Interview: Andrew Paulson, CEO, Sup: Russia’s Web Revolution, Making LiveJournal Pay

imageThe first most people heard of Sup was when the upstart Moscow internet investment vehicle bought LiveJournal from SixApart in December (oh, and poached Annelies van den Belt from But with mega IPOs planned for Yandex and, national ad spend forecast to almost double this year and Sup itself buying news site, the company finds itself on the cusp of a Russian internet revolution…

So what is Sup? After he sold his Afisha magazine publisher in 2006, Paulson founded the company with partner Alexander Mamut, a wealthy entrepreneur close to Boris Yeltsin’s Kremlin, because “we realised the time was finally right in Russia to begin investing in the internet”. “Up until that point, there was limited broadband penetration and ad spend moving from print and TV. The first thing that came up on our radar was the fact the fourth largest website in Russia was owned by this company in America that had no idea how it had emerged there, had done nothing to get it there and wasn’t doing anything to maintain its position.

Russian explosion: Embodied by Google last week buying Rambler’s Begun ad unit, the scene is finally taking off, with Russia’s online population forecast to become Europe’s second largest on 40 million this year. “The three major mobile players here are just falling over themselves to get broadband market share, it’s ‘play now or forever be marginalised’. Economically, the country’s doing very well and even better when compared to the doldrums of the US and western Europe; media buyers in Russia are more imaginative and more demanding of innovative advertising tools than elsewhere in the world, the shift from old media to new media is happening faster than it happened in the west.

All the other BRIC countries have strong presence from Yahoo (NSDQ: YHOO), Google (NSDQ: GOOG) and Microsoft (NSDQ: MSFT), but neither of these companies has made much of a dent here.

Lots more after the jump…

Because the Russian market is big and daunting, everyone (outside) was hoping they’d come in and acquire Yandex, or Rambler, but it never happened.” It’s this lack of international crossover Paulson, who quit the US in the early 80s, identified as the “great opportunity” for Sup, which was designed to connect with international partners. Its +SOL ad agency places banners in Russia for sites including Forbes, Times Online and plus, through the LiveJournal acquisition, Sup has a San Francisco office, used as a gateway to specific Silicon Valley skills.

LiveJournal plans, going to India: LJ’s Russian traffic has more than doubled since being bought from SixApart, Paulson said. As for revenue, Paulson wouldn’t comment; it’s low because “not very much attention was paid to monetising LiveJournal (by SixApart) before we acquired it“.

There’s already a big cultural difference between US and Russian users. “In Russia, it goes a step further… it’s much more about politics, the quality of posts is so high that we actually consider to be a kind of mass media itself.” So much so that, unlike, better-crafted posts are fed to the front as though part of a professional news site, Paulson said. He aims “to recreate that uniqueness” in other LJ territories.

There are internationalisation plans for north Africa, the Middle East and south America – “we’re also poking our nose in Kazakhstan at the moment” – but everything will be organic rather than acquisitions, and first stop is “moving aggressively in to India”. The site will initially launch in Engish but consider further localisation depending on success.

Keeping the partial pay wall: Recent buzz may have been about a shift from paid content to ad-supported, but LiveJournal has no intention of dropping its premium, no-ads subscription offering. One wonders if this is a response to users’ outcry over LJ’s recent decision to axe the free offering, something reinstated after a community revolt. “If you’ve got a company that has two revenue streams, keep ’em,” Paulson said. But he still wants more “payment relationships with our clients” and, in the next couple of months, “we’re building partnerships with a number of companies that are going to be developing that relationship even deeper”.

Advertising: A recent eMarketer study forecast Russian online ads would almost double to $685 million this year. LiveJournal’s new VP Matt Berardo, recently hired from Yahoo, told me Russia’s web ads sector is “probably a bit behind” and “still primarily banners and some contextual advertising” but that’s “in fast-forward” and buyers are calling for more targetability. Paulson claims “surprisingly high” CPMs of $20 to $30 for Sup’s +SOL clients and is “not worried” about an advertising recession spreading.

Kommersant deal: Last month, Sup gave a minority stake to the business newspaper publisher and used some of the proceeds to buy its outright in return; the remaining investment will be used for more acquisitions next year. Paulson: “That more or less confirms that we’re an international media company. is an incredible jewel of an asset. It’s the online journal of record in Russia; we’re planning on marketing it worldwide.” Isn’t a news site a world away from blogs? “We’re proud of having acquired it but we’re aware of the enormous responsibility of having a news site beyond the social network. We assume we’re going to be able to double’s 2.8 million unique users in the next year and a half. The most interesting thing it brings us is an incredibly high CPM.” LiveJournal integration, then, is “not our principle goal” but LJ may be used to market LJ already powers the Kommersant comments facility.