ from the reporting under IFRS.

The revenue of the social network Vkontakte for four years (since 2014) quadrupled, amounting to 18,431 million rubles at the end of 2018. According to the holding, VKontakte has significant opportunities for further development and will be able to once again double revenue in the next 3-4 years.

In the fourth quarter of 2018, revenue from MMO games increased by 37% and amounted to 7,104 million rubles. Over the year, this figure increased by 34% - to 23,290 million rubles. At the end of 2018, the share of international revenue from games in the company's total revenue is about 20%. The margin of the gaming business in the fourth quarter reached 33%, and for the year - 17%.

The Mail.ru Group also noted the growth of mobile IVAS products (from the English Integrated Value Added Services), including music subscriptions, where the number of active paid and trial subscriptions on the holding's platforms and in the BOOM application in December 2018 reached 2.1 million. According to the company, as of February 2019, it is the largest content subscription service in Russia. In 2019, Mail.ru Group intends to additionally invest about 0.5 billion rubles in the development of its content services.

In the fourth quarter, Delivery Club's revenue increased by 71% compared to the same period in 2017 and reached 646 million rubles, and growth for the whole of 2018 amounted to 48%.

In 2018, Mail.ru Group's communications and social platforms continued to grow and their revenue outpaced forecast. Expanding the gaming direction in global markets, we have successfully launched a number of international gaming projects. We continued to consistently implement the Mail.ru Group strategy. We still see social media and communications as the center of the ecosystem in which new services are embedded. We completely own some of these services, others - together with partners, - commented on the results of 2018 Boris Dobrodeev, CEO of Mail.ru Group. - In advertising in 2019, we will focus on improving the efficiency of advertising by constantly improving advertising technologies and advertising products, expanding our advertising network and attracting new types of advertisers to the platform - small and medium-sized businesses and offline retailers. In games, we will continue our international development. International revenue is already 63% of total gaming revenue, or 20% of total Mail.ru Group revenue.

According to Boris Dobrodeev, in 2019 the holding will even more actively support innovative technological projects, especially in the field of artificial intelligence, voice and image recognition, as well as in the development of new experimental communication products.

According to forecasts of the Mail.ru Group, in 2019 revenue on a comparable basis will increase by 18-22% and reach 85-88 billion rubles.

2017: Revenue growth by 34.4% to RUB 57 billion

In 2017:

• total segment revenue of the company increased by 34.4% compared to last year and amounted to 57,469 million rubles.
• the total segment indicator EBITDA increased by 14.7% compared to last year and amounted to 20,551 million rubles.
• the total net profit of the company increased by 22.6% compared to last year and amounted to 14,244 million rubles.
• The balance of cash in accounts as of December 31, 2017 amounted to RUB 15,371 million.

Advertising revenue in social media news feeds is growing the fastest. Native video advertising formats in social media feeds are becoming more and more popular with both media and performance advertisers. The redistribution of advertising budgets in favor of online advertising continues, while in the online segment the redistribution is in favor of mobile advertising and, in particular, advertising in social networks. Traditional offline brands are increasing the share of the advertising budget for promotion on mobile devices, focusing on social networks. In 2017, this trend intensified, and we expect it to continue in 2018.

Mobile advertising is a key area. In 2016, it provided about a third of social media advertising revenue; in 2017, this share increased and reached half. In 2017, we focused on advertising products and technologies that provide efficiency, transparency and create additional value for our partners by increasing ROI. We will continue to work in this direction in 2018.

2016: Revenue growth by 14.8% to RUB 42 billion

• The total segment revenue of the company in 2016 increased by 14.8% compared to the previous year and amounted to 42,751 million rubles. In the fourth quarter of 2016, the company's total segment revenue increased by 19.2% compared to the same period last year and amounted to RUB 13,241 million.

• Taking into account the one-time non-cash tax expense of RUB 768 million, the total segment EBITDA in 2016 decreased by 1.0% compared to the previous year and amounted to RUB 17,914 million. Excluding this expense, EBITDA grew by 3.3% to RUB 18,682 million.

• Taking into account the one-time non-cash tax expense in the amount of 1,022 million rubles, the company's total net profit in 2016 increased by 18.0% compared to the previous year and amounted to 11,616 million rubles. Excluding this expense, the company's net profit in 2016 increased by 28.4% and amounted to 12,638 million rubles.

Excluding Delivery Club, one-time non-cash tax expense, as well as the effect of exempting the revenue of our online games on the Russian market from Russian VAT in the fourth quarter of 2016:

• The total segment revenue of the company in 2016 increased by 13.6% compared to the previous year and amounted to 41,787 million rubles. In the fourth quarter of 2016, the company's total segment revenue increased by 15.9% compared to the same period last year and amounted to 12,713 million rubles.

• Total segment EBITDA in 2016 increased by 3.7% year-on-year to RUB 18,811 million.

• The total net profit of the company in 2016 increased by 29.3% compared to the previous year and amounted to 12,820 million rubles.

• Net cash balance as at 31 December 2016 was RUB 5,391 million.

2015: Revenue growth by 11% to RUB 36 billion

Excluding results HeadHunter , the company's total segment revenue in 2015 increased by 11.0% compared to 2014 to RUB 36,316 million. The total segment indicator EBITDA in 2015 increased by 7.6% compared to 2014 and amounted to RUB 18,123 million. In turn, taking into account the results of HeadHunter, total segment revenue increased in 2015 by 10.0% compared to the previous year and amounted to 39,343 million rubles, while the total segment EBITDA increased over the year by 6.7% to 19,623 million rubles.

Meanwhile, the company's total net profit decreased by 11.5% compared to the previous year to 11,110 million rubles.

The indicator EBITDA (excluding HeadHunter) increased by 7.6% compared to the previous year to 18,123 million rubles, and the level of profitability in terms of segment EBITDA amounted to 49.9%, which is close to the level of 2014.

The company's advertising revenue (excluding HeadHunter) increased by 19.4% compared to last year and amounted to 14,630 million rubles. Although forecasting capabilities are still limited, in the second half of the year there was a revival in demand: advertising revenue (excluding HeadHunter) for this period increased by 27.5% compared to last year, amounting to 8,333 million rubles. The main growth driver was targeted advertising, especially mobile advertising and advertising on the VKontakte social network, including through an increase in the number of advertisers and users. In the second half of 2015, revenue from media advertising also improved.

Total revenue from MMO games in 2015 increased by 6.3% to RUB 8,945 million; at the same time, in the second half of 2015, revenue increased by 10.9% compared to the same period last year, amounting to 4,814 million rubles. "In 2016, we plan to release a number of mobile games. Taking into account the success of previously released games and the schedule of planned releases, we expect revenue from MMO games to continue strong growth in 2016.

Fluctuations in exchange rates and the growth in the use of mobile devices continue to affect the company's ability to increase the monetization of social services through user payments (Community IVAS). As a result, in 2015, revenue from Community IVAS increased by 5.4% compared to the same period last year and amounted to 12,508 million rubles.

2015 was the first full year during which Mail.Ru Group consolidates VKontakte. The integration process is progressing and will for the most part be completed in 2016. According to the company, during the year the team continued to show good results: in 2015, revenue increased by 44.2% compared to the same period, and in the second half of 2015, revenue increased by 52.8% compared to the same period last year. Engagement and audience continued to grow: for example, MAU (monthly active audience) in January 2016 for the first time reached almost 90 million users, more than 70% entered the social network from mobile devices.

2014: Revenue growth up to 35 billion rubles (+ 14 %)

In 2014:

• The total segment revenue of the company increased by 14.8% compared to the previous year and amounted to 35,778 million rubles.
• Total segment EBITDA in 2014 increased by 13.5% year-on-year to RUB 18,297 million.
• Total net profit increased by 11.4% compared to the previous year and amounted to 12,518 million rubles.
• The above indicators are presented taking into account the full consolidation of VKontakte since the beginning of 2013
• VKontakte revenue in 2014 increased by 12.9% compared to the previous year and amounted to 4,319 million rubles, while EBITDA increased by 54.9% and amounted to 1,603 million rubles. In the fourth quarter of 2014, VKontakte's revenue increased by 22.6% to RUB 1,348 million.
• Net debt as at 31 December 2014 amounted to RUB 16,987 million (excluding interest payable of RUB 147 million)

2013: Revenue growth up to 27 billion rubles (+ 29 %)

• Net profit of Mail.Ru Group in 2013 increased by 28.3%, to 10.91 billion rubles compared to 2012.
• The unaudited net profit of one of the largest Russian Internet companies Mail.Ru Group in 2013 increased under IFRS by 36% - to 11.447 billion rubles compared to 8.4 billion rubles in 2012, follows from the company's statements.
• Revenue of Mail.Ru Group increased in 2013 by 29.6% - to 27.404 billion rubles against 21.151 billion rubles in 2012.
• The financial indicators of Mail.Ru Group were higher than the forecast of analysts who expected net profit from the company in the amount of 10.91 billion rubles, revenue - 27.3 billion rubles.
• EBITDA grew by 30.8% to RUB 15.087 billion compared to RUB 11.534 billion a year earlier. At the same time, analysts predicted an increase to 14.16 billion rubles.

2012: Revenue of 21 billion rubles (+ 39%), net profit of 8.4 billion

• The total segment revenue of the company in 2012 increased by 39% compared to the previous year and amounted to 21,151 million rubles.
• In 2012, the aggregate segment indicator EBITDA grew by 38% year-on-year to RUB 11,534 million.
• In 2012, the total net profit of the company increased by 36% compared to the previous year and amounted to 8,499 million rubles.
• Cash balances as at 31 December 2012 amounted to RUB 28,777 million.
• The monthly audience of the Mail.Ru portal in Russia in December 2012 reached 33.3 million users (according to TNS Russia)

The Company's annual report, containing the consolidated financial statements for 2012 prepared in accordance with and IFRS the opinion of the independent auditor, was registered with the National Bank data storage authorized by the Financial Supervision Service and Great Britain can be obtained at http://corp.mail.ru/files/Mail.Ru_Group_AR_FY2012.pdf

2011

Fin results of the year: revenue of $515.4 million, net profit of $208.6 million

Total revenue amounted to $515.4 million, total EBITDA - $282.9 million, total net profit - $208.6 million.

• Cash balance as at December 31, 2011 was $154.3 million
• The monthly audience (TNS) of Mail.Ru in December 2011 reached 30 million users.
• Social network Odnoklassniki and messenger Mail.Ru Agent steadily increased its audience, which reached 20.8 million monthly users (TNS) and 22.9 million monthly users, respectively

Q1: 120% Contextual Advertising Revenue Growth

Mail.ru revenues from contextual advertising in the first quarter of 2011 grew 1.7 times faster than the market - by 120.5%. This is due to ICQ joining and possibly favorable contract terms with Google.

Mail.ru Group's revenue in the first quarter of 2011 increased by 68.8% to $110.6 million. In the first quarter, the Mail.ru did not yet take into account the results of ICQ, which it acquired in April 2010, and organic revenue growth amounted to 61.2%, explains a representative of Mail.ru Group. Revenues from media advertising increased by 77% (inorganic growth was 89.8%) to $25.4 million, and from contextual advertising - by 66.7% (120.5%) to $12.6 million. At the games, the company earned $32 million (+ 39.4%), on paid services in social networks - $28.4 million (+ 68.9%), and on other paid services - another $12.1 million (+ 80%).

The serious growth in revenue from contextual advertising can be explained primarily by the favorable conditions offered by the Mail.ru Group of American Google, believes Maria Chernitskaya, general director of the iContext advertising agency. Mail.ru Group signed an agreement to replace search on its portal from Yandex with Google at the end of 2009, but in reality this search started working only in the second half of 2010. According to Chernitskaya, Google, which needs to increase its market share in Russia, gives Mail.ru Group almost 100% of its revenue from contextual advertising on the pages of the portal^[10].

The entire contextual advertising market in the first quarter of 2011 grew by about 70%, Chernitskaya estimates, and Google's revenues, according to her, grew faster than the market. AKAR has not yet summed up the sales of media advertising in the first quarter, says Dmitry Ashmanov, CEO of Mindshare Interaction (part of the AKAR commission of experts). But the first quarter of 2010 was very bad in terms of advertising sales, so against its background, growth in January - March 2011 could be impressive, he notes.

Revenue in the Mail.ru Group in the field of media advertising is growing largely due to the position of the Mail.ru Group in this market, said Anastacia Obukhova, an analyst at VTB Capital. There are few sites on the Russian Internet with such a large audience, and advertisers are ready to pay to be placed on this site. It turns out that the sites of the Mail.ru Group are also interesting to large advertisers with serious budgets, which were traditionally presented on television.

Capitalization $6.96 billion

Capitalization on the LSE (February 2011) - $6.96 billion.

2010

Fin results of the year: revenue growth of 50% to $324 million, advertising revenues dominate

Mail.ru Group's revenue grew in 2010 by 50% to $324 million. Excluding the effect of the acquisition of ICQ in July 2010, the growth was 58%^[11]. Profit amounted to $76.7 million, EBITDA - $116.6 million.

• The Mail.ru portal brought the group $226.3 million (includes ICQ revenues),
• Odnoklassniki - $68.9 million,
• HeadHunter recruiting service - $28.7 million.

The group earns the most from advertising - $124 million; online games brought in $99 million, services admitted - $70.2 million.

Mail.ru Group's advertising revenues grew significantly faster in 2010 than the market average. Media advertising brought the holding 56% more revenue than a year earlier - $91.2 million, and contextual - 87% more, $32.9 million. The market grew more modestly: according to the Association of Communication Agencies of Russia, sales of online advertising in 2010 increased by 40%, including media - by 28%, contextual - by 46%.

A representative of the Mail.ru Group explained the significant growth in the context by the consolidation of the Internet pager ICQ, which receives a significant part of the revenue from this type of advertising.

It is unlikely that ICQ can be considered a serious player in the context market, doubts the general director of the second in Russia operator of context advertising "Runner" Alexei Basov. The growth of context can be explained by the fact that Mail.ru in 2010 seriously engaged in this business and increased the number of space for context, he said. Mail.ru also raised revenues by arranging auctions between different operators of contextual advertising, he continues. In addition, according to Basov, Odnoklassniki, which always sold the context well, could have made a significant contribution.

Judging by the reporting, the growth was largely organic in nature, that is, the takeover of ICQ did not have a decisive impact on the group's performance, Kochetkov agrees. At the same time, the Mail.ru increased them not only faster than the market, but also faster than the number of users grew. Therefore, we can talk about more effective monetization of the company's services, in particular social networks.

In 2010, Mail.ru abandoned Yandex search in favor of Google. Kochetkov believes that the growth in income from the context could also be associated with obtaining more favorable conditions from an American company. True, it is unlikely that the partnership with Google was decisive, because the number of search queries Mail.ru decreased over the year, which could not but affect the revenue, notes a top manager of an Internet company. According to Liveinternet, the share of Mail.ru searches for the year fell by 2.5 pp to 7.4%.

1st half of the year: revenue of $94.2 million, including on services - $56.4 million

In the first half of 2010, Mail.ru earned $94.2 million, including $56.4 million on services. Although advertising revenues also increased: 1.5 times (compared to January - June 2009) - from the media and 1.6 times from the contextual.

In the first half of 2010, the difference in the contribution of advertising and services to the revenue of Mail.ru Group amounted to $17.4 million in favor of services ($56 million).

According to the calculations of Vedomosti^[12], during the deal to buy out the DST stake Naspers Mail.ru in July 2010, the capitalization of DST increased to $4.44 billion.

2009: Revenue - $148.3 million, of which $63.4 million - paid services

IFRS: Revenue - $148.3 million

Mail.ru Group revenue structure: out of $148 million earned by the group in 2009, paid services accounted for $63.4 million - more than advertising ($62.8 million). The rest was brought by recruiting services and dividends from venture capital investments. In 2009, the contribution of advertising and services to revenue was almost equal^[13] is^[13].

Most of the revenue ($138.4 million) was brought to the group by the Internet portal Mail.ru. On paid services, he earned $77.9 million in 2009, and most of it - $64.9 million - from online games. In previous years, services brought many times less. But in the spring of 2009, the Mail.ru Group gained control of the game manufacturer Astrum Online Entertainment (now part of the Mail.ru), which makes money by selling game items to users. The ability to make money on services such as selling content reduces the company's dependence on fluctuations in the advertising market and makes revenue more stable, says Finama expert Leonid Delitsyn.

The Odnoklassniki social network, 100% of which has been owned by the Mail.ru Group since the summer of 2009, earned 67% of its revenue ($29.7 million) from services in 2009. Including $5.6 million - on paid registration. In the first half of 2010, paid services accounted for 71.1% ($21.5 million). Since September 2010, the registration fee has been canceled, which will affect revenue, admits Mail.ru Group, but hopes to compensate for the loss of this income item by an increase in the number of users.

DST is the most expensive Internet holding on the Russian market, says Dmitry Zhuk, an analyst at the London office of Citibank. But it is difficult to accurately assess it, since most DST assets do not disclose financial performance. Mail.ru together with Astrum Online cost $1.3-1.5 billion, Vkontakte - up to $300 million, Forticom - several hundred million dollars, a share in Facebook - $300 million. Taking into account the rest of the assets, the value of DST is in the billions of dollars, Zhuk said.

The head of the corporate finance department of IC Finam"" Alexey Kurasov estimates the main assets of DST at $1.9-2 billion. But taking into account the rest of the companies, according to him, we can talk about $2-2.5 billion. That is, 12% of DST can be roughly estimated at $240-300 million. The company's valuation changed throughout the year, according to a DST source. The dynamics depended both on the value of Internet assets in general and on the purchase of a share of such a significant company as Facebook, says Kurasov. If you focus on the multipliers of public companies, they have grown by about 2 times since the beginning of the year. At the beginning of the year, DST assets could be estimated at about $1.2 billion, Kurasov believes.

Notes