Yandex is a giant and a veteran in Russian Internet. Its founding team has been developing the technology since 1989 and managed to innovate throughout the two decades of its existence to merit the status of Russia's number one search engine. Last week Yandex announced its unaudited financial results for 2010 and they look sweet. Unlike in 2009 when its revenue shrank by $26M, Yandex reported a 43% increase, reaching $410M annual revenue. Contextual ads make up 88% of that revenue. Online advertising has been growing exponentially in Russia throughout 2010, which is great news for Yandex who generates over 64% of overall search engine traffic in Runet (with Google having a bit over 22% of the market share). Estimates of Mail.ru Group's revenue for 2010 at the time of its IPO application were around $300M. The Group has not yet published its financial results for 2010 but if those figures are correct, Yandex's annual revenue might have surpassed that of Mail.ru's by over $100M. What's the reason for Yandex's current success?

Arkady Volozh, CEO, claims it's due to the constant improvement of the product. In 2010 alone Yandex added foreign content to its search engine, launched an international service (yandex.com) together with a number of specialized services like music streaming, job search, property search, detailed banking service, maps and panoramic views and their own prepaid card for online shopping worldwide. Yandex also stroke deals with Facebook and Vkontakte for the social networks'profile search and expanded its operations to Belarus, Ukrain and Kazahstan. Finally, Yandex went mobile resulting in its mobile portal being the most visited in Russia (8.5M unique monthly users with 150M pages viewed per month).

“The considerable revenue increase we report this year reflects two important trends — a post-crisis revival of the small and medium-sized businesses and a shift in advertising expenditures from other channels towards online advertising”, says Arkady Volozh. So if you're considering expanding your business for the Russian audience you should probably start by looking into keyword queries your product generates in Yandex. For a detailed overview of the company check out this excellent presentation.

With such great financial indicators and growing success, we can expect Yandex to file for an IPO any day this year.