Kommersant (Ukraine) – April 17, 2008

Media holding to invest $6m in new Internet project

The RBC holding and Israel’s Tweegee company have agreed to form a joint venture that will manage a social network for children. Tweegee will provide the joint venture with a platform used by 80 percent of Israelis aged 8 to 14, while RBC will invest $6m in the project over the next three years.

Children’s social networks are a trendy line of business in the West at the moment, but in the CIS they have not yet become a lucrative business, experts note. The Russian website on the basis of the Israeli children’s social network Tipo.co.il will be launched in June or July of this year, RBC Media General Director Artyom Inutin told Kommersant yesterday. He indicated that the two companies were currently in talks on the domain name and the new company’s registration. RBC will hold control over the joint venture. “Tweegee will provide us with a platform for a social network, on which the Israeli portal Tipo.co.il currently works, and we will invest $6m in return,” Inutin stated. The Israeli company confirmed the striking of the deal. Shay Bloch, co-owner of Tweegee, told Kommersant that the company was also planning to enter the U.S. market this year. He pointed out that about 1.2 million aged between 8 and 14 currently lived in Israel, and nearly 1 million were registered on the Tipo.co.il website. With this in mind, roughly 80 percent of all children used the portal. RBC plans to use the company’s experience in Russia, and its goal is to have 1 million people using the website daily within three years, Inutin observed.

Tweegee was formed in 2004 by a group of individuals, including Chairman of the Board of Directors Yohai Rayfeld and General Director Shay Bloch. Tweegee owns the Tipo portal in Israel and Tweegee.com in the U.S. The website features an environment for children where they can play multi-user online games, communicate, keep diaries, upload videos, find new friends according to their own interests, save photos, create virtual worlds, and even create their own web pages. Last year, the users of Tipo.co.il created more than 870,000 personal web pages. Information about Tweegee’s financial performance is not available, but the company assures that it is a profitable one.

RBC needs a children’s resource in order to take up the niche on the market that is still vacant in Russia, said Inutin: “For us, this is a new category of users, which will help us attract new advertisers.” RBC expects the new social network to become lucrative within three years. Among the elements that can potentially bring revenue are media advertising, payments for certain services (e.g., games) via text messages, product placement in games and virtual realities. “We are also testing the system of placing advertisements in videos,” Inutin added.

It is quite possible to bring the daily children’s audience up to 1 million in the span of three years, Deputy Director of the Russian TV channel Vesti 24 Askar Tuganbayev believes. He indicated that VGTRK (All-Russian Television and Radio Company) was also planning to launch its own children’s social network in June of this year and hoped to attract roughly 1.5 million users in the next two years.

Children’s social networks are a fashionable segment on the Western Internet market, Investment Director for ABRT Venture Fund Nikolai Mityushin stated. He cited the deal on the acquisition of the children’s network Club Penguin by The Walt Disney media company for $700m in August of last year as a reminder. “Before the acquisition, the network had only existed for two years and targeted children between the ages 6 and 14. At the time of the sale, the number of the portal’s users stood at 12 million people,” Mityushin observed. Meanwhile, advertising market participants believe that advertisers are reluctant to place advertising for children’s products on the Internet. MindShare Interaction marketing manager Yulia Udovenko stressed that the youngest age of interest to an advertiser on the Internet is 12 years. The situation will change, however, as an increase in the number of children using the Internet will lead to higher advertising budgets targeting a children’s audience, General Director of Mediacelling advertising agency Lev Glezier said: “This can happen as soon as within the next two years.