In February 2005 Michael Gir, manager of advertising agency Young &Rubicam met with a 30 year old entrepreneur Andrew Andreev. He was looking for executive director for his new project. Andrew told Gir about “Mamba”, his previous project which was launched a year ago. Mamba was an online dating service with more than a million of registered users. Every day this number was increasing in 7000 people every day. Andreev explained that he wanted to promote Mamba in the West and that he needed a team of expats to make translations into foreign languages.
This idea was never implemented. In October 2005 when the number of profiles in “Mamba”’s database exceeded 4.5 million, the most popular dating site in Russia was purchased for $20 million by an investment holding “Finam”. According to Victor Remsha, “Finam” founder, almost all the money went to Andreev.
Though Mamba never made it to the international dating market, Andreev did it with his new project in 2006 when he launched another site Badoo.com. He’s also opened a new company with the same name with an office in London. Gir became its executive director. Today Badoo counts about 80 million people. The site competes with Plentyoffish - a leader of European free online dating services (135 million profiles), as dating market analyst Mark Brooks from New York Courtland Brooks says. In 2007 “Finam” bought from Andreev 10% stake in Badoo estimating the whole company into $300 million. According to people who know Andreev, company prepares to enter the stock market. Remsha, who increased “Finam” stake in Badoo up to 20%, doesn’t know anything about that, but considers IPO a possible step as long as the price is good for the founder. Anyone, who knows Andrew, says that he won’t agree to less than $1 billion.
The first famous Andreev’s project “SpyLog” gave the West a stir. In 2001 many American users, checking the history in their browsers found that someone had visited their computer from Spylog.net. Domain was registered in Valencia (Spain). To contact they were advised to use a suspicious email firstname.lastname@example.org with Petr Zaitcev (now he owns his business in Silicon Valley). Finally Moscow friends of American bloggers confirmed that SpyLog was a “reputable and big business by Russian standards”. No American computer was damaged and people stopped talking about it.
The story of SpyLog started in 1999 in a basement where Andreev was renting a space for his computer store “Virus”. SpyLog would study user behavior in the net and profit from selling analytic reports to the owners of various web resources, advertising agencies, and marketers.
“It was the first Russian statistics service which could be used as web analytics system”,- explains Leonid Filatov, chairman of the Board of Directors of “Aktivist” holding. In 2007 “Aktivist” paid about $3 million for SpyLog. Andreev left the project in January 2002 so it’s unknown if he got any profit from the sale. According to Babayants (former executive director of SpyLog), while working in SpyLog, Andreev’s team was already working at another project – “Begun”. Andreev is a type of person who can make something in a basement, sell it for $100 000 and start another project. He has a talent for that.
“Begun” became the first Russian system for placing contest advertising with payments per click. Advertiser had only to choose key words, describing his goods or services, and a banner or a text link would appear on sites which attract people who are interested in that type of goods. Advertiser pays for results only, and the price per click is set like at an auction: the more you pay the higher you are in a listing. One could easily start advertising campaign after paying with wire transfer, credit card or via courier. It was a revolution in Russian internet.
First they were using free computers in their friends’ offices, and then rented an office in an old building working all nights. In several months “Begun” started to bring money. During one and a half years the company performed advertising campaigns for 20000 advertisers. Each campaign cost approximately $50 a month. Monthly turnover reached U.S. $ 150 000. Potential investors started contacting Andreev. That was the time when he met Victor Remsha from “Finam”.
Remsha was looking for internet projects for investment. They met and then in the end of 2003, 80% of Begun’s shares went to “Finam” for $0.9 million.
The investment turned out to be a good profit. In two years “Finam” sold main shares of “Begun” to Rambler Media for $0.75 million. In 2007 Rambler bought another 25% for $18 million. “Finam” could have earned more when in 2008 Google offered $140 million for 100% of “Begun”. But the deal didn’t come through at the time. Unofficially Rambler was saying that Vladimir Putin himself prohibited selling “strategic assets” to Americans. Andreev didn’t earn a lot from his project again but he was already taken by a new project.
Remsha says that the next project, dating service “Mamba” they were designing together. At the time SMS payments service just appeared and they had to understand how to use it. Andreev thought that unlike other similar dating services which were charging a lot for memberships to contact brides and grooms, registration at “Mamba” should be free and anonymous. Also, he wanted to play on users’ vanity and allow them increase their popularity and profile visits. This is how they got an idea of profiles promotion to the first page of the site for a small sum of money. The price was approximately $1. No one had such an option, exclaims Remsha.
Most of Russian internet startups just copy foreign model. Mamba was unique, notes Nikita Sherman, ex-president of the company. Together with rare internet games it was creating demand for SMS payments. And if all previous Andreev’s projects were connected with advertising, Mamba was supposed to have no ads at least at the very beginning.
Andreev managed to do almost impossible: unite hundreds of dating sites into “Mamba” partner network with one general database, including dating sites owned by his direct competitors Rambler and Mail.ru. He added another service “Catch a leader” which was an auction for the most noticeable place at a homepage. Sherman calls this as a way to show that “you are not one in a million but one of the few”. “During the rush hour the best place would cost $1000 - he says. – Some would pay this thousand with one SMS.”
Having bought “Mamba” in 2005, “Finam” CEO didn’t regret. In 2009 its profit reached 664 million rubles with EBITDA 48%. The number of users increased 12 million people.
In 2007 “Finam” sold 30% of “Mamba” for $18 million to Mail.ru, which was a part of internet holding DST of Yuriy Milner. The rest part of “Mamba” became main share (73.9%) of venture fund “Finam IT” net assets of which are estimated at 3 billion rubles.
In spite of huge success in Russia and efforts of expats team, “Mamba” couldn’t go out to the Western market. Its ex-president Sherman thinks that the reason is that foreign users do not trust free services. They are used to the fact that all online dating sites are closed communities with memberships to get access to database. Free registration was suspicious. Gir sees a different reason.
“Mamba” was too concentrated on dating, - he says. – To start in Europe successfully, it was necessary to add social networking components”.
When creating Badoo, Andreev considered that. By that time he already moved to England and lived in a townhouse near London.
And again the project turned out to be a success. In a year after Badoo was launched Google mentioned it in its review Year-End Zeitgeist-2007 saying that by the number of queries Badoo bypassed all the world’s novelties, except IPhone.
Not all feedbacks were positive though. TopTenReviews noticed that Badoo was an interesting site which represented a mix of a chat, dating service and photos rating masked to look like a social network. Enumerating its drawbacks including “endless spam”, the agency set Badoo in a row with Facebook, MySpace and Bebo anyways. In Russia Badoo couldn’t overdo “Mamba”. Though in France, Spain, Portugal, Latin America and Nigeria it became very popular.
By the end of 2007 Badoo had 12 million of registered users. In 2009 it already had 48 million of registered users. Now Badoo has about 80 million. According to Nil Briant, executive director of the company, “20% of the users pay for lifting their profile [1 euro] once a month, and some of them do it eight or nine times a day”. According to conservative estimates, annual revenue of Badoo (not counting payments for virtual gifts and other options) should pass $200 million.
Just to compare: the last year income of adult dating service FriendFinder Networks was $224 million, net loss - $ 27 million, debt - $0.4 billion. Friend finder has 109 million of unique users (1 million of paying ones). The company intends to place its shares on the market, hoping to gain $ 200 million for 40% stake. IPO was delayed because of claims of U.S. Securities and Exchange Commission. Others, more successful IPO took place in Japanese market during crisis of 2008. First in Tokio there was a local social network Mixi (15 million users), which was estimated $0.9 billion, then several months later Gree followed it (7 million), which assets immediately raised 52% providing a capitalization of over $ 1.3 billion.
Developing Badoo for four years, Andreev had a reason not to follow his habit to leave his projects. “With Badoo he seemed to learn on how to go on”, - says Filatov from “Aktivist”.
Unbelievable but true. Internet entrepreneur with passport data Andrew Andreev does not exist. Even many friends of Badoo’s creator don’t know that it’s not a real name but a nickname. Last time when Andrew publically introduced himself with a real name – Andrew Ogandzhanyants , was at a conference “Internet-Marketing-99”. In all other interviews, till 2002 when he stopped giving them, Ogandzhanyants was using his nickname.
No one knows why he is hiding. Forbes representatives, who know Andreev quite well, said that before his projects appeared at a Russian market he spent several years in Valencia and studied in London.
Friends and colleagues before telling anything to Forbes were consulting with Andreev and then were refusing to talk or agreed only to make some comments about the project. When Forbes requested an interview he said that he was not ready to talk to Russian press.
Andreev’s close friend explains that he never liked to be public. Besides, he was always afraid for his own and his business safety. One of the former managers in Badoo Rick Baker adds that Andreev doesn’t like to be photographed.
On the other hand, this restraint and distrust can be explained by family tragedy. One of the interlocutors told Forbes that Andreev’s father Vagner Ogandzhanyants was a prominent Leningrad physicist who either got in a car accident, or was a victim of an attack. He was very badly damaged. Judging by the patents found by Forbes (the last one was dated 1984) inventions of Ogandzhanyants-father were used in underwater plasma cutting technologies for metals. Development of his son may not be as high technology as his, but for sure are commercially more successful.