Yandex shares drop as costs of keeping top spot rise
MOSCOW (Reuters) - Russia's top internet search engine Yandex (YNDX.O) gave revenue guidance for 2013 that analysts said showed slowing advertising growth, sending its shares down 9 percent at the New York open.
Yandex, which leads the world's top search engine Google (GOOG.O) with a 60.5 percent share of the Russian market, said fourth-quarter earnings grew 27 percent, outstripped by a 40 percent rise in its marketing and product development costs as it tried to maintain dominance of its home market.
"It is a really difficult thing to control as the market gets more mature and it is more difficult to raise prices on inventory while the company has to be competitive across all other technological areas," said Anastasia Obukhova, analyst at VTB.
Yandex's fourth-quarter total cost of revenue rose 40 percent to 2.1 billion roubles, while total revenue rose 37 percent to 8.8 billion ($290.4 million). It said cost increases reflected investments in growth, including personnel.
For 2013 it expects rouble-based revenue, excluding that from Yandex.Money, its joint venture with Sberbank (SBER.MM), to rise by 28-32 percent. In 2012, revenue rose 44 percent to 28.8 billion roubles.
"Yandex's guidance suggests to us that internet advertising market growth is slowing fairly sharply, although it is possible that the company has opted to guide relatively cautiously at this stage in the year," wrote Renaissance Capital analyst David Ferguson, who said the revenue forecast was below consensus.
Ferguson noted speculation that the company was set to return cash to shareholders. "With this not happening, we see scope for disappointment here too," he said.
(Reporting by Megan Davies; additional reporting by Anastasia Teterevleva; Editing by Louise Heavens)