The ongoing saga at VK.com, Russia’s most popular social network, has twisted and turned so many times in the past 12 months that it is very difficult to keep track. Founder and long time CEO Pavel Durov has been rumoured to have left/been fired repeatedly in 2014, including one “April Fools” that managed to deceive pretty much the whole country (and VK’s majority shareholder Mail.ru). However, this time it seems like it really is all over.
It remains unclear whether Durov was fired or whether he resigned. VK’s executive director Dmitry Sergeev claims that Durov handed in a resignation notice on 21st March. However, the company was legally bound to keep this information secret for 30 days - hence the announcement on 21st April.
Durov’s April 1st announcement was, therefore, partly true, which explains why even Mail.ru was taken in by it. Durov had, effectively, already resigned. On April 3rd however, perhaps flattered by the response to his resignation, he announced his intention to stay on. At the time he apparently thought that this decision overruled his original resignation request.
It turns out that he was wrong - yesterday he announced that
“The cancelation of my resignation letter, which I signed on 3rd April, turns out not to have conformed ‘to all the rules’. This means that I have been automatically relieved of my duties and VKontakte is now under the complete control of Igor Sechin and Alisher Usmanov. It is likely that, in today’s Russia, such an outcome was unavoidable, but I am glad that we were able to hold on for seven and a half years. We achieved a lot, and it is too late to take much of that back.”
There are still many unanswered questions, but Nikolay Kononov, author of “The Durov Code”, a biography of VK’s young founder, has tried to clear up some of the main ones in a recent article for online business journal Hopes&Fears.
Has Durov actually left or not?
VKontakte has two main shareholders - the fund United Capital Partners (UCP) and Alisher Usmanov (Mail.ru Group), and only Usmanov’s representative has accepted Durov’s resignation. UCP responded by saying “you can’t just pack up and leave VKontakte”. If the two shareholders can’t agree, they’ll probably file a few more court cases.
What the hell is actually going on?
Shareholder conflict. The story goes something like this. Durov blocked the sale of his co-founders’ (Vyacheslav Mirilashvili and Lev Leviev) stakes to Usmanov’s Mail.ru Group. Usmanov himself got involved in negotiations, offering Durov to buy him out at a good price. In return Durov would not obstruct the purchase of Mirashvili and Leviev’s stakes.
However, Usmanov didn’t manage to come to an agreement with VK’s shareholders, but UCP did. UCP then proceeded to hassle VK’s managers - making public documents about how much Durov was spending on flights, asking why the network was generating much less revenue per user than its rivals. Usmanov stood by Durov, even after Durov’s un-politically correct claim that the authorities were putting pressure on him.
Who is behind UCP?
Durov is convinced that it’s Igor Sechin, one of Putin’s right hand men. H&F sources reported this a year ago, and Forbes later wrote that UCP’s boss Ilya Sherbovich ‘sold’ the deal to the Kremlin as one of political importance, which is why Sechin got so involved. However, it is almost impossible to verify whether such agreements were ever made, and Sherbovich insists that he acts independently.
Why is the Kremlin so bothered about VK?
It can’t just ignore the country’s biggest independent media company, with an audience of 60 million daily users.
So UCP bought 48% of VK - now what does it want?
It wants to sell its stake for a higher price - possibly to Usmanov. They claim that they are considering an IPO, but no concrete steps have been taken in that direction.
Does VK really earn so little?
In 2012 VK’s revenue was $172 million. There are good reasons to believe that in 2013 it exceeded $200 million. In terms of average revenue per user, VK is way behind Facebook ($0.8 vs $1.7). Sherbovich also claims that VK’s main rival in Russia, Odnoklassniki, makes 2.5 times more per user than VK. Durov however counters that a social network’s capitalisation depends more on its daily audience than total revenue.
Does Durov really oppose the authorities?
He is his own man, and as his project’s success is founded on his users, you can say that he is his users’ man. You can’t make a success of a global project if there is a stain on your reputation. Look at Kaspersky, and the way that the West, considering his KGB past, demanded proof that he didn’t intend to use antivirus software to steal data about his users, and imagine how they would respond if it became known that Durov was handing over data about users. He understood this, which is why he was so hostile to demands from the state prosecutor.
What about the new network that Durov has promised to build?
This is the most interesting question. Lawyers reckon that Ilya Sherbovich has a chance of winning his legal battle to bring Telegram into VKontakte, because it was developed by VK’s programmers. However, Durov has previously talked about creating a mobile-oriented social network separate from Telegram, and given the impression that Telegram was really just about testing the waters.
Therefore, in the near future we can expect to see an interesting, new product from Durov that brings together all the best things about Telegram - speed, self-deleting messages, chats with up to 1000 users etc.
But what will happen to VKontakte?
The same, as will happen to Russia.
Top image via Shutterstock
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