Nebius Group NV (YNDX) 2011 Q2 法說會逐字稿

Thank you for standing by and welcome to the Yandex 2011 results second-quarter conference call. At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions).

I would like to advise you this conference is being recorded today, Thursday, July 28, 2011. I would now like to hand the conference over to your first speaker today, Katya Zhukova. Please go ahead.

Hello, everyone, and welcome to Yandex's Q2 2011 earnings call. Today we have on the call our CEO, Arkady Volozh, and our CFO, Alexander Shulgin. Our CTO, Ilya Segalovich, and our Director of Corporate Finance, Dmitry Barsukov, will be available during the Q&A session.

Our call will be recorded. The recording will become available on our Investor Relations website in a few hours.

For your convenience, we put together a few slides to accompany this story. They are currently available on our IR website. And now let me take you through the Safe Harbor statement.

Various remarks that we make during this call about our future expectations, plans, and process constitute forward-looking statements. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our APR prospectus dated May 24, 2011, which is on file with the SEC and is available online.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Although we may elect to update the forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

During this call we will be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with US GAAP. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today.

And now to Arkady Volozh.

Thank you, Katya, and welcome, everybody, to our first conference call as a public company. It was a historic quarter for Yandex. Our IPO was an important milestone in the life of our business and in the life of our technology sector as well. And we are pleased to welcome so many new investors to the Yandex family.

These projects required tremendous effort from across our Company, and I want to congratulate and thank all of our employees on the success of this IPO. And since we have so many new investors, I would like to start my presentation with a short introduction of the public company.

As you may know, we started -- Yandex was started, it went online in 1997. Our principal operating company was integrated in the year 2000. Today we have more than 3000 employees who work in 10 different offices across Russia, Ukraine, Kazakhstan, Belarus and the United States. We are currently the largest Russian Internet business, and we are the number one Internet destination in Russia. And Russia, as you may know, is the seventh largest Internet market in the world has measure by users. And according to comScore, Russia has more than 48 million Internet users.

We are number one not only search but also hold the number one position in several verticals, central news, comparison shopping, maps, and others. A strong technology, a deep local focus, understanding of local culture -- this has been at the core of our success and kept us ahead of competition in our market.

We are proud for our reputation of the best place to work for Russian software, the engineers and developers, and now let me update you at last on our second-quarter results.

Let me start with some users statistics of the portal. We remain the most (inaudible) destination on the Russian Internet, attracting 48.5 million unique visitors in June. This is according to comScore. According to LiveInternet, this is a real time tracker of market share, our second quarter search market share in (inaudible) was average at 64.6% level. Search (inaudible) volumes continued a strong growth trend. The average monthly number of search engine results pages which were served on Yandex increased approximately 60% year on year, and this growth came both from increased Internet penetration, as well as intensity of use. According to comScore, the total number of Internet users in Russia increased by 15% year on year to 48.7 million users in June this year. So the rest of the growth came from the intensity of use.

Our search market share in adjacent geographies remained also pretty strong. Our market share in the Ukraine, Belarus, Kazakhstan was 38%, 39% and 25% respectively.

As you all know, our revenue mostly comes from advertising, so let me say a couple of words about our advertising system. This second quarter we served 144,000 of different advertising clients both tech-based and display, mostly tech-based, of course, which is a 41 increase over the same quarter last year and a 15% increase from the first quarter this year. So we served 41% more clients than a year ago.

We continued our communication to regional markets, and in addition to Moscow, as you know, we already had sales offices in Saint Petersburg, Ekaterinburg, Novosibirsk and Kazan. And in May, we launched our southern sales office in Rostov, Rostov-on-Don.

In advertising technology, we also continued development. For example, we continued tuning of our placement logarithms, which led to improved click-through rates. We also made some design enhancements to our Yandex advertising network and got a lot of additional clicks in revenues (inaudible) installed partners, and we also implemented much needed new technologies on Yandex.Market, our comparison shopping service.

Now a couple of words on the user services and products which we launched. The first thing I would like to mention Is rambler. Rambler is one of the leading Internet portals here in Russia and the fourth largest player in the Russian search market. And Rambler joined our Yandex advertising network this quarter. We now power both search and advertising solutions for them. And, as you may know, we were not the only option for them to go with, and we are very proud that they chose Yandex as their partner.

In maps, we take a continued focus on development here. The Yandex product is called the Yandex's Business directory. It is our new location-based advertising service, which sits on top of our maps platform. The Yandex's Business directory tripled the number of advertising during this quarter, and we have our own in-house cartography team here, which introduced several services on maps, including new satellite images, new panoramic views for several cities, and also some crowd source players on the maps.

On the mobile front, we continue to develop superior products for all the major platforms. This quarter we launched a Yandex.Mail application for iPhone. We also launched Yandex.Panorama for all mobile platforms, and we also modified our mobile exchange and results page in use for touch devices.

User traffic for mobile devices has been growing very, very fast. For example, our main mobile application, Yandex.Maps increased 2.5 times year-over-year in usage and increased 30% from the first quarter this year. And so mobile is important for us, and we continue to invest heavily on this front.

In marketing, this quarter we successfully executed a major outdoor advertising campaign to support our Yandex's Business directory, a new product.

And at least, we launched Yandex.Factory to take -- we wanted to take care of the Internet ecosystem, and Yandex.Factory is to provide seat financing to entrepreneurs and startups here. Yandex.Factory has screened over 700 of different business plans, not only from Russia but also from abroad. After screening, we provided funding to four teams.

And in conclusion, and before I hand over to Alexander, I would like to stress that this second quarter has been all about investing in growth and attracting new talent for Yandex. We accelerated hiring in the second quarter, and we have achieved most of our hiring targets this year. Accordingly, in the remaining quarters, headcount projection will be much more modest.

And now we go to financials, and I hand over to Alexander Shulgin, the CFO of Yandex.

Thank you, Arkady. Before going into specifics, I would like to note that our topline performance was quite strong, reflecting continuing growth of the Internet as a communication and advertising medium. At the same time, we continue to execute on our growth agenda by aggressively investing in equipment of expansion and new talent. And then now to numbers.

Our consolidated revenues increased 57% year on year to RUR4.5 billion. It is $162 million, north of that June month and exchange rate. The main contributor to revenue growth was text-based advertising, and text-based revenue increased 59% year on year and comprised 88% of total revenue in the quarter. Display advertising contributed 10%, and the rest came from Yandex.Money and other sources.

Our revenue on our partner websites was growing slightly faster than on our own website, and some further improvements in partner website monetization, as well as partnership with Rambler, are not yet visible in Q2 results as both happen toward end of the quarter. The main driver behind text-based revenue growth was paid clicks, which increased 47% year-on-year, while average cost per click or CPC increased 8%.

Display advertising continues to grow at a robust clip as we see brand advertising budgets migrating from traditional media to the Internet, albeit at a slower pace than in Q1 this year.

But the bulk of our revenue continues to come from the Russian market. Our second largest market is the Ukraine, accounting for less than 2% of total revenues.

And now turning to costs. Our operating costs, excluding share-based compensation and depreciation and our amortization expense, increased faster than revenue at 82% year on year, primarily due to accelerated execution of our growth agenda, including higher (inaudible) expansion, as well as the effect of an outdoor advertising campaign. The increase in share-based compensation expense was related to a revaluation of share-based expense in the quarter, resulting from a change in divestment turns with one employee, as well as mark-to-market adjustments related to nonemployee grants and certain share-based awards accounted for liabilities.

I would like to give a little more color on traffic acquisition costs and say a few words about the [S&L], our most significant growth item. Traffic acquisition costs increased 82% year on year, faster than text-based revenue. The increase in TAC on our partner website is the result of partner revenue growth overall, as well as a slight change in partner mix. Traffic acquisition costs from distribution agreements, however, was increasing faster than revenue on our own website as we took on additional distribution partners.

Going forward, we will seek to avoid significant increases in distribution TAC as a percentage of revenue on Yandex's own website as our distribution goals are almost met. However, we cannot completely rule out growth in distribution costs as a result of users changing their headers and search preferences.

In Q2 our personnel costs increased 65%, reflecting aggressive hiring to sustain growth. The increase was primarily due to headcount. By the end of Q2 this year, the number of full-time employees increased to 3001 people, an increase of 54% over the end of Q2 last year. The growth in headcount was primarily coming from the product development and engineering departments.

As Arkady mentioned earlier, we do not see this kind of progression in hiring continuing in the remaining two quarters and expect personnel costs for the full year in the range of 20% to 21% of revenue as was typical in prior years.

All other costs, excluding stock-based compensation expense and depreciation, increased 106%, primarily due to unfavorable year-on-year effect of our advertising campaign, as well as IPO costs of RUR65 million in excess of the amount reimbursed by the underwriters.

As a result, our adjusted EBITDA increased 32%, and adjusted EBITDA margin for the quarter was 42% versus 50% in Q2 last year. The increase in depreciation reflects past and this year investments in equipment and content licenses. Equipment was generally amortized over three years, while purchased technologies and licenses are generally amortized over the useful life, but not to exceed five years. And stock-based compensation expense reflects past grants to employees predominately amortized over the four years they are scheduled.

As you saw from our press release, our effective income tax rate for the quarter has been reduced to 18.5%. This comes as a result of a change in her treasury and investment plans for the near future, whereby we do not anticipate paying intercompany dividends from Russia to the Netherlands out of this year, 2011, earnings. Therefore, we have stopped accruing for the dividend withholding tax between Russia and the Netherlands. The 18.5% reflects both the lower effective tax rate and the reversal of Q1 accrual. For the full year, we expect the effective tax rate to go down approximately by 1.5 percentage points.

As a result, our net income increased 11%, and net income margin was 25%. Adjusted net income, which is calculated before share-based compensation and foreign exchange gains and losses, grew 35%, and adjusted net income margin was 28%. The major adjustments affecting the year-on-year growth rate was strip off the foreign gain of RUR143 million recorded in Q2 2010 last year, as well as the loss of RUR34 million in Q2 2011. These gains and losses result primarily from revaluation of our US dollar-denominated deposits in Russia.

Our CapEx increased quite significantly, arriving at approximately 25% of revenue in Q2. And we expect to ramp up our CapEx rate in the remaining quarters, as well as catching up on our investment program, which had been slowed down during the crisis years.

And finally, turning to our balance sheet, we have the equivalent of RUR18.8 billion and cash held in US dollars and rubles, including the $404 million in IPO proceeds held in the Netherlands. The accounting rules require us to record gains and losses on cash held in nonfunctional currency. Accordingly, we will continue to be exposed to Forex volatility attributable to the US dollars held in Russia. However, over time we expect to reduce US dollar holdings in Russia to manage our dollar-denominated expenses.

US dollars held in the Netherlands will not have any impact on the P&L as our functional currency in the Netherlands is the US dollar.

And finally, about our full-year expectations, for the whole year of 2011, as laid out in the press release, we expect our ruble-based revenue growth to be in the range of 55% to 60% year on year. And on CapEx we will continue to aggressively invest throughout the year and expect to return to more normalized levels, historical CapEx levels, by next year. In 2011 our CapEx is expected to be up to RUR6.3 billion.

With this, I would like to hand it back over to Arkady.

Thanks for the update, and at this point I would like to open the floor for questions and answers.

(Operator Instructions). Joseph Okleberry, Morgan Stanley.

Congratulations on your first quarter. Two questions, one for Arkady and then one for if Ilya is on the call.

The first is, can you just comment on anything you're seeing in terms of the competitive landscape and changes over the past few months either on the partnership side or on the hiring side?

And then the second one is, can you guys just talk a little bit about how much of your internal resources are spent trying to improve the core algorithmic search experience versus the advertising, targeting and paid search experience?

On partnerships -- this is Arkady -- maybe I will take the first part of the question. The question was partnerships, what is the competitive landscape?

As you know, we have a four major search players. We have the first one, which is 60%-something market share. And then there is Google with 20%-something. And there is [Mail] with 7%-something and Rambler with 1% to 2%. This quarter we partnered with Rambler, meaning that we added their market share to our search and advertising to increase our advertising power by the 1.5%, 2%.

It is important to notice that after switching to Yandex search, Rambler has increased their market share from 1.4% to 1.6% and 1.7%. So maybe it reflects the search (inaudible) increase, and this actually was the major change on the competitive landscape between the search engines here.

On the hiring side, we successfully compete for the talent. We grow talent in our school of data analysis, which had its fourth graduation this year. And actually, we have some challenges from the international companies. We compete for talent with big international companies on the west coast of US. When young people decide where to go for work, it's usually a choice between us and them. But we managed to compete quite successfully and we won --

We didn't lose basically no on engineer. It is Ilya Segalovich. In Russia we have several Russian companies that feel that we are too aggressive. We are not trying to be aggressive, but people are willing to come to Yandex, very, very strong.

Well, talking about our efforts in search and advertising, I would like to say that I think half of the efforts at least are spent to the search. And we are increasing our algorithmic efforts to advertisement. Recently we hired new people and increased the team, and we see the coming improvements in algorithms and in advertising.

We already made some improvements this year -- in this quarter, sorry. We made improvements in Yandex.Market targeting, and we improved the advertising network targeting quite significantly. So that's what you kind of relatively important steps for us. And once again, we are now quite aggressively increasing the efforts on the advertising.

Thank you.

Edward Hill-Wood, Morgan Stanley.

I've got two questions, please. Firstly, just on your full-year revenue guidance, it does imply a very healthy second half of the year against very tough or much tougher year-on-year comparisons. So I was wondering if you could give us an idea of how you -- how much visibility you have on that number, how confident you are in the 55%, 60%, and does that imply flat market share for you, or does it imply any other changing dynamic in terms of contextual against display, for example? That would be the first question.

The first second question is on mobile. Could you just give us an update on where we are in terms of mobile as a proportion of search queries right now and how it has changed through this year, and whether or not there has been any change in dynamic between either -- our handset manufacturers would need to browse in terms of agreements you have with them to provide default search status, please?

Alexander will take the first question.

It is Alexander again. On full-year revenue guidance, we are very comfortable with our revenue guidance of 55% to 60%. This would assume flat market share, so, let's say, no big changes in the market share or our monetization preference. So that's it.

On the mobile side, the mobile is very important. We are behind many markets in smartphone penetration yet, but it's crowing. The search traffic on mobile grew over 60% during this year, only since this year, since February. But search is not the only search change in -- results page is not the only question answering service on mobile. There is also maps, which we are focusing a lot. Because people tend to ask questions, not only by tagging them, but mostly on mobile too much degree on maps. And our maps application, Yandex.Maps, has grown as I said, 2.5 times since last year, the same period last year, and we continue to invest a lot in maps in general, in mobile maps in particular. And I think this will be -- this should be one of the key applications for us in mobile.

Also, I would like to add -- this is Ilya -- that we had a new search engine result page this quarter for mobile and a new Yandex.News page for mobile, and we're working on some improvements, further improvements and further services on the mobile front. That's it.

Perfect. Thank you very much. And if I may just ask one final one, have any of you recently been down to Istanbul in Turkey recently?

Many Russians have vacations in Istanbul. We have just partnered with [SIM].

Thanks very much.

Jeetil Patel, Deutsche Bank.

I had a couple of questions. First of all, your advertiser number was up 41% year on year on a tough comparison. Maybe if you can walk us through the dynamics of the advertiser growth in the business, how quickly -- how much do they end up spending as they come onto the platform? Does it take six months to 12 months to finally ramp up their spending, or is it fairly instant in terms of the underlying impact? I'm just trying to figure out the lag on the number of advertisers and their spend ramping up on the site.

Second, on the index factor, you talked about four business models getting funded. Do you see this as a growing trend, and how do you work with these individuals startups in terms of leveraging their ideas, and what do you bring to the table besides obviously great know-how, expertise? Are you providing them traffic, maybe a team dedicated to understanding how the market is evolving, etc.?

And that I have a quick follow-up.

Alexander will answer the first question.

On advertisers increase, we see a robust increase in the number of advertisers that grew 41%. And what we see that beck and flow of new advertisers and the existing ones are increasing their spend. However, since we have a flow of newcomers, the average spend -- advertiser growth at, say, between 20% to 10% rate, which is fine for us because we see people who are used to running campaigns from Yandex have a strong increase in their spend, and at the same time, we see an inflow of new guys who will eventually start to spend more.

So overall, we're very comfortable with the increase in active advertisers and also an average spend increase.

Talking about Yandex.Factory, it's a new project for us. We are investigating this area, and we are trying to raise the atmosphere, the temperature in the Internet area. And we looked at about 700 different companies and projects, and we contacted very closely and made several conferences in Yandex that we ought to have such thing.

We invested into four projects already, and we are working on about one, two, three, four -- about four other projects. Plus, we have some negotiations. The projects are from Israel, Moscow, Ukraine, another Ukraine, so it's quite diverse internationally. The help that we give them we are actually very open and give them all the APIs we can provide and also ultimately try to -- we are very open in this kind of respect and want to help them as much as we can.

Our investment there is quite small. It is tens of thousands of dollars, usually, and we give them -- it is a seed investment, and usually we start doing something together.

Is the idea that eventually they can leverage our traffic and build a business off of some of the traffic and core products that you've already developed?

And then just as you look at from a technology standpoint, maybe you can give us a sense of how expendable your core technology is into other markets out there, maybe the previous speaker was referring to Turkey, etc., but how extendable is the technology to other languages out there and any sort of plans that we should be thinking about that may result in you taking your product into other regions?

Just a couple of points about the technology extension. We have very diverse languages inside Russia and inside (inaudible), Ukraine, Belarus, Russian. Also, we serve in German and these kind of Western languages, the European languages.

So technologically speaking we are advancing into the position where we are very highly developed and on a very high level. And maybe Arkady will add something.

As we announced previously, we are looking into the direction. We are experimenting, but we don't have any product for any market now except for the Russia and the (inaudible) markets. The more we expand, the better we understand how tricky it is.

Alex Balakhnin, Goldman Sachs.

A couple of questions if I may. First is, you mentioned that you were fine-tuning a design of your placement for the advertising network, and that might explain the good revenue growth of your earned network revenues. Do you expect this will continue contributing to the revenue growth in the third, fourth quarter? That's the first question.

The second question, you also mentioned that you are working on improvement of the click-through rates. Could you elaborate on that and like what exactly you are doing, if it is possible to say, and also what magnitude of share improvement we might expect?

And lastly, on your CapEx guidance, does your CapEx guidance assume that you will be spending more this year and less, relatively less next year? I.e., is your high CapEx of the year offsetting the CapEx levels for 2012, 2013, or this just comes [through the tiers]?

Ilya will handle the first part of the question. Alexander will handle the second one.

Yes, talking about targeting and algorithmic advertising on the network, we are constantly working on improving the design. That's one of the things that we are working on and playing with that, making it more clear and more attractive.

But the other thing is what we did is we improved the behavioral targeting, improved the way how we guess what people will click next, the click prediction algorithm. And that actually was the source -- one of the two sources of the growth on the advertising network this quarter.

On CapEx -- this is Alexander -- yes, our guidance for this year that CapEx will be about RUR6.3 billion -- up to RUR6.3 billion. Next year we plan to increase CapEx as a percentage of revenue. However, naturally the decrease won't be as much because we expect revenue to grow next year. So it depends on what will be our regional growth by 2012. The amount obviously could go down or up. But overall, an absolute amount, we don't expect CapEx to be substantially lower than this year. But it will be lower by about high teens to lower 20% as a percentage of revenue.

Steve Weinstein, Pacific Crest.

Thanks for taking my call. Just a couple of questions for you. There was a slight difference in the growth in terms of paid clicks versus the growth in SERPs. I guess 47% compared to 60%. Can you help us understand the difference in that between -- is the difference in search result pages because of noncommercial query growth maybe growing faster, or is it just in areas that you haven't begun to monetize yet, and is that a future opportunity? That's my first question.

And then the second one would be just about the SG&A in the quarter. Obviously a big increase from where it had been. You talked a little bit about the hiring, but I'm wondering if you could call anything else out or point to anything else in the quarter that may be unusual or something that we wouldn't want to extrapolate forward as we built our models?

This is Alexander. I will start with the second question. SG&A expense, yes, there was a high growth in G&A expenses. On one hand was hiring, and we increased our marketing team for example and HR teams because on the new teams they are just forming a department.

But the biggest driver was our one-off IPO-related expenses to the extent it is not covered by underwriter. And also we are running in Q2 an outdoor advertising campaign, which (inaudible) or Q1 this year. In absolute amount it was approximately from RUR100 million to RUR120 million, but [IT-related] expenses of about RUR65 million. So these are one-off items which won't repeat going forward.

As to paid clicks, the growth in paid clicks fluctuates versus growth in search result pages. And from quarter to quarter, we see that sometimes the trend grows faster than commercial activities (inaudible). However, in the long run, this growth rate tends to equal or converge on longer time periods. So we are not very much concerned that it will be a long-term trend.

Usually in fall, in high season, the clicks grow faster than the search traffic. This is Arkady. And in summer, it is vice versa.

Thank you.

Gene Munster, Piper Jaffray.

I'll add my congratulations to the first quarter. And one question in terms of your view on the government investigations on the recent data privacy issues, have you had investigations like this from the government in the past? And what's been the outcome? Any sort of color on that. Thanks.

On the one hand, we (inaudible) some investigations, but, on the other hand, there was nothing on the personal data before. As you know, there was personal data leaked by different sites in the web, which users noticed in the search engines in Yandex and Google and Bing. And due to mostly unexperienced webmaster behavior that made this available to the index and search engines just did their job and indexed whatever is available on the Internet.

We collaborate with the investigators. We will be happy for them to track what happened. And, as you know, the new regulation was adopted and signed by the president just last week on personal data, which will make carrying all this data in a much more safe way.

May I add a couple of things? I think that this is a very common situation when personal data is available through the search engine because people and webmasters are doing sometimes very silly mistakes, and they might be found at any moment, any time.

This week was very big on that topic because it is probably one of the first moments in the history of Russia when it was discovered that the search engines might be used like that. So there was a spike of interest for this topic, and everyone was trying to find some examples of personal data. And that was --. But we tried to -- first of all, we strictly (inaudible) to the rules and trying to not to crawl private information, not to -- how to say -- not to have nonrelevant, very personal data in our index, and we are working with webmasters to make all this problem solved.

What do you think the outcome of this is going to be? Is it there is some sort of continued definition around how you can index data, or could there be potentially a fine, or I guess what are -- what is the most likely outcome of this, and when do you think we will have some sort of resolution?

We don't know, but actually we don't expect -- currently we don't expect any new regulations on the search engines in this area. There is again the new regulation was adopted, which make the rules for those who publish the data. So hopefully it will help webmasters and people think twice before they make any data available.

And on the other side, again, we are ready to help them, to show them what is available, obviously help them to see what's available online publicly and maybe to hide the sensitive information. (Multiple speakers)

Just a follow-up question in terms of the bidding platform, if you can just clarify -- right now your bidding platform is an open bidding platform so advertisers can see other advertisers' bids. Is that correct?

Yes, that's correct.

And then over time do you suspect you're going to go to a closed bidding platform?

We don't know if we should do it. Because if not, we think we will stick with what we are doing now. As you know, there is no theory showing that closing the platform better than in terms of revenues integration than opened it. So we have the open bid platform. We think it is attractive to our advertisers now, and after examining this, I think we will stick with it for a while.

Great. Thank you.

David Reynolds, Jefferies.

Two questions for you. The first, I think you said that your advertising customers were migrating their advertising budgetary spend online slightly slower in the second quarter than in the first, and I was wondering if you could explain why that was.

And secondly, I think you reported you now have 144,000 advertising customers. I wondered if you could give me a sense of how concentrated is your revenue there? What proportion of your total revenue would, say, your top 100 or your top 1000 clients provide you with?

Alexander, want to handle the question?

On number of advertisers growth, actually we see acceleration of growth over this last year in Q2. In Q1 this year our growth rate versus last year was 38% in number of advertisers, while in Q2 it is 41%. So the growth rate accelerates.

And, at the same time, spend per advertiser also increases versus last year. The increase this year was in Q2 was 12% in average spend to advertiser. And this increase is impacted from two sides. One is the season advertisers accelerate their spending versus last quarter and last year, while the newcomers bring the average lower, which is fine because eventually the newcomers will also start using the system more. Professionally and the spend per advertiser will go up as well.

So, in this regard, in growth rates in terms of number of users for the system and spend for advertiser, it has grown well in both regards.

In terms of concentration of our revenue, with advertisers the picture is quite stable, and it is not increasing -- actually going in the opposite direction, it becomes less concentrated. However, we are not going to disclose the figures by advertiser. So unfortunately, I can't answer this particular question.

This is Dmitry Barsukov. I just wanted to add that no single advertising customer accounts for more than 1% of our revenues, if that helps.

Thank you for that. So could I just clarify then, perhaps I misheard in your conference call, I thought you were explaining that the migration of advertising budgets from traditional media to online seemed to be slightly slower in the second quarter. Is that not the case, and could you perhaps give me a bit of a feel for what you see happening in the Russian advertising market right now with regard to the migration of spend online?

This is Arkady -- no, we never thought it had changed. What we see here is continuing trend on migration of advertising to online. Nothing has changed, and it is just like it was in Q1. No significant changes. We still continue to grow faster than any other medium.

Thank you.

Probably it was some kind of communications error.

And for your final question, we have a follow-up from Alexander Balakhnin of Goldman Sachs. Please go ahead.

A quick follow-up on your advertising campaign you had in the second quarter. It was quite noticeable. I mean your advertising was all around. What may force to do it again probably later this year or next year? I mean what drove you to do this advertising, and what may change or may happen to cause you to do it again?

This is Alexander again. The reason for the advertising campaign in Q2 was the launch of our new navigation service is advertising on our maps. That's why we ran the campaign and also to attract users to our map service, which is the most popular map service in Russia.

What could make us do advertising again is the launch of new product or desire from outside to attract user attention to some kind of new update or change in our recent services.

Currently I cannot comment if we will run or not run an advertising campaign in the following six months; however, we are definitely committed to do advertising in the long run again in Russia or in other markets where we operate.

I would now like to hand back to management for any closing remarks. Please go ahead.

Thank you, everybody. Thank you very much for your support in our first earnings call, and we are looking forward to updating you on our progress on the next call in October. Thank you very much.

We will have more.

Thank you.

Thank you.

That does conclude this conference for today. Thank you for participating. You may all disconnect.