Central regions | Telecoms, media | Finance, business

Online video service Ivi.ru secures $40m from leading Russian and Western investors

12 Sep '12
East-West Digital News, the international resource on Russian digital industries, reported yesterday that this past Monday, just days after witnessing the financing rounds of online shoe retailer Lamoda.ru and travel site Onetwotrip.com, the Russian Internet scene saw another giant funding operation with Ivi.ru, a major video streaming service.

Ivi.ru raised no less than $40 million from private equity firm Baring Vostok Capital Partners, a shareholder of Yandex and Ozon.ru, along with existing investors Tiger Global Management, a US investment management firm already involved in several leading Russian Internet properties, Ru-Net, a prominent Russian fund, Frontier Ventures, a Moscow-based, $50 million venture fund launched earlier this year, and Prof-Media, a large Russian media and entertainment group.

Launched in 2010, Ivi.ru makes more than 97% of its content available for free, but a small part of its content is reserved for the paid subscribers of its ‘ivi+’ service, which was launched earlier this year.

Judging by its monthly traffic, Ivi currently ranks 4th among Russian free video platforms. Last July, according to TNS, it attracted 8.1 million users aged between 12 and 54 residing in large Russian cities, including 4 million users who watched Ivi’s clips from partnering sites.

That same month, Youtube served over 23 million Russian users, according to the same source. The audience of Rutube, initially a Russian copycat of Youtube but now developing a more specific approach, exceeded 13 million users, while Tvigle.ru approached the 10 million mark.

Among paid video sites are Now.ru, which belongs to Russia’s gas giant Gazprom, and Stream.ru (previously Omlet.ru), a property of LSE-listed holding AFK Sistema, which invested $15 million in the service last June.

Russian online video services have to cope with the competition of Vkontakte.ru (VK.com), the leading social network, whose users share – often illegally – a virtually unlimited amount of video content from all countries.

Big audience from big money?

The amount of Ivi’s latest financing round, and the site’s possible valuation, may seem disproportionately large given the size of Russia’s video advertising market, which has been estimated to be less than $30 million in 2011.

“The market is growing up to three-fold each year, driven by improvements in broadband coverage and a dramatic growth of mobile content consumption throughout the country,” Ivi.ru founder and CEO Oleg Tumanov said in an exchange with East-West Digital News. “In addition, there is a clear trend in favor of legal content and legitimate market players in the middle and long terms.”

“We are targeting, and we need to get prepared for, a market of another order of magnitude,” Tumanov added.

Ivi will use its funds to build out its technology, including mobile and Smart TV platforms, and enrich its content offer.

Tumanov declined to disclose any financial indicators.

The future will determine whether Ivi’s big money will easily translate into a big audience. While the site previously raised “several dozen millions” of dollars in investment, according to Tumanov, Tvigle reached its existing position – ahead of Ivi – with only $5 million raised in its early stages, four years ago.

Tvigle secured its second round of financing in September of last year, raising $8 million from Promsvyazbank’s venture arm Media3.

Both sites dealt recently with major Western content copyright owners to enlarge their catalogs.
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