The Federal Anti-monopoly Service (FAS), a Russian watchdog agency, blocked Google from executing its planned transaction of Russian ad platform ZAO Begun.
Digital ad players are increasingly acquiring properties in the Eastern-European ad market, from WPP's purchases of Advertures and Alite Ltd., to Isobar's absorption of AdWatch.
So when Google announced plans to buy Russian contextual ad firm ZAO Begun in July, few thought to question it.
The FAS denied permission to permit private firm Kokuna Holdings Limited — Google's Cyprus-based subsidiary — to purchase 100% of Begun's stock, invoking the "Protection of the Competition" law.
Because Google failed to provide proper and complete information on all its Russia-based employees, the FAS claimed it could not evaluate any potential consequences of the deal.
Among other concerns, the FAS worries Google's acquisition of Begun will make it a major player in the burgeoning Russian ad market. These aren't idle worries. 77.4% of US search engine ad spend in Q2 occurred on Google, which serves 71% of searches in the country.
Google is also the most popular search engine in most European countries — serving 87% of searches in the UK, for example — with the exception of Russia, where the leading player is the country's own: Yandex, the third most-accessed search engine on the continent.
Search advertising in Russia alone is anticipated to be worth $1 billion in 2010. Online and marketing spend doubled between '06 and '07, totaling $369 million, of which search and contextual advertising comprised $210 million. Yandex, Russia's search darling, is currently preparing a $2 billion IPO for the NASDAQ, which will value the company at around $5 billion.
Google's $140 million acquisition of Begun was expected to finalize in September. Founded in 2002, Begun is a keyword-targeted network with distribution relationships with 40,000 Russian advertisers and 143,000 websites. It offers pay-per-click, pay-per-call and other performance-based ad models.
The American search Goliath was expectedly disappointed with FAS's decision. It responded thus (via ClickZ):
We strongly believe that this acquisition will enable us to significantly improve opportunities for Russian users, advertisers and publishers as well as the entire industry. At this time we are reviewing FAS's decision. Once this process is complete, we will decide on our next steps.
In Dec. '07, Google's controversial $3.1 billion bid for DoubleClick was approved by the US Federal Trade Commission. The EU's antitrust agency, however, refused to pass it until March '08. Less than a month later, Google began dismissing redundant employees.
Fruits of the deal were first visible in August, when Google used DoubleClick's ad technology to improve AdSense.
