Yandex NV, the Internet search provider that has kept ahead of Google Inc. in Russia, is also succeeding at fending off another global competitor: Uber Technologies Inc.

Yandex now has more than 15,000 taxis connected to its online-hailing application in Moscow, according to estimates by the city’s Chamber of Commerce. That compares with about 3,000 cars for Uber. Yandex, which still gets most of its cab revenue from the capital, plans to increase coverage to 25 Russian cities by year-end, unit head Tigran Khudaverdyan said in an interview.

While advertising has been hurt by Russia’s recession, Moscow’s 60 billion-ruble ($1 billion) taxi market has held up well as competition from online services make grabbing a ride more affordable, according to Khudaverdyan. Taxis using the company’s system may see sales of more than 10 billion rubles this year, ZAO Raiffeisenbank estimates.

“Online services have made competition in the taxi market more transparent, leading to lower prices and sharp growth in the number of rides per person,” Khudaverdyan, said at Yandex’s headquarters in central Moscow. “For a third consecutive quarter, our taxi revenue is growing faster than we could’ve expected.”

Expansion would help Yandex to diversify away from search- related advertising, which still accounts for over 90 percent of sales. While the company doesn’t break out taxi income, items listed under “other revenue” in its second-quarter results tripled and consist mainly of the taxi business, according to the company.

Moscow’s government requires online-taxi services to work with licensed drivers and has been pushing for unlicensed cabs to get permits, which cost nothing and let drivers use special lanes and park in taxi stands. By the time San Francisco-based Uber started services in late 2013, Yandex had a two-year head start.

Uber also lags behind Gett, founded by Israeli businessman Shahar Waiser, which has more than 10,000 cars in Moscow, according to the chamber of commerce. Uber is also present in St. Petersburg and Ekaterinburg.

Turkish Taxi

Uber is seeing growing demand among existing and new riders for its services in Russia, a company spokesman said in an e-mailed response to questions. The company declined to say how many drivers it has in the Russian cities in which it operates.

As part of the battle to win customers, Uber has offered Russian clients free ice-cream or movie tickets, while Yandex has responded by buying two Teslas and offering random clients rides in the electric cars, which are still a rarity in the country.

Yandex is considering expanding its taxi service outside of Russia to countries where it now offers Internet searches, including ex-Soviet republics and Turkey, Khudaverdyan said. In Turkey, where Yandex has about a 5 percent share in the search market, it invested in BiTaksi, the country’s largest online taxi service.

Additional Channels

Unlike Uber, Yandex started by connecting taxi companies in Moscow with dozens to several thousands of cars each to its service, helping them to win additional orders. This approach allowed the company to quickly gain market share, Khudaverdyan said. Later, Yandex started setting fares, requirements for cars and testing drivers for knowledge of Russian.

Uber, in contrast, mainly signs up individual cars, resulting in a “chicken-and-egg dilemma,” according to Khudaverdyan. “They need more passengers to hire more drivers, but they also need more drivers to get more passengers.”

This article was written by Ilya Khrennikov from Bloomberg and was legally licensed through the NewsCred publisher network.

Tags: russia, taxis, uber