Casting the net wider

2011-01-11 00:00

THERE is something going on in China­, Russia and South Africa. These three countries combined, via various Internet investments and creations, have built up major stakes in some of the world’s biggest sites and social networks.

Russian investment company, Digital Sky Technologies (DST), now owns about seven percent to 10% of Facebook by various­ estimates, putting the company among Facebook’s biggest owners. Via its sister company another 2,4% of Facebook is held. Recently, according to the New York Times, DST ploughed a further $50-million into Facebook.

DST also owns about five percent of the popular social gaming company Zynga and another five percent of the prominent shopping-coupon company Groupon. The company is now apparently eyeing a piece of Twitter, but then again, who isn’t?

The Group, which has grown into the biggest Internet company in the Russian-speaking world, owns 100% of Russian social networking site Odnoklassniki and has a significant stake in the country’s other major networking site, Vkontakte. DST also owns the early-Internet era instant messaging service (IM) ICQ, an interesting investment because the service is somewhat of a fading star.


The Chinese and South African connection

There is also a Chinese, and even a South African, connection to the Russian group.

South African emerging markets media giant Naspers, an $18-billion company, also owns a stake (reported at 28,7%) in DST, and therefore indirectly holds a stake in Facebook.

Naspers also owns a chunk in Tencent’s QQ, China’s largest instant messenger and social network. In December 2010, ranked ninth overall in Alexa’s Internet rankings, ahead of Twitter which ranked 10th. According to Business Day, Tencent had about 637 million registered users in December 2010.

Ironically Naspers hails from a newspaper background, but started to make serious money via pay-TV operations in South Africa and throughout Africa. Naspers operates from a home market with a comparatively small Internet user base of anywhere between seven to 12 million South African users, so this may explain why the company has been aggressively fishing beyond its borders for Internet properties.

Naspers is headed by a tough, shrewd and ambitious Cape Town-based CEO in Koos Bekker. At home, the company owns the largest Internet media player in News24, which attracts a modest — by world standards — five million monthly users. It also owns a piece of the South African MXit, a mobile-app-based IM now claiming around 25 to 30 million worldwide users­.

In 2001 Naspers bought the 46,5% piece of Tencent for $32 million, making it the largest shareholder in the then three-year-old company. Then QQ had just 18 million accounts. As Ten-cent grew and turned into the world’s third-largest dot-com by market value, the value of Naspers’ stake jumped more than 400-fold to exceed R14 billion.

With these impressive figures, it appears that Tencent’s QQ platform may be challenging Facebook as the world’s largest social networking platform. They are not exactly comparable platforms because QQ is an IM first and a social network second. For Facebook it is the other way around. But a broad definition of “social network” — a somewhat abused term these days — could put the companies in the same category.

In September 2010, Naspers snapped up yet another social network, but this time in the United States. The company bought a controlling interest in social networking site Multiply. Multiply, headquartered in Boca Raton, Florida, reportedly has more than 11 million registered users.

Naspers also owns Indian social networking site Ibibo, as well as various ecommerce platforms in Eastern Europe, South America and other parts of Asia. The company holds 25% of Singapore-based BuzzCity, a mobile­ media company that runs a global advertising network on the mobile­ Internet­.

Memeburn has it on good authority that Naspers some time back had an opportunity to buy a piece of business networking site LinkedIn, but turned it down at the time — a decision which has caused some regret at the company­.

The Russians are not coming, they have in fact arrived

On the other side of the world, the other figure leading this new emerging-markets Internet charge is the low-profile Internet tycoon Yury Milner. Milner is also the chairman of

The shaven-headed businessperson trained as a physicist in Moscow before starting out as a manager at the World Bank. He began investing in the Russian Internet in the late nineties and founded in 2001.

A report in the New York Times noted that if DST had invested $50 million (37,5 million euros) more in Facebook, its combined stake with would be worth about $500 million. made its debut on the London stock exchange in November and was valued at $5,71 billion on flotation.

In a rare interview with business daily Vedomosti late in December 2010, Milner said that had “chosen a strategy to have a global expertise in a very narrow sector”.

He said that in every Internet sector, there was a tendency for one single firm to become dominant, and that the company had picked Facebook as the leader in English-language social networking.

“On the Internet there is a tendency for winner takes all and a leader emerges in every niche with surprising consistency,” he said. “This is the main issue that we look at. When we made our first investment in Facebook, it was not obvious that it was a winner.”

Milner said he planned to invest the proceeds of the initial public offering (IPO) in Internet projects, which he called “one of the most promising areas for the next 10 years”. The Group and DST are part-owned by Alisher Usmanov, a Russian­ billionaire of Uzbek origin who first invested in DST in 2008 and who is also a major shareholder in Arsenal Football Club.


The Silicon Valleys of emerging markets

The first 10 years were all about Silicon Valley — the undisputed king of Internet innovation and home to the great Internet properties that have defined the online landscape of today. The next 10 may see the famous Silicon Valley­ share its mantle with new and rising centres of Internet innovation in key emerging markets in Asia, Eastern Europe, South America and Africa.



• Matthew Buckland previously worked for Naspers’s He is now involved in his own Internet startup.

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