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. Last Updated: 07/27/2016

Advertisers Discovering Internet Gold Mine

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What do a flying babushka and a space-bound beer bottle have in common? Both take center stage in different online ads, which come in all shapes and sizes to compose the fastest-growing segment of Russia's booming $3.8 billion advertising industry.

The nascent Internet advertising market has nearly tripled over the past two years, growing from $11 million in 2002 to $30 million in 2004. While it still comprises less than 1 percent of the total ad market, online advertising grew 67 percent last year, compared to the 37 percent growth of the television ad market, according to the Association of Communications Agencies of Russia.

"Our revenue nearly doubled over the past year," said Arsen Revazov, president of online advertising agency IMHO VI, part of the Russian advertising conglomerate Video International.

One of IMHO VI's ads advises users not to let the babki -- which is both a Russian word for "old women" and a slang term for "money" -- pass them by, while cartoon babushkas fly over a sign, urging people to hurry and make money with Microsoft.

An increasing number of Russians are logging on to the web, which market watchers say creates new opportunities for advertisers.

By the end of last year, 8.9 million Russians got online at least once a week, which is about a 35 percent increase from 2003, according to J'son & Partners estimates.

Only 16 percent of Russians surf the web, compared to Britain's 60 percent or Sweden's 77 percent, according to the Public Opinion Foundation's latest figures.

Still, Internet users are just the audience many advertisers are trying to tap.

The majority of Russia's web users have academic degrees beyond a high- school diploma and nearly half have incomes that surpass the average in their regions, the Public Opinion Foundation found.

Advertising companies are finding creative ways to catch these users' attention.

"You make content that's funny, encouraging people to forward it on," said Alex Shifrin, general director of The Creative Factory advertising agency, explaining the idea behind viral marketing.

According to this method, logos and other information about advertisers are included in e-cards, personality tests and other forward-friendly content that makes its way from one inbox to the next, carrying hidden promotional information through the Internet.

The myriad of advertising techniques makes Internet advertising difficult to define and measure.

"Like with any new sector, the picture is muddy and estimates vary," said Boris Ovchinnikov, an analyst with J'son & Partners.

For example, last year's market calculations of the country's largest Internet portal, Yandex, are $10 million higher than ACAR's. Unlike the advertisers' association, Yandex also includes ads that are targeted to online word searches in its calculations.

Measurement problems mean that direct comparisons across markets can be misleading.

It is clear, however, that Russia's $30 million Internet advertising market is tiny, taking into account the size of the country's population of more than 140 million people. By comparison, Poland's market grew from $20.6 million to $24.5 million last year, according to online ads consulting firm the Internet Advertising Bureau. Poland's population is about 105 million less than Russia's.

Nevertheless, IMHO VI's Revazov is confident that the domestic Internet advertising market will continue to grow.

The number of weekly web users is poised to reach 10.5 million by the end of the year, according to J'son & Partners estimates. Internet surfers are also becoming more active. IKS-Consulting found that the number of web pages visited by each user in a 24-hour period reached 34.8 in December, a 10 percent increase from December 2003.

"The Internet has already become a normal medium for advertising, same as TV, radio and press," Alexei Basov, who is the managing director of Begun, Yandex's main competitor in providing targeted online advertising, said in a written response.

Manufacturers of cellphones, computers and various household electronics, as well as car salesmen, banks and real estate companies, are already actively advertising online, said Anna Artamonova, vice president of the country's largest e-mail provider, Mail.ru.

Entertainment organizers are also catching on to the trend.

"It is a good way to attract people to our event," said Svetlana Brilliantova, spokeswoman for the Third Global Festival of Tea and Coffee, scheduled for the end of May. After the banner ad announcing Moscow's annual tea-lovers' festival appeared on Yandex, visits to the festival's site more than tripled, Brilliantova said. Producers of fast-moving consumer goods, such as groceries, are likely to be the next ones actively advertising online, she said.

Television commercials still hold the lion's share of the market, accounting for 44.1 percent, while online advertising accounts for only 0.8 percent, according to ACAR.

"Everybody in Russia has a TV set, but not everyone has access to the Internet." Shifrin said.

However, the Internet is a way to get to people while they are at work, he said.

Shifrin's TCF tries to get procrastinating employees interested in Efes beer, with a sly viral marketing ad -- a Cosmonauts' Day greeting card showing beer bottles flying into open space toward a man in a spacesuit.

Mail.ru's Artamonova projected that the Internet advertising market would double by the end of the year.

"People have finally decided to take [Internet advertising] seriously," Shifrin said.