Google: closure further impoverishes Russian tech, not Alphabet

First seize the airwaves. The old playbook, deployed in countless coups across Asia and Africa, is back in vogue. Authorities in Hong Kong froze the assets and arrested top journalists of Apple Daily, a gossipy pro-democracy newspaper, triggering its demise. Now Russian authorities have seized and raided Google’s domestic bank account, tipping its subsidiary in the country into bankruptcy.

Bad news for citizens, but investors need not sweat. Google had already shuttered the “vast majority” of its commercial activities in the country. International clients must have been pulling ads in any case. There will be no material impact on first-quarter results.

This is not a Google exit on the scale of China. The search website was banned there more than a decade ago, but Google still makes plenty of money selling overseas advertising to Chinese companies. Nor will it entail the sort of write-offs incurred by asset-heavy businesses such as oil supermajor BP ($24bn) or carmaker Renault (€2.2bn).

Any income foregone by parent Alphabet will be small. Roughly 1 per cent of Google’s revenues emanate from Russia, largely from advertising. The emptied piggy bank at the Russian subsidiary was essentially local currency working capital, rather than a nest egg of billions of dollars. It may not even be enough to cover outstanding fines, levied for such perceived malfeasances as ditching a YouTube channel run by a sanctioned oligarch and disseminating content critical of the Russian government.

Google will maintain a presence — YouTube, the app store and other free services will continue to be available in Russia — without obvious reputational damage. YouTube may still be in the business of supplying independent content in competition with a predominantly pro-Putin Russian media.

Tech companies have long benefited from Russian talent; Google’s co-founder Sergey Brin was born there. But disenchantment with the country as a place to operate has grown. Laws on data sovereignty and arbitrary blocks on websites chased out tech bright sparks well before the latest exodus. The Google shutdown will further weaken Russia’s undersized private sector tech ecosystem, as well as the access of Russian citizens to independent news.

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Source: Financial Times