Marketing through social media in Russia

Everything will spin around Nosik: he'll be sort of a capitalization driver

An interview with Denis Terekhov, the CEO of Social Networks agency

Marketing through social media in Russia has become a topic of interest for not only consumer good makers and telecom players, but also largest resource companies. Indeed, heads of huge corporations seek to meet LiveJournal frequenters online, and information agencies retrieve new information from official blogs of companies. The Chief Executive Officer of Social Networks company, Denis Terekhov agreed to tell RBC daily about the future of marketing through social media in Russia, elaborating on his joint project with a prominent Russian web figure Anton Nosik.

Newly available accounts suggest that the market of ads in social networks is set to boom this year, following the introduction of a new pattern for traffic accounting. What do you think of it: are social networks ready for such monetization?

— Social Media Association says the ads in social networks were worth $10 million last year, and the sum is likely to rise up to $20-25 million in 2010. I think the figures are underestimated. We expect the number of new projects to reduce this year, but existing ones will become more expensive. The market is unlikely to surge under these circumstances. Nor should ads in social network bring higher profits. Traditional methods in this segment have a very low output: the banner responsiveness is extraordinarily low here. Indeed, if the CTR is 0.1% in a social network it is said to be a good result for the ads maker. The normal CTR for other Internet portals often reaches several percent. The reason behind such low figures is that the user comes to a social network for entertainment and chatting, rather than for reading news, and therefore banners are out of their sphere of interest. Yet more important is that there is no internet surfing in social networks as users seldom go anywhere far from their homepage. Some social networks can boast a more or less successful practice of personalized banners, which address users by their names. Such ads do give a temporarily positive effect, but people seem to have been inoculated for advertisements and the positive effect does not last long. In other words, the social network ads market will only grow as long as the general growth of advertisements continues after the crisis.

As for the marketing through social media in Russia, this indeed is a segment for the advertisers who are keen on Internet. We expect a boost of new marketing tools this year, both in terms of quantity and quality: new software will come featuring integrated advertisements, and users will be grouped as to their specialized interests and so on. Market consolidation will be the main trend this year. Social Media's accounts suggest there are 47 agencies in Russia that major in social networking and blogs. In my opinion, only very few largest of them will remain by the end of the year, while the others will switch over to rendering consulting services or something alike.

Ru-net is now mulling over your new project with Anton Nosik, I mean a new agency, dealing with social networks. Aren't you afraid of breeding up a competitor and what is the sum of investments into the project?

— Indeed, we have plans to set up a joint venture with Anton Nosik to be named La Verite (the French for "The Truth"). The control stock will be held by Social Networks, while the rest will go a management company, representing Anton Nosik's interests. We will play the part of investors and offer infrastructure, but operations will be run independently. I would not like to disclose the exact sum of investment, but it is not very large now.

Who will manage the project?

— Anton Nosik. We sometimes have different opinions with him over Internet communications. He believes that some of the existing methods of working in social media are inappropriate. He calls for "clean" relations with consumers and strongly opposes such methods as covert ads, or use of personal data of social network users and so on.

From my perspective, Anton's approach to advertisements it too expensive. Therefore, La Verite will major in consulting and education in social media, as well as perform reputation risk assessment and train PR and marketing specialists for companies to deal with social networks.

The present concept of La Verite is that it should be a boutique, capitalizing on the name of Anton Nosik. Everything will spin around his name: he'll be sort of a capitalization driver. Further on we might expand.

Do you think such services will be in demand?

— The demand for them keeps growing, while the offer is quite limited. There are few methods to assess reputation risks while launching a marketing campaign via social networks. But the risks are real. We also expect specialized departments to appear in Russian companies and offices of foreign corporations to deal with social networks. Presently, their duties are shared by PR and marketing departments, which often means serious clashes and conflicts over it.