Dmitry Grishin leaves the post of CEO of Mail.ru Group / E.Razumny / Vedomosti

Dmitry Grishin is stepping down as CEO of Mail.ru Group, the company announced yesterday. He will take the post of chairman of the group's board of directors and focus on its strategic development - investments and international expansion. Boris Dobrodeev, who previously headed the VKontakte social network, which is part of the group, has been appointed CEO of Mail.ru Group in Russia (see inset). Grishin will continue to participate in the management of the group, the statement noted.

"I put forward this initiative to the board of directors, which supported me and approved it," Grishin told Vedomosti. A person close to the company says that Grishin has not been fully involved in the operational management of Mail.ru Group recently. He spent a lot of time in the United States, where, in his opinion, there are many good ideas that should be brought to Russia. In addition, since 2012, Grishin has had his own investment project - the venture company Grishin Robotics, which invests in consumer robotics.

"Vkontakte" without the main thing

Dobrodeev will not combine the positions of CEO of Mail.ru Group and VKontakte, says a representative of the group. The social network will not have a separate CEO: Andrey Rogozov will continue to manage its product and technical development, and Mail.ru Group Vice President Dmitry Sergeev will be responsible for business functions.

In 2014, a similar change in the management structure took place at Yandex – its founder Arkady Volozh stepped away from operational management of Yandex’s Russian business and began focusing on strategy and searching for new business models. And Alexander Shulgin became the CEO of Yandex in Russia.

Grishin has been working at Mail.ru Group practically since its foundation. He joined Mail.ru (then not yet united into a group) in 2000 as the head of the development department, in 2001 he became Mail.ru's technical director, and from 2003 to 2010 he was its CEO. Then he headed Mail.ru Group, a holding company that combined Mail.ru and the assets of Yuri Milner and Alisher Usmanov's Digital Sky Technologies fund. In the same year, 2010, the group held an IPO on the London Stock Exchange.

Grishin's departure coincided with the publication of Mail.ru Group's quarterly results, which were below analysts' expectations. Thus, the company's revenue in Q3 2016 grew by 5% compared to the same period in 2015 to RUB 9.1 billion – analysts surveyed by Interfax expected it to be at the level of RUB 9.3 billion. On average, they predicted revenue growth of 5–7.5%. In the first half of 2016, the group's business growth rate was higher – 11.6%.

At the same time, revenue in the third quarter grew only due to advertising: its sales in the third quarter grew by 21.3% to 4.4 billion rubles. In the first half of 2016, the growth of this segment was higher - 29%. But even in this segment, Mail.ru Group's growth rate was below the market, a source in a large investment company claims. The Association of Communications Agencies of Russia has not yet summed up the results of the third quarter. In the first half of 2016, it estimated the growth rate of the Internet advertising market at 25-30%. Analysts surveyed by Interfax expect that the revenue of Mail.ru Group's competitor, Yandex, will grow by 23% in the third quarter.

The two other key sources of Mail.ru Group's income, in addition to advertising, which brought in more than 48% of the holding's revenue in Q3, are user payments and games. Both of them showed a decrease in quarterly revenue. Thus, in the user payments segment, Mail.ru Group's revenue decreased in Q3 by 3.8% to RUB 2.7 billion (30% of revenue), and in the multi-user games segment, by 13.5% to RUB 1.9 billion (21% of the group's revenue).

The company explained the significant drop in revenue from multiplayer games by the high base of the third quarter of last year. Analysts polled by Interfax predicted a slowdown in the growth rate of Mail.ru Group revenue precisely because of games. Thus, Sberbank CIB expected that revenue in this segment would decrease by 6% due to the high base of last year, when the company launched the global release of the game SkyForge and the game Armored Warfare.

True, Mail.ru Group itself expects that in the fourth quarter of this year the multiplayer games segment will grow again after the launch of the game Revelation and thanks to the consolidation of the financial indicators of the mobile game developer Pixonic, recently acquired by the group.

There are no plans for growth in the user payments segment: the economic situation is not improving, and Mail.ru Group is unable to achieve monetization of services on mobile devices.

Based on the results of 2016, Mail.ru Group forecasts growth of total revenue by 10%, EBITDA – 45%. VTB Capital called Mail.ru Group’s forecasts disappointing in its report. Thus, the growth rate of annual revenue includes the results of Pixonic, while Pixonic will account for as much as 7% of Mail.ru Group’s expected 10% growth.

However, the group's main shareholder, USM Holdings, is pleased with how Grishin managed the group, says a representative of the holding. "That is why we asked Dmitry to stay in Mail.ru Group as chairman of the board of directors. In addition, USM Holdings is a partner in the Grishin Robotics fund, he added.

Mail.ru Group Changes Management