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Russia's Yandex targets Google with expansion abroad

By Conor Humphries

DUBLIN (Reuters) - Russia's leading internet search engine, Yandex, will take the fight to Google in emerging markets like Turkey in a bid to offset the inroads made by the U.S. giant in its home market.

Yandex founder and chief executive Arkady Volozh told Reuters on Friday the firm was likely to use its own experts to expand into new countries, but would not rule out acquisitions or partnership deals.

"We are focusing on the markets with Google dominance in search ... where they have 90-plus percent market share," Volozh said in an interview in Dublin, adding Yandex would stress to consumers the dangers of one firm dominating the internet.

Yandex is currently focusing on Turkey, where it has eked out a 1 percent market share since it entered the market last year. It describes this as a base for a significant expansion and says it will look to other large markets where it sees no real competition to Google, though Volozh refused to name them.

Yandex, which raised $1.4 billion in an initial public offering (IPO) in New York last year, has seen its share of the Russian search market fall to 60 percent in the second quarter from 64 percent a year earlier, according to LiveInternet.

That is partly due to inroads made by Google.

"We'll be growing 30 percent or something next year, but it's not doubling every year as we used to have four or five years ago. We need to find some new markets, new opportunities ... it could improve our revenues dramatically," Volozh said.

Yandex posted revenues of 20 billion roubles ($648 million)last year and has a market capitalization of $7.2 billion.

Google is also under pressure from slowing revenue, shocking analysts on Thursday by reporting quarterly revenue growth of 17 percent year-over-year, the first time its growth has fallen below 20 percent since 2009.

DEFENDING ITS LEAD

Despite the drive to expand abroad, Yandex will defend its market share at home against rivals like Google and Microsoft, which use proprietary browser and operating systems to encourage users onto their search products, Volozh said.

Last month Yandex launched a browser to compete with Google's Chrome. Norwegian mobile internet browser maker Opera has signed a licensing deal with Yandex to share its browser technology.

The Russian search engine has no plans to follow Google into the hardware market, where it builds mobile phones and tablets, but it would consider it if necessary.

"We will see where we will need to go. Whatever we need to preserve our market share we will do," Volozh said.

While Yandex is building a platform of applications to work on its browser, it expects most revenue to continue to come from search rather than display ads or paid-for services.

Apple has blazed a trail selling applications, music and video through its iTunes store. But that market is only a fraction of the size of the tens of billions earned every year in search, Volozh said.

Yandex would not rule out deals to help its expansion abroad, he added.

"It may be one of the models to buy somebody or partner with someone or just to build something from scratch," he said.

The key was to persuade consumers of the importance of maintaining choice and competition.

"We have ended up with these platforms where you are gardened in ... you can't step out of it. This is completely contrary to the initial idea of the internet," Volozh said.

($1 = 30.8509 Russian roubles)

(Editing by Mark Potter and Alden Bentley)

(This story is corrected in eleventh paragraph to clarify that Yandex developed its own browser)

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