Feb 16, 2016
Executives
Katya Zhukova - IR Arkady Volozh - CEO Alexander Shulgin - COO Greg Abovsky - CFO
Analysts
Lloyd Walmsley - Deutsche Bank Edward Hill-Wood - Morgan Stanley Alex Balakhnin - Goldman Sachs Ulyana Lenvalskaya - UBS Cesar Tiron - Bank of America Merrill Lynch David Ferguson - Renaissance Capital Vladimir Bespalov - VTB Capital Svetlana Sukhanova - Sberbank
Operator
Welcome to the Yandex Q4 2015 Earnings Call. Today's conference is being recorded.
I would like to turn the conference over to Miss Katya Zhukova. Please go ahead.
Katya Zhukova
Hello, everyone and welcome to Yandex's fourth quarter and full-year 2015 earnings call. We distributed our earnings release earlier today.
You can find the copy of the press release on the Company's investor relations website and on newswire services. On the call today we have Arkady Volozh, our Chief Executive Officer; Alexander Shulgin, our Chief Operating Officer; and Greg Abovsky, our Chief Financial Officer.
The call will be recorded. The recording will be available on our IR website in a few hours.
We also put together a few supplementary slides currently available on our IR website. Now, I will quickly walk you through the safe harbor statement.
Various remarks that we'll make during this call about our future expectations, plans and prospects constitute forward-looking statements. Our actual results may differ materially from those indicated or suggested by these forward-looking statements, as a result of various important factors, including those discussed in the risk factors section of our annual report on Form 20-F dated April 30 2015 which is on file with the SEC and is available online.
In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Although we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change.
Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. During this call we will be referring to certain non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with U.S. GAAP.
A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today. Now, I am turning the call over to Arkady.
Arkady Volozh
Thank you, Katya and hello, everyone. I would like to take a minute to reflect upon the important milestones of 2015.
Despite macroeconomic headwinds, we grew our total revenues 18% and posted annual revenue growth 2 percentage points above the top end of our guidance range. We intensified our focus on core business that allow us to reverse our search share trend in a highly competitive environment.
We made significant architectural and technological changes to our algorithmic search that led to increase to our search quality, not only in Russia but also in Turkey and implicit evidence of the Company's technological advance and uniqueness. On the ad tech front, we introduced the VCG auction, the largest change in our auction system since the inception of the contextual advertising platform.
It is starting to gain traction among advertisers as it provides an easy to manage bidding process while rewarding so-called truthful bidding. In 2015 we served 680,000 advertising clients, that is 22% higher than a year earlier.
During 2015 we've given considerably more independence to our newly created business units, such as Yandex.Market, Yandex.Taxi and Auto.ru. While it is still early days, it is remarkable just how much each of these units managed to accomplish last year.
We continue experimenting with new business models, such as bringing our data science technology to large enterprise clients. This year Yandex data effectively posted its first revenues and signed a few contracts with Russian and international companies as a result of successfully completed pilot projects.
As we look out to 2016 we will continue working on our search product quality on desktop and mobile, as well as on advertising technologies and new advertising formats. We will continue to invest in the longer term opportunities, both within our core business as well as in investment areas.
These include our business units that I just mentioned and other experiments which we deem promising and we believe we have great expertise. At the same time, 2016 is likely to be another year of high uncertainty with potential further currency fluctuation, continued economic pressures and highly charged geopolitical backdrop.
That's why we provide pretty wide range for our revenue guidance in 2016, 12% to 18% versus last year. With this, I am turning the call over to Sasha to discuss our Q4 developments.
Alexander Shulgin
Hello, everyone. In Q4 we grew our search share in Russia to 57.3% compared to 57% a quarter earlier.
Just recently our search share increased further to approximately 58% in February. The main reason for the recent growth is 200 basis points gain in our desktop search share.
Our mobile share remains stable. We estimate that in Q4 our share on android was at 40%, while our share on IOS averaged 45%.
Share on mobile in our overall search traffic in Q4 was 27% compared to 26% in Q3, while in terms of revenues mobile generated 22% of our search revenues. Our search share trends are a result of marked improvement in our search product quality and increased investment in our browser and our search distribution.
Towards the end of the year we completed our big index project and built a robust index base with more than quadruple number of index pages. We considerably advanced diplurian [ph] techniques which allowed us to significantly improve our image and video search and we continue applying our knowledge in diplurian to other types of search.
Our new search algorithm Minusinsk, significantly reduced the volume of traffic to websites that utilize black hat search engine optimization tactics. The change was so effective that 70% of the sites that utilized such tactics abandoned them by the end of 2015.
This and many more other small things led to significant improvement in search quality across all metrics. We believe that we're now considerably better than any other search player on the Russian market.
As Arkady mentioned earlier, during the past year we enjoyed strong growth in our advertiser base, with Q4 showing a record high in the number of advertising clients. The number of clients that we served reached 394,000 and grew 24% in Q4 year over year and 11% sequentially.
Turning to industry segmentation, we saw a strong growth in real estate; home and garden; healthcare; and several other advertising categories, including FMCG, where we see increased propensity to advertise online. In Q4, we saw improvement in advertising spend in auto and financial industries which were negatively impacting our revenue growth rates during the first 10 months of 2015.
However, we believe it's premature to speak about complete stabilization in auto with respect to 2016. An ad category that softened in Q4 is travel which was hurt both by macro and geopolitical issues.
We expect auto and travel to stay structurally weak throughout 2016. VCG auction is gaining traction among advertisers.
Clients keep bidding for higher positions in our special placement advertising block on search result pages. This boost in bidding activity led to 12% growth in our average CPCs in Q4.
Our accelerated revenue growth in Yandex.Direct was accompanied by excellent performance of our non-search businesses. Yandex.Market delivered solid results, growing faster than our overall revenue.
We implemented [indiscernible] across all pages, introduced easy to navigate product catalog, developed product spotlight pages and many other changes aimed at modernizing the Yandex.Market. We expect Yandex.Market revenues to continue benefiting from these changes in the coming quarters.
Auto.ru continues to focus on its non-advertising revenues. Revenues from FAS and listing fees grew more than 50% in Q4 and exceeded half of Auto.ru revenues.
Auto.ru is now the leader in St Petersburg in terms of number of calls generated from the service. We also strengthened our leadership in Moscow.
The goal for 2016 is to gain traction in certain regions, as well as to focus on product quality and mobile products. Yandex.Taxi again was in double-digit revenues in Q4.
We maintain our strong leadership in Moscow by providing users with by far the shortest car arrival times compared to our competitors. The goal for 2016 is to continue our reginal expansion.
As a reminder, we're now operating in 12 cities in Russia. I'm very excited by the prospects of our emerging businesses.
In 2016, we expect to accelerate our investments into these three business units, with additional hiring and marketing investments. With this, I am turning the microphone over to Greg.
Greg Abovsky
Thank you, Sasha; and thank you, all, for joining our call today. While the overall economic and geopolitical environment remain challenging, we delivered solid financial results in Q4 2015.
Our consolidated revenues grew 23% year on year and reached RUB18.1 billion. Our full-year revenues grew 18%; 2 percentage points above the top end of our guidance outlook.
Text-based advertising accounted for 90% of total revenues in Q4 and increased 23% year on year. Yandex's owned and operated websites constituted 66% of total revenues and grew 20% year on year, reaccelerating versus the previous quarter.
Our text-based industry mix remains diversified. As Sasha mentioned before, we saw a slight improvement in auto ad category and financial services throughout Q4, but growth rates of travel ad budgets softened.
Our ad network grew 35% year on year as we continued benefiting from the addition of new partners and improved targeting capabilities implemented earlier in 2015. Contribution of ad network revenues total increased 200 basis points compared to Q4 of last year, but remained fairly stable compared to the previous quarter.
Ad network comprised 24.4% of total revenue in the quarter. Display advertising revenues were flat year on year, contributing 7% of total.
Display revenues from our own website decreased 4% year on year, while our display network revenue grew 22%. Other revenues more than doubled, surpassing 3% of total revenues, with the Yandex.Taxi remaining the main driver of growth in this category.
Traffic acquisition costs related to partner advertising network grew 27%, slower than our text-based partner network revenue. Partner TAC, as a percent of partner text-based revenues, was 60.5% compared to 64.3% in Q4 of last year.
The decrease was mostly due to the change in our partner mix. Distribution TAC increased 6% year on year and constituted 8.8% of text-based revenues from our website, compared to 9% in Q3 and 10% in Q4 2014.
On an annual basis, distribution TAC was 9.3% of our overall revenues. Total TAC grew 20% versus Q4 last year, while on an annual basis TAC increased 15% year on year, significantly slower than our advertising revenue.
Paid clicks grew 10%, while cost per click increased 12%. Turning to our cost structure.
Total OpEx excluding TAC, G&A and a charge for impairment and goodwill related to our acquisition of KinoPoisk grew 49% in Q4. Excluding stock based comp, expenses grew 43%.
Growth was primarily driven by growth in advertising and marketing expenses, aimed to promote our core services and our business units, as well as by increasing office rent and salary increases implemented earlier in 2015. Personnel costs still remain the largest cost item.
In Q4 our headcount increased by 51 people versus September 30 of 2015. We continue viewing the current economic situation as a good opportunity to add talent.
As we mentioned before, we're focused on strengthening the mobile team as well as Yandex.Browser, as well as our business units. In Q4, our personnel costs constituted 18% of revenues.
Stock-based comp which is part of personnel expenses, increased 138% due to ForEx, new grants and the RSU exchange program that we executed earlier this year. G&A expense for the quarter increased 89%, due to ruble depreciation as well as increases in our datacenter spend.
Our adjusted EBITDA increased 8% year on year. Adjusted EBITDA margin was 36.3%, down approximately 5 percentage points from the previous year.
On an annual basis, we delivered EBITDA margin at 35.1%; a decrease of 6 percentage points compared with 2014. This quarter, the impact from ForEx was a gain of RUB1.1 billion, related to dollar-denominated assets and liabilities in our balance sheet.
Our effective tax rate in Q4 was 34.5% on GAAP basis. Adjusted for certain reserves and allowances, including impairment and goodwill and an increase in share-based comp which is not tax deductible under Russian tax code, our adjusted effective tax rate was 25.8%; around 2 percentage points higher than the effective tax rate in Q4 2014.
Adjusted net income was down 8% and then just in that income margin was 20%. Our CapEx was RUB1.7 billion or 9% of Q4 revenues, down from 27% of sales during the first nine months of 2015 as we completed our big index project.
A significant part of our CapEx continues to be denominated in U.S. dollars.
In 2016, we expect to see our CapEx-to-revenue ratio in the mid-teens, subject to FX moves. We've continued to buy back the convertible bonds that were issued in December of 2013.
In Q4, we bought back another RUB25 million face value of the bonds. Since inception of the buyback program, we've bought approximately RUB269 million face value of the bonds.
We ended the quarter with approximately $833 million and equivalents using the exchange rate as of December 31. The currency split was approximately 40% rubles and 60% dollars and euros.
Now turning to guidance. With lots of uncertainty in economic conditions, commodity prices and exchange rates, we provide a particularly wide guidance range for our full-year revenue growth.
At this point, we expect our revenue to grow in the range of 12% to 18% in the full-year 2016 compared with 2015 and, with this, I'll turn the call over to the Operator for the Q&A session.
Operator
[Operator Instructions]. We will now take our first question from Lloyd Walmsley, Deutsche Bank.
Please go ahead.
Lloyd Walmsley
First, you just delivered a very strong 20% owned and operated search revenue growth and you're about to see an easing of the comps which would naturally move revenue higher, all else equal. Yet the guidance is for 12% to 18% growth which is clearly robust in the light of the macro economy for the full year, but it does call for deceleration.
So just wondering if you can give us a sense for how much of that is what you're seeing today versus perhaps just baking in a lot of caution for the period beyond where you have visibility. And then as a second follow-up question, can you just give us a little bit more color on how the VCG auction dynamics are playing into both your advertiser counts as well as auction participation?
It looked like you accelerated the number of advertisers you have. Wondering if any of that can be directly tied to VCG and getting a little bit more color there.
Greg Abovsky
Lloyd, it's Greg. I'll take the first part of the question and Sasha will answer the second part of the question on VCG.
On our guidance, just repeating again what I said in the prepared remarks, the range does reflect general macroeconomic uncertainty and geopolitical fluctuations. Clearly, we're 25 work days into the year, so it's a little bit early, I think, to give you a very precise range of outcomes.
So that's number one. Number two, on the comps question.
Yes, you're right, I think the comps are easier in the beginning of the year, but they will get tougher in the back half of the year. Given that we're so far out away from them, it's hard to predict where we will be.
So I think that's where we're which is why sitting here on February 16, we're seeing the range at 12% to 18% and we'll see how things will shape up. But that also does mean that the year will be kind of front-end loaded, because of easier comps.
As comps get tougher, it'll also depend on what the macroeconomic conditions are. I'll pass the mic to Sasha.
Alexander Shulgin
So on the VCG auction, we see good trends in competition of top advertisers for the placement in the top block bubble search results. The competition metrics that we measure internally, it improves and we also see the result of this on CPC.
As you have noticed, our CPC has increased 12%. Talking about total number of advertisers, I would attribute the growth again to a record high number for us in Q4 to our activity in our commercial team where we actively attract customers in Moscow region and also throughout the country.
Going to other cities except for Moscow and St. Pete is a priority for us now to increase the usage of text-based and overall Internet advertising for different industries in Russia.
Also, I would attribute that to the current economic situation in Russia. Performance -- measurable performance-based advertising in the Internet, becomes especially attractive when the situation becomes tough and customers start to measure efficiency of different advertising channels and contextual is typically the most effective one.
Operator
We will now take our next question from Edward Hill-Wood, Morgan Stanley.
Edward Hill-Wood
I've got a couple of questions. Firstly, just on the cost base, you had a 6-point margin reduction.
You mentioned that you were planning to step up investment in the three projects in 2016. Based on your revenue guidance, I was wondering if you could just give a bit more color on whether or not with FX also being high this year and that investment, whether or not you would probably anticipate margins to be a couple of points lower in 2016 at least, just based on that.
And the second thing is on mobile. The mobile revenue share continues to drop relative to where it has been and even though traffic is ticking up.
Two questions there. Why is the pace of mobile just so slow in terms of the transition in Russia?
Is it macro -- is macro having an impact? And within the revenue component, do you think there is a -- you're clearly taking market share in desktop.
But do you think you're also maybe losing a bit of market share in revenues in mobile? Thank you.
Greg Abovsky
I'll try to take the first question and part of the second question; and Sasha can answer the second half of the second question. On overall cost base and margins.
So if you recall, I think in the last call, you asked the same question on margins. My answer was I think we can be around 700 basis points lower than the previous year.
I think what we've delivered is about 600 basis points lower than last year which is, I think pretty good. We accomplished all of that while making very substantial investments in our business units.
In Q4, our marketing spend was up about, call it 130% year over year. But of that, almost 600% growth was in the business units, such as taxi, market and auto, whereas the search part of the business grew more in line with the revenues or at kind of the mid-30s range.
So most of the investment, both in terms of percentage terms as well as in absolute ruble terms is in the business units. That's kind of what we're planning to do in 2016 as well.
We're planning to step up and aggressively invest in Auto.ru where we're really going to expand aggressively into the regions that we currently are not winning in, i.e., where we haven't had much of a presence and where Avito is currently the market leader. We have established market leadership in St.
Petersburg. We've regained our leadership position or re-established our leadership position -- clear leadership position, in Moscow and we think we can do the same thing in other cities now.
Turning to taxi again, that's a fantastic business where we probably, historically, have invested in it less than we should have, because we're constrained by investor expectations of margins and investments and so on. We're looking to rectify that.
I think that the taxi business has incredible promise and we're going to invest very aggressively in this business. We're currently in 12 cities there.
We're a clear leader in Moscow. I think we're top in St.
Pete and we're leaders in many other cities, but we think we can make it even bigger. The same thing with Yandex Market.
Yandex Market has accelerated its growth rate every month this year and, by the end of the year, was growing, I think, in line with the overall business, if not slightly faster. This year, it's already showing really great results.
I think e-commerce is a very promising area in Russia. So all of that was said to make the case that, look, yes, margins will likely be slightly down from 2015 levels.
Whether it's 200 basis points down or slightly more or slightly less, we shall see. As you said, it'll depend on FX fluctuations.
It'll depend on how successful we're with businesses, like taxi, for example, right? The more successful it is, the more we will likely invest in it and so on.
So hopefully, that answers your questions. FX will continue to impact us vis-a-vis potential for personnel expense growth, in terms of rent expense, in terms of CapEx.
But we're trying to manage it the best we can in a tough environment. I think we've done a really disciplined job in 2015 and we expect to do the same in 2016.
So that was a long-winded answer.
Edward Hill-Wood
Just before going onto mobile, can I just ask that a different way. So basically what you're arguing is that the investment in taxi, market and Auto.ru, ex that additional investment, would you expect margins to be broadly similar to 2015 levels?
Greg Abovsky
Yes. On the mobile question, so Sasha will answer in more details.
But basically, if you look at our share of mobile traffic, so one year ago, we had mobile at about 24% of search queries and now it's 27%. Mobile revenue one year ago was 18%, but now it's 22%.
But I think in terms of the general question as to why mobile's growing slowly, I think Sasha can answer that best. I think it has to do with macroeconomic issues in Russia.
Alexander Shulgin
Actually, it is not so much what Greg said. I would say that share of mobile revenues is not -- well, it's growing steadily.
As Greg said, it's increased by 400 basis points over the last 12 months. In Q4, we're focused on improving our amortization on desktop as well, so maybe, say, a better job at desktop has a bit decreased the growth rate of our share of mobile revenues in mobile.
Also, there is a trend that we see from imports on sale of mobile devices that the sale of new devices is decelerating. I guess it has to do with lower disposable income of people, due to the current economic situation in Russia and also increase in prices of devices which are produced in foreign countries.
Operator
We will now take our next question from Alex Balakhnin, Goldman Sachs.
Alex Balakhnin
Two questions from me if I may. First, I've been trying to reconcile the acceleration of the number of advertisers with this slowdown of paid clicks and the acceleration of CPC.
So I'm just wondering, what is exactly going on? Do you have more small advertisers coming to your platform and they squeeze out the big advertisers which we used to have?
Just if you can help us understand the granularity of that process that would be helpful. The second question is on costs, well, specifically the FX pass through.
It looks like you now have the wage inflation more under control. I just wanted to confirm if that's the case?
And also, what do you contemplate to eliminate the excess FX volatility impact on your rental expenses? Thank you.
Alexander Shulgin
Alex, this is Alexander speaking. So in Q4, clicks were growing at 10% and CPC, on average, was growing at 12%.
So I would say we have solid reasonable growth on both networks here. Talking about contribution of new advertisers, this is actually typical for the last many quarters I would say.
The inflow to Yandex.Direct comes primarily from smaller advertisers. And over time, they grow into bigger ones.
Average check per customer did not increase this quarter and it was a similar situation in Q3. I would say this is normal and expected in the current situation.
So we see acceleration and growth in number of customers who are switching to text-based advertising from other advertising channels. But since the newer customers who are coming to us are smaller, on average, the check per customer is not increasing in 2000 -- in the last two quarters for 2015.
But as I said clicks and CPCs are growing healthy and steadily. So I would say it's a very good situation for us.
Greg Abovsky
Sasha, on the question of wage inflation, it does appear to be probably slightly more under control now than before. We have taken measures to make our salaries more competitive and retain talent.
I think we've done a pretty good job of that. Hopefully, 2016 will be easier for us from that point of view.
But, obviously, it'll depend on what happens to foreign exchange rates and so on. Your questions of other ways of controlling FX impact on the P&L, we're looking at a range of alternatives and seeing whatever can make the most sense for us.
But there's certainly nothing to announce at this point.
Alex Balakhnin
And just quickly following up on the first one, I was rather referring to the growth rate slowdown for the paid clicks statistic and, at the same time, acceleration of the growth -- well, not the number increase, but the acceleration of growth of the advertisers. But maybe I'm overcomplicating here.
Just was wondering if there is any shift in the distribution of advertisers, if I can put it this way.
Alexander Shulgin
Alex, I would say there are no substantial changes in the quality of industry split of advertisers, so it's a normal situation.
Operator
We will now take our next question from Ulyana Lenvalskaya, UBS.
Ulyana Lenvalskaya
My first question will be on Turkey. In light of current geopolitical challenges, does it have any impact on this business currently?
And what is the strategy for Turkish project going forward?
Arkady Volozh
Okay, let me summarize where we're in Turkey after 2015. As you know, after several years of experiment, we have reached the level where we have at least two breakthrough products.
It used to be just Navi. Now, in 2015, we build the search product which is as good as or better than what exists on the market.
With this product, we prove that it is, I would say, distributable. If it's installed to consumers, it stays with them.
The churn rates are minimal. So the product which we build is very competitive.
With this product, we've reached 7% market share on desktops, 7%/8% and it's there. The product is unique in its kind.
Being made default, like it was in Firefox when they gave us just one place on their browser, we got 20% of traffic from Firefox and it's still there 10 months after. Microsoft made us default on their Edge browser and we have got 33% market share there and growing.
This is absolutely unique. Do they have any other examples of such a product on new markets?
Absolutely not. Can we build business with just product?
No. To build business you need distribution and we made a lot of experiments in distribution area, positive and negative.
We proved that, yes, product is distributable. Our contract with [indiscernible] or something else, shows that if you deliver the product it stays there.
But delivering the product takes a lot of money if you're not -- if you're foreign to the market. But if you found somebody local to the market, who have free distribution resources, it could be maybe a holding operator or somebody else, then probably, yes, you can reach the market share which makes the whole economy viable here.
I think we have proven that and this is one of another result of 2015. And if you ask if our Company is capable of going to other markets?
I would say yes, technologically we can go to any other market now and we're ready if, the second part, we have a local partner who can help with distribution. This is the result of our Turkish experiment.
I think it's fabulous and unique and shows why actually we're still leading our home market, because we're a real technology company. We decrease our spend on this experiment now, because we don't want to spend our money in vain on distribution, especially in the current political environment.
But we stay open there, we will deliver -- we will continue improving our products. We will improve our sales in Turkey.
We will just, maybe not so pushing on distribution and marketing; and we stay open for partnership as soon as it's available in Turkey or elsewhere in the world. And it looks like we're unique.
Ulyana Lenvalskaya
What's the current estimate of Turkish market share?
Arkady Volozh
ComScore shows something like 7% something.
Ulyana Lenvalskaya
So it was flat quarter on quarter. Like not impacted by the [indiscernible]?
Arkady Volozh
No because there was no -- well, you can see what's going on and we refrain from any TV advertising or any significant distribution efforts now.
Ulyana Lenvalskaya
Okay. And will it be possible for you to comment on the current status of Google appeal?
How long those sort of cases could take?
Alexander Shulgin
As you know Google has appealed in December 2015. The case now is in, I would say, early in administrative procedures.
Yandex was accepted to the case as a third party, because Google [indiscernible]. I think the case will take about one year and, hopefully, will be complete by the end of 2016.
But there is nothing to comment, at this point, on substance of the case.
Operator
We will now take our next question from Cesar Tiron, Bank of America Merrill Lynch.
Cesar Tiron
Two questions. So first on the Google case.
Just wanted to check if you could still sign any partnerships with mobile phone manufacturers to distribute the Yandex browser before the case is over? And then just a precision on the margin outlook that was given.
So you said that the margins would not decline if you're not going to invest in the other businesses. But is that at spot FX?
So is that assuming the FX stays at 77%? Thank you.
Greg Abovsky
I'll take the first part and Sasha will take the second part. On margins, it basically means that the core business, yes, the core business margins are roughly flattish year on year.
And the growth is reinvested in the business units, i.e., Yandex.Taxi, Auto and Yandex.Market. And then Sasha will take the question on the Google case.
Alexander Shulgin
On OEMs. OEMs were interested in -- were always interested in placing Yandex services on their phones.
But they will and they still are restricted by Google in what they can do to place Yandex. We now see better traction in terms of place in Yandex search and the Yandex browser with Yandex search.
On the second screens of devices, home screen is still typically not accessible to us, due to limitations imposed by Google on OEMs. That's why we believe that our position's absolutely solid and fair world council and [indiscernible].
But, as I said, with second screen it becomes easier. OEMs, looking at what happens with FAS, become more willing to or more free to place Yandex services.
Cesar Tiron
And is that enough to positively impact the mobile market share over time?
Alexander Shulgin
In Q4 our market share mobile devices was flat, both Android and iOS. I think what happens when Android gives us opportunity, to think that our share on Android will be stable and possibly increasing.
With iOS it's to that easy, because this system obviously is controlled by Apple. Currently, Yandex and Apple is one of the search engines, but is not default.
Apple actually made it more tougher for us several months ago by removing the possibility to prompt the user to switch the default search system from Google to Yandex. We're in talks with Apple typically, but it's not so easy with Apple to make Yandex the default search engine.
Operator
We will now take our next question from David Ferguson, Renaissance Capital.
David Ferguson
Two questions please. Firstly, on Auto.ru, you talked about number one position in St.
Pete, leadership in Moscow. What are the different criteria that you're measuring that on?
And are you talking about number one position in mobile? And then secondly, on Yandex browser, it seems that that's having a lot of success at the moment.
How much of that growth is just due to a lot of advertising and if it due to advertising, what's the retention rates that you think you can see as the advertising moderates? That's it, thanks.
Alexander Shulgin
So on Auto.ru we believe that for auto classifieds, the relevant metrics is number of calls to dealers and individuals who are sat in their cars; number of calls generated by the classified resource, classified service. In Moscow, we're leading by this metric and actually by all other metrics you could name; say even monthly or daily audience or number of individual cars, listed on our service.
In St. Pete, we're leading by number of calls based on our measurement which is provided by independent third party.
We lead by number of calls that Auto.ru generates to our partners. We're on par with our biggest competitor in terms of number of cars and more or less on a par in audience that comes to auto classifieds from St.
Pete.
Operator
We will now take our next question from Vladimir Bespalov, VTB Capital.
Vladimir Bespalov
My first question is on your data sector. You mentioned that you started to run first revenues last year.
Are you any closer to developing a successful monetization model? And how do you see this in general, developing over one, two years?
My other question is on your non-add revenue exposure. Do you have internal target maybe as a percentage of total revenue?
Are you going to earn from these new departures? Are you going for example, in classifieds, to expand beyond just Auto.ru and whether you're going to do it organically or through acquisitions.
Thank you.
Arkady Volozh
Maybe I will pick up another experimentation question, now it's about Yandex Data Factory. Yes, you are right.
So Yandex Data Factory was just in proof of concept stage and we were extremely proud when they delivered the first real revenues this year. The goal is to go and breakeven and hopefully to grow further, to become a real, viable business model for us.
Again, the switch portal of the Yandex Data Factory is that we try to apply our machine learning knowledge, outside of our core -- not only core business, of consumer Internet, but outside of our core market. We try to focus it on foreign markets.
There all signs that we might have something there we will apply a lot of effort on, Yandex Data Factory, this year.
Alexander Shulgin
Vladimir, coming back to the question on non-search, non-advertising revenue growth. I would say that we're committed to growing our e-commerce product, Yandex.Market.
We're committed to growing Yandex Taxi and Auto.ru to the maximum extent we can. So I wouldn't say we have a specific target in our heads that we have to increase non advertising revenue, to X% of our total revenues.
This is not the case. We treat this business like separate businesses and we want to maximize their market share, their revenues and, eventually, their profitability.
If we see additional opportunities too, we can tackle and gain sizeable market share and also do a high-quality product which will be liked by people, we will definitely do so. But currently we're committed to market, taxi and Auto.ru.
Operator
We will now take our next question from Svetlana Sukhanova, Sberbank.
Svetlana Sukhanova
My question would be, if I may start with a small follow up question on Turkey. This 7% market search share which you mentioned, isn't it actually too small or weirdly small, given that you have your partnership with Windows 10 rollout which started in the middle or late November?
I was expecting it to accelerate quarter on quarter and looks like it's flat. Is it because you reduced your investments in the distribution as you mentioned or what is going on, given that partnership with [indiscernible] is ongoing?
Arkady Volozh
Our partnership with Microsoft is going on. We're -- the problem is where default is just in the age browser and the Microsoft home browsers.
As of now, Microsoft do not promote their own browsers inside Windows 10.
Svetlana Sukhanova
But is it only age browser where you default or are you also default in Explorer?
Arkady Volozh
It's Explorer as well. Edge -- they mix it in different proportions, but the fact is that not promote their browser defaults in their own operating system.
And they allow -- actually, the more -- in our experience, the more Windows 10 we see, the more Chrome browser in Turkey we see on the market, because people switch. If Microsoft decides to change their policy some time, I don't know.
It's not up to us. Therefore, what is important for us now, we do not count on global agreements here.
We expect the most distribution power comes from local partners, so a big local partner. This is what we expect to happen sooner or later.
Svetlana Sukhanova
That is good, thank you very much. My second question would be about rent.
I definitely heard how you were answering about chasing different range of alternatives to reduce FX effect and P&L. But can you please elaborate on what's going with your potential, with yearend, because we all have seen an article in [indiscernible] in late December that, in December that you are very close to negotiating the deal.
Should we expect any kind of deal from your side or like Mail.ru recently has renegotiated rent in rubles. What should we expect?
And what's approximate time frame from your side about HPU FX risk?
Greg Abovsky
Yes, sure look it's obviously Company's policy not to comment on rumors or speculation in the press. We're considering acquisition of our headquarters, it's an option that we're exploring, but we have nothing to announce.
Svetlana Sukhanova
Okay, so you're no longer considering to renegotiate rent in rubles?
Greg Abovsky
That's also another alternative, obviously.
Svetlana Sukhanova
And my very last question, if I still may, would be about the economics of taxi. I'm really very pleased to see how your taxi is developing in Russia, especially in Moscow; how you're gaining market share and switching on new taxi parks.
But I really wonder what's the economics on taxi right now? Do you break even on EBITDA or you are loss-making, given the investments which you are making in the marketing promotions and expansion?
And when do you expect to gain, to start to break even on taxi and to start gaining regions, I would say comparable with regions of the core business?
Greg Abovsky
Sure, I can answer that. In core markets, established markets, the economics are excellent, considerably better than the core business.
Most of the investment is for new markets and it is primarily spent on marketing, especially -- specifically on user acquisition.
Svetlana Sukhanova
Okay, but on a blended basis -- that's very clear and extremely helpful. But on a blended basis, have you broke even on taxi already at the EBITDA level?
Greg Abovsky
It was healthily break-even for most of 2015, but I think we expect to invest considerably more in it. We did so in Q4 and we'll probably do even more in 2016.
Operator
We will now take our next question from Alex Balakhnin, Goldman Sachs & Co.
Alex Balakhnin
Just a quick follow-up from me. I've been trying to reconcile the increased usage of your -- the Yandex.Browser throughout the fourth quarter with the wording in the press release.
So you mentioned marketing expenses, mostly on Auto.ru market and taxi and you don't really mention browser. So I was just wondering whether these downloads and seeming sort of improvement of all [indiscernible] of the Android market share is just totally organic or you support browser with marketing as well.
And whether this support stays for 2016?
Greg Abovsky
Yes, sure. On Browser, yes, we have invested in marketing there.
So we shifted our marketing mix, within the core search business, away from general brand advertising and towards more browser advertising in the fourth quarter. Specifically, we released Yandex.Browser with protect technology which has a lot of the anti-virus and Wi-Fi protection features built right -- anti-searching features built right into the browser and we supported that with a TV campaign, as well as we've done performance advertising on mobile.
So it is growing, with help of advertising, but also reflects a shift in marketing mix. Sorry and for 2016, yes, we will support it as well, both in the first half of the year and potentially in the second half, although the second half we haven't fully decided on.
Alex Balakhnin
And just a very quick follow-up here. So in terms of the distribution channels, it sounds like they were quite evenly split between the key performance-based mobile, social, sort of nothing to like mention specifically or there was any particular channel you used the most for the browser distribution?
Greg Abovsky
A variety of channels, everything from performance, i.e., in-app advertising to, frankly, search.
Arkady Volozh
We're following conversion rates very tightly and whichever channel brings us more in conversion, we follow it.
Operator
We will now take our next question from Cesar Tiron from Merrill Lynch. Please go ahead.
Cesar Tiron
Yes, I just wanted to ask you if you think it's possible to see some in-market consolidation within the two dominant taxi booking applications in Russia? I mean that could be a way to crystalize the value as well.
What do you think about this? It happened in a couple of countries, like India, for example.
Greg Abovsky
Sure, that's clearly one alternative. As we're looking at the market, we see a very large opportunity ahead of it.
In essence, you are competing with non-consumption. You're not exactly taking market share away from other players in the market.
You're taking market share away from people who are utilizing their cars, utilizing public transportation or getting gypsy cabs in the streets? So, as long as that's going on, I think it's perfectly fine for there to be multiple players, but also we're open to consolidation, if and when that makes sense.
Operator
As there are no further questions, I would now like to hand back to the speakers for any additional or closing remarks.
Katya Zhukova
Thanks again for joining us today and we hope that you will join us on our Q1 2016 call in April.
Operator
Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation.
You may now disconnect.