Archive for the ‘Bloomberg Business Week’ Category

The Russian Twins Behind Hit iPhone App Cut the Rope

Thursday, September 22nd, 2011

When they were 10, fraternal twins Efim and Semyon Voinov received a British-made ZX Spectrum personal computer from their parents. It was 1991 in late Soviet-era Moscow, and such things were rare. The Voinovs put the Spectrum to good use. They picked up programming and quickly graduated from playing games to designing their own.

That childhood hobby has rewarded the twins, now 29, big-time. Last October the Voinovs’ latest project, a game called Cut the Rope, exploded into the iPhone App Store, quickly reaching No. 1. In July the Android version debuted and also hit the top spot. It’s the first game to knock the megahit Angry Birds off the top roost, and has now been downloaded more than 50 million times. The in-game ads and 99¢ sales pile up: Although the brothers won’t talk figures, they’ve earned “several million dollars” from the game, says Mikhail Lyalin, executive chairman of the Voinovs’ year-old company, ZeptoLab. In a country saturated with programming talent, they’re among the first Russian developers to turn their attention to the smartphone market. And they’re likely not the last. Last year, Russians had 6 million iPhones and other mobile devices, though they generally arrive late to this corner of the world. That figure is expected to triple in 2011.

The brothers are rooted firmly in the Soviet heritage of science and engineering. “Everyone in our family is either a physicist or a chemist,” says Efim. Yet because their formative years coincided with the collapse of the Soviet education system, they are, like many of their coding compatriots, largely self-taught. While studying unrelated topics at university, they worked part-time as game programmers. They published some of their creations on a small site called PalmGear.com, and occasionally “we would get checks from America for $50,” says Semyon. “That was a lot of money for us back then.” After they graduated in 2004, Lyalin hired the brothers to work at a gaming company he owned, Reaxion, where they gained experience developing for different mobile platforms.

In the summer of 2010, the brothers left Reaxion to form ZeptoLab. “Zepto,” a math prefix meaning 10-²¹, was meant to signify how truly boutique their operation was: twin brothers working at home with their cat. After success with another game, Parachute Ninja, which was downloaded 3 million times, Efim and Semyon began prototyping the game that would become Cut the Rope. The objective is to get a shiny lollipop into the mouth of a little green monster, named Om Nom, by slicing swinging ropes at the right time. Efim, who typically writes code for the twins’ games, studied a kinetics textbook to understand how ropes move. Semyon, the designer, aimed to make Om Nom maximally cute. “I wanted it to have an emotional attraction,” he explains. “Like a child or a pet that needs to be fed.”

As the game shot up the rankings, the Voinovs started getting offers from Silicon Valley, they say, though they turned them all down. “We’re fine for now,” says Efim. Their focus is on expanding the business: They’ve moved into a real office, hired five people, and in August released a sequel, Cut the Rope: Experiments. They’re also taking a cue from the success of Angry Birds and expanding the brand into comics, stuffed animals, and more. After that? They’re hoping for “a little bit of a breather, so we can create a completely new project,” says Efim.

The bottom line: Cut the Rope has been downloaded more than 50 million times and earned its twin creators “several million dollars.”

The Russian Twins Behind Hit iPhone App Cut the Rope [BBW]

Facebook’s Russia Campaign

Monday, January 3rd, 2011

Facebook is the world’s largest social network site, with 500 million-plus members at last count. However, there are plenty of big markets where Mark Zuckerberg’s creation isn’t dominant. In Japan, Facebook doesn’t rank in the top three, and the site isn’t much of a force in Brazil or China, two populous countries where Internet usage is off the charts.

The outlook for Facebook in Russia may be more promising, despite the popularity of homegrown social network sites. Facebook officially launched its site in April and only ranks No. 5 so far, according to Internet tracker comScore, but its growth has been impressive. From January until August in 2010, its Russian operation has racked up a 376 percent increase in users, to 4.5 million, according to comScore data.

Early last year the company cut deals with Russian wireless carriers Beeline and Mobile TeleSystems, so that their subscribers could tap the mobile version of Facebook. To overcome the language barrier, Facebook allowed users to suggest translations for the name of features not easily understood in Russian such as “poke” (as in trying to get another Facebook user’s attention), and then let the site’s members vote them up or down. “Russian is a very complex language, so we allowed the users to translate the interface themselves so that it captures the complex grammar,” says Javier Olivan, a London-based Spaniard who holds the title Head of International Growth at Facebook.

Its founder has made no secret of his ambitions to thrive in Russia, a market where other Western players, including Google, have struggled to get their footing. Speaking at an Oct. 17 event at Stanford University, Zuckerberg said that if Facebook succeeded in penetrating the Russian market, it might have a shot at doing the same in China, the country with the largest number of Netizens. Russians’ heavy use of social network sites makes the country an ideal test-case. Russians spend 9.8 hours per visitor on a monthly basis on such sites—more than double the world average, according to comScore.

Why do Russians while away so many hours online? For one thing, there’s the climate: Staying indoors and socializing via the Internet is much more attractive when winter lasts a good six months. Then there’s the physical isolation, compounded by poor infrastructure, especially in cities like Murmansk, which lies north of the Arctic Circle.

Most importantly, though, there is a long tradition in Russia of relying on informal information networks for simple day-to-day survival. “In Russia, there is no sense that you can rely on the public or the system, so you’ve traditionally had to rely on a network of friends,” says Esther Dyson, a venture capitalist who has been investing in Russia’s tech sector for over a decade. In a country with weak institutions, “it’s very natural for people to network for what they want.” Even in these less oppressive, post-Soviet times, relationships are critical to everything from landing a job to wriggling out of a problem with authorities.

It’s no coincidence that the Russian love affair with the Internet has blossomed at a time when citizens are once again seeing their political and media freedoms dwindle. “[The Web] has become a place where you have absolute freedom of speech, where you can say whatever you want, good or bad,” says Ilya Krasilshchik, editor-in-chief of Afisha, a Russian lifestyle magazine and website. Afisha was one of the first Russian sites to incorporate the Facebook Like feature, which allows users to share content with friends on the site. Krasilshchik points out that Russia is different from China, where censorship prevails online. “We have this strange paradox where civil society is hemmed in, but its freedoms are limitless online.”

Not surprisingly, then, social networks have multiplied in Russia. Odnoklassniki.ru, a site modeled on Classmates.com with 17 million users, is the preferred destination for older, less tech-savvy users, along with being a popular dating site for Russians of all ages. Then there’s Moi Mir, similar to News Corp.’s (NWS) MySpace, with 20 million members.

The leader of the social networking pack is VKontakte, which is majority owned by Mail.Ru Group, a Russian investment fund specializing in Internet companies that also owns a small stake in Facebook. VKontakte, which has 28 million users, is inspired by Facebook. VKontakte has been dogged by claims that it has allowed the unauthorized posting of pirated music, movies, and other content free on its site. Mail.Ru declined to comment on allegations that VKontakte has engaged in such practices, though the company did disclose in a prospectus for a recent initial public offering in London that it is currently defending itself against several lawsuits. As for Facebook, the company “will not host any content that violates our terms of agreement,” says Olivan.

One thing Facebook does have over its Russian competitors is cachet. Whereas Odnoklassniki.ru has become the domain of the older generation, and VKontakte the hangout of young middle- and lower-class Russians, Facebook is the network of choice for the urban and the urbane. Facebook’s Russian users are generally of the wealthier, well-traveled, cosmopolitan variety, have foreign friends and tend to live in Moscow and St. Petersburg.

Facebook’s status received a boost in September, when the company hosted its first developers’ conference in Russia. The event, held in Winzavod, an up-and-coming art complex in Moscow, drew hundreds, including some prominent Russian Internet investors. The bulk of the crowd was made up of software developers hoping to transform their Facebook apps into riches.

Anton Nossik, the Russian Web guru who has a number of successful Web startups and used to run the company that owned the popular blogging platform LiveJournal, notes that in Russia sites such as Facebook and Google attract a particularly cosmopolitan set. Both are “for the global Russian, for the circle of people for whom the world doesn’t begin and end with Russia.”

Facebook’s Russia Campaign [BBW]

From Russia with Gloves

Monday, July 5th, 2010

On a windy May evening, seven perfectly respectable, well-paid professionals —including two women—trudged up three flights of dusty concrete stairs in an abandoned Moscow factory and strapped on boxing gloves. For the next hour and 15 minutes they twisted and ducked, jabbed and cut, and sweated through their T-shirts as their hair turned to wet spaghetti. “I’ll quit drinking, I’ll quit smoking! I promise,” one moaned, slinking, paunch first, out of the room and past the boxing club’s owner, his wife.

“Get back in,” she snarled. “Stop whining.”

Her husband obliged, and Elena Molova went back to monitoring the class from the studio’s doorway. It was the second day of operations at her October Boxing Club, a high-end boxing studio located on a thin island in the middle of the Moscow River and named for the now defunct, Soviet-era Red October Chocolate Factory next door. Tan, thin, and leathery—with a bob of peroxide blonde hair and vertiginous platform shoes—Molova is around 50 years old and has no prior boxing experience. (Her previous career? “Let’s just say…construction,” she demurred.)

About a year ago, in the throes of a financial meltdown that hit Russia especially hard—and hit its construction industry even harder—Molova sensed a trend wafting from the West. It started about a decade ago when Gleason’s, the hallowed Brooklyn training ground for boxers, started admitting the occasional neophyte. The trend moved across the East River to Wall Street, where overpaid and overfed bankers, traders, and analysts began gathering in places such as the financial district’s Trinity Boxing Club to release their competitiveness and, in some cases, vanquish their inner nerd. These soft-pawed bankers trained and competed in charity smackdowns that, during the good times, brought in as much as $100,000 a night. The trend quickly leapfrogged the Atlantic. From London, a city crawling with Russian expatriates, the hop to Moscow—where the sport remains popular from its 1930s proletarian heyday—was inevitable.

In a strange riposte to boxing’s hardscrabble roots here, four gentrified clubs have opened in Moscow in the last eight months. All claim they are open to everyone, but they’re actually targeting one particular demographic: men under 50 from the higher rungs of corporate management. “Our clients have achieved a certain stature in life—they know what they want,” says Evgeny Tresko, a former boxer and the owner and manager of the Put’ Boksera (Way of the Boxer) Club. “These are not people with too much time on their hands who just want a dumb fight. Of course, a couple of those types have shown up here. But they were intimidated by the prices and left.”

As aspiring oligarchs seek out ways of differentiating themselves from other bourgeoise strivers, belonging to an exclusive club where only the wealthy can afford to pummel each other makes sense. “This is the most expensive equipment that exists in 2010,” boasts one thirtysomething fighter at October, invoking the standard Russian metric for quality. The club is stocked with Johnson weights and Title gloves and punching bags. Says the fighter: “It’s what Mike Tyson uses.”

When it comes to price, this is not your mother’s Russia—and that’s the point. Way of the Boxer’s one-on-one sessions can top $100 per class. And with membership at $2,000 per year, October’s denizens are not your average street brawlers, either. Tatyana Arno, a TV personality, is a regular; so is Andrey Boltenko, the artistic director of Channel One, the main state-owned TV network. Filipp Yalovega, a Moscow hedge fund tycoon, usually rolls up on his Augusta motorcycle.

October is a favorite of Deutsche Bank (DB) employees as well as their counterparts at Merrill Lynch (MER) who work across the water. “The English and American guys just spar politely and break it up,” says Eugenia Kuyda, Molova’s daughter and a fighter herself. “The Russians—once you get gloves on them, you can’t tear them apart. They are vicious.”

That may be good news. Moscow’s boxing club owners will tell you that the point of boxing is unprecedented fitness, but the real inspiration is reviving a masculine ideal that some feel is lacking in modern, corporate Russia. The empowerment of these wimpy, corporate technocrats is a challenge, and boxing appears to be a distinctly Russian solution. “It gives a man what he needs to be a man: to stand up for himself,” says Tresko, hitting a common refrain. Behind the spread collars, lavish lunches, and hired women—so the theory goes—are fragile eggheads who studied hard, played chess, and paid for it in schoolyard gut punches. “What happens when a boy is attacked?” asks Kabi Korreia, a trainer at October club and a native of Guinea-Bissau who grew up in Russia. “He needs to fight back. It’s wired into his nature.”

In its first month in business, October Boxing Club has garnered about 50 regular clients. Molova is looking to eventually quadruple the number, launch a second gym, and, with the help of Moscow’s government, open a children’s boxing clinic in the fall.

“What’s most important about boxing is it allows a man to not feel like a girl in a step aerobics class,” Molova says amid the din of Russian gangster rap. “Boxing allows them to engage their masculine emotions. It’s a way to prove himself, and it’s nice to see men being men.”

To that end, once they enter the gym, the nouveau riche suits are reduced to average citizens. “These are slightly spoiled people,” Korreia says. “But here, when you walk in with your white collar, your status means nothing.” This is not the first place Korreia has worked with doughy elites. Once, he personally trained a banker pushing 50. In two months, the client dropped 26 pounds and quit smoking. “I trained him like an animal,” he says proudly.

As if on cue, three men walked in, one fat, one in a trench coat, one nondescript, all of them slightly menacing looking. They glanced around and watched the sparring a bit. Molova marched over to Yuri Koptsev, a bistro owner and former boxer who helps run the gym. “Who are these men?” she demanded. “Are they yours?” They were. Mr. Trench Coat, it turned out, was the deputy media director in the office of the all-powerful Moscow mayor. He was interested in taking classes.

With the more democratic fitness chains in Moscow offering more affordable boxing sessions, office drones all over the city just might start following the suits into the ring. By that point, though, the elites will have moved on to something different and more expensive. In modern, white-collar Russia, catharsis is important, but status is everything.

From Russia with Gloves [BBW]