Russia tightens grip on media as Yandex sells homepage, news to rival VK

(This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine)

MOSCOW (Reuters) - Russia's leading internet firm Yandex (NASDAQ:YNDX) on Tuesday said it had agreed to sell its news aggregator and yandex.ru homepage to rival VK in a move likely to further limit Russians' access to independent media.

The all-share deal, in which Yandex will acquire 100% of food delivery service Delivery Club, marks a significant shift in Russia's internet landscape, with Yandex effectively passing control over distribution of online content to a state-controlled firm.

VK already runs Russia's largest social network, VKontakte, while Moscow has blocked access to some foreign platforms, including Meta Platforms' Facebook (NASDAQ:META) and Instagram.

Russia's years-long suppression of independent media intensified sharply after Moscow sent troops into Ukraine on Feb. 24, passing a law banning what it calls "false information" about the armed forces and quashing many organisations' ability to broadcast freely.

"The board and management of Yandex have concluded that the interests of the company's stakeholders...are best served by pursuing the strategic exit from its media businesses and shifting to a focus on other technologies and services," Yandex said in a statement.

Nasdaq-listed Yandex, often referred to as "Russia's Google (NASDAQ:GOOGL)", has in recent years complied with Moscow's demands under threat of fines over which publications' stories can feature on its news aggregator, drawing criticism over the impact on media freedom.

Moscow has not blocked access to most foreign-language media, which remain freely available in Russia and on Yandex, but search results do restrict access to any sites that communications regulator Roskomnadzor has banned, many of which are Russian-language independent media.

In February, Yandex started warning Russian users seeking information about events in Ukraine of unreliable information online.

A former head of Yandex News, Lev Gershenzon, on March 1 described Yandex as a key element in hiding information about the conflict in Ukraine. Yandex has denied being complicit in censorship.

"We are buying our freedom," a source close to Yandex said. "This business had been such a weight on our feet.

"This will enable us to do our business significantly depoliticised, practically completely depoliticised."

SEARCH SHIFT

Yandex dominates Russia's online search market with a share of around 62%, according to its own analytics tool Yandex Radar. Google accounts for about 36%, with VK's mail.ru at less than 1%.

That stronghold over the online search market will likely continue.

Yandex.ru displays a bundle of news stories below its search bar, followed by a rolling stream of content. The company's entry point for search will now become ya.ru, a site that resembles Google's homepage and is already popular with those who prefer uncluttered searches.

Yandex.ru, complete with News and Zen, will be renamed dzen.ru, Yandex said, with VK to take over development and control over "content, look and feel".

The deal, signed on Monday, requires anti-monopoly approval and is expected to close in the coming months, Yandex said.