Russia’s Internet group Mail.ru has acquired the remaining stake in VKontakte (VK), making it the sole owner of the country's largest social network. This concludes the drawn-out battle for control over the lucrative business and the data of millions of users inside and outside Russia.
Mail.Ru group, which until recently owned 52% of VK, bought the remaining shares of the company for $1.47 billion from the Moscow-based fund United Capital Partners (UCP). UCP became owner of this stake in April last year, after it bought the shares from VKontakte co-founders Lev Leviev and Viacheslav Mirilashvili for an undisclosed amount of money.
Almost immediately, UCP started to pressure Pavel Durov, VK's founder and CEO, accusing him of various misdeeds. UCP claimed that the messenger app Telegram, a separate venture launched by Durov and his team, in fact belonged to VK, because the founder allegedly used the social network’s equipment and technology to create it. Durov, in turn, announced that VK had fallen under the control of Russian authorities and that he himself was a victim of political games.
Of course, it’s hardly possible to verify his accusations, but a few details about VK's owners do suggest some ideas. The head of UCP, Ilya Shcherbowich, is said to have close ties to the Kremlin. He was previously a board member of state-owned oil giant “Rosneft.” The head of “Rosneft”—Igor Sechin—is a close ally of the Russian president Vladimir Putin. Sechin and Shcherbowich are intimate friends, according to some reports in the Russian media.
The main shareholder of Mail.Ru group—billionaire Alisher Usmanov—isn’t a fan of the opposition, either. One episode from recent Russian history illustrates his unwillingness to fall out with the authorities quite well. In December 2011, Kommersant-Vlast (a magazine owned by Usmanov) published an article about the Russian legislative elections with a photo of a bulletin, where a voter wrote “Fuck you, Putin.” Soon afterwards Usmanov commented to the media that such behavior was totally unacceptable. The editor-in-chief of Kommerdant-Vlast and the CEO of Kommersant holding were then fired in a rather emphatic manner.
The next change in VK ownership happened in December 2013: Durov sold his stake (12%) to Ivan Tavrin, CEO of mobile carrier Megafon, which, like Mail.Ru, is controlled by Usmanov. At the time, Durov also claimed that Russia's Federal Security Service came to him demanding the personal data of Ukrainian protesters who had accounts on VK, and that he'd refused to hand it over. While in conflict with the FSB, and feeling under pressure, Durov said he felt compelled to sell the shares. Later on, in spring 2014, he resigned.
In March 2014, Tavrin sold his stake to Mail.Ru. The group had made earlier attempts to increase their stake by making offers to Durov, and he refused to acquiesce by making a public (and graphic) comment on his Instagram account (the photo was later deleted).
Now that Mail.Ru has reached their goal, and Durov is trying to make a new life for himself abroad, the network's users are left speculating about the future of VKontakte. Mail.Ru group happens to also own Russia’s other large social network, Odnoklassniki.ru.
Unlike VK, Odnoklassniki is viewed by many Russians as a “redneck network.” Its users are typically older, more conservative, and spend their network time spreading jokes, videos and images, most of which fall short of the standards of VK and Facebook audiences. The social network platform is full of ads, and its interface is far from friendly.
Odnoklassniki users are also characterized by very strong support of Putin’s actions in Ukraine, and most of the questionable reports and rumors about events in Eastern Ukraine find a faithful audience here.
After the deal between Mail.Ru and UCP was announced, users flooded the RuNet with indignant remarks. VK is now full of messages saying “it’s about time to delete my page” and “let’s register on Facebook.” “It is as if Huawei bought Apple,” lamented one TJournal reader.
VK users fear that Mail.Ru might decide to merge the two social networks or at least make VK more similar to Odnoklassniki. Indeed, the same day the deal was announced, VKontakte began to include off-site ads in the feeds of its Android application users.
The ads are not the worst of the trouble, however. What may be more disturbing is that one of the social network’s main uses—political activism—is under threat of suppression. The Russian State Security Service (FSB) had demanded user data even when Durov was VK's CEO. He had opposed it, and ended up having to sell his stake and resign. The new CEO of VK, who was recently appointed, has direct ties to the Kremlin propaganda machine: Boris Dobrodeev is the son of Oleg Dobrodeev, who is in charge of VGTRK, the Russian state TV and radio broadcaster. We can only guess how much access to user data FSB will get now, and how much control the new management will exert over the free flow of politically charged information.
For Russian Internet users, the Mail.Ru acquisition of the remaining stake in VKontakte is a big deal, as many of them spend quite a lot of time on the network. But it matters little for foreign investors. The main shift in the VK narrative occurred quite a bit earlier, when the network fell under the control of two businessmen with ties to the Kremlin. The recent deal changes little, as room for independent online entrepreneurs in Russia shrinks dramatically and loyalty to the regime becomes the main criterion of achieving any kind of success.