QR-codes for all

The Bell

Hello! This week our top story is Russia’s decision to make QR-codes its main tool to fight the pandemic as coronavirus death rates remain at record highs. We also look at why several big Russian companies have scrapped IPOs at the last minute, and the official launch of advertising on messaging app Telegram.

Russia embraces mandatory QR-codes to fight coronavirus

The Russian government submitted legislation to parliament Friday that, if passed, would make QR-codes obligatory to access mass public events, eateries, retailers, and cultural institutions, as well as trains and planes. 

  • The new regulations are contained in two laws that are now before the State Duma, and could be passed in a matter of weeks. If the proposed legislation is passed in its current form, it will come fully into force on February 1, 2022. The first bill barely changes the current situation: QR-codes are already in operation in all 85 Russian regions, and governors would still have the final say over which locations require them. The second bill about QR-codes for inter-city and international transport, however, is a different story.
  • The second bill requires people to have a QR-code confirming vaccination, a medical certificate proving a previous case of COVID-19, or a medical exemption from the vaccine from anyone seeking to travel on inter-city or international rail and air services. This will become a requirement not only for boarding, but also for purchasing tickets. Foreigners who have a vaccination that is not recognized by Russia can still travel by train or plane, but will need a negative PCR test.
  • Airlines have said that introducing a QR-code check when selling tickets is impossible as the technology is complicated — and that they require more explanation before QR-codes can be routinely checked when boarding a flight. Russia’s largest private airline, S7, estimated that introducing QR-codes would reduce passenger numbers on internal flights by 50 percent.
  • While the first bill doesn’t much alter the present situation, it likely means that QR-codes will be used more widely, and for longer. It requires regional authorities to restrict attendance at public events, cultural activities, hospitality venues and most retail outlets to those with a QR-code, a certificate proving precious infection or a medical exception. Grocery stores, pharmacies and other essential retail will not be affected. 
  • Both these measures will come into force once the law is signed off by the president. Until Feb. 1, people will be able to use a negative PCR test in place of a QR-code, however, after then, the PCR test option will only be available to those who are unable to have the vaccine for medical reasons.
  • At present, the requirement to use a QR-code to access public places is already in operation in all 85 Russian regions. However, in practice, there are often only a few occasions when it is needed: for example, in Moscow, you only need a QR-code when visiting museums and theaters.
  • In regions where QR-codes are currently widely required, retailers have reported a 50 percent drop in footfall. Unsurprisingly, the hospitality industry reacted with horror to the prospect of compulsory QR-codes. Sergei Mironov, ombudsman for the Moscow restaurant sector, said it would lead to the closure of many restaurants. “If 35 percent of people in a region are vaccinated, how can restaurants work at 35 percent capacity? They simply can’t do it,” he said.
  • The QR-code legislation comes amid an ongoing spike in new coronavirus cases and rising fatalities — Russia recorded 1,241 COVID-19 related deaths Saturday, another daily record. Meanwhile, the country’s stalled vaccination campaign shows few signs of picking up. Despite being the first country in the world to register a coronavirus vaccine, barely a third of the population has been fully vaccinated.

Why the world should care

When Moscow closed its restaurants to visitors without QR-codes over the summer, it did encourage people to get jabbed, but businesses paid the price: footfall in the city’s restaurants dropped 90 percent. In addition to the economic impact, it’s known that hundreds of thousands of Russians are willing to risk jail by using fake vaccine certificates, raising the question: will a nationwide QR-code system actually be effective?



Russia’s IPO boom turns to bust

An expected IPO bonanza for Russian companies is in jeopardy after two major listings were abruptly cancelled. The owner of Russia’s largest alcohol retailer, Red & White, announced Tuesday that it was canceling its placement just a few days after the Delimobil carsharing service postponed a listing on the New York Stock Exchange.

  • Mercury Retail Holding, which owns leading alcohol retailers Red & White and Bristol, said that its IPO will not happen due to “market conditions”. As we wrote last week, the company was anticipating a valuation of up to $13 billion that would have made it the biggest food and drink retailer in Russia.
  • When it postponed its IPO the week before, Delimobil also cited “market conditions”. The company came up against limited demand, according to sources cited by Forbes, as investors were unconvinced by the business model of a service that is competing with giants like Yandex — and that is heavily dependent on favorable government regulation. Delimobil, which was aiming at a valuation of almost $1 billion, blamed the pandemic, competition in the car-sharing market, and the danger of possible cyberattacks and computer viruses.
  • Despite the disappointments of Mercury and Delimobil, another major IPO, that of the St. Petersburg Stock Exchange, is still due to go ahead. The company announced Tuesday it wants to raise about $150 million and get a valuation of up to $1.3 billion.
  • Originally, the St. Petersburg Stock Exchange planned to float in the U.S. with a valuation of $2.5 billion. However, it encountered obstacles: according to Forbes, the auditors did not issue a document required to validate the prospectus. The company now plans to seek a NASDAQ placement in the first half of 2022.
  • One major Russian IPO did take place recently — although it could hardly be described as a major success. The Cian real estate platform, which dominates the Russian market and ranks among the top 10 real estate services in the world, floated earlier this month in New York and Moscow. Cian managed to list at the upper end of its initial price range, and was valued at $1.1 billion. However, since the IPO, shares in the company have fallen 14 percent.

Why the world should care

The failed IPOs of Red & White and Delimobil suggest that Russian companies need to offer a big discount on their shares compared to their international counterparts.



Problems plague Telegram’s monetization drive

The first official adverts began appearing on messaging app Telegram earlier this month. But the development has caused widespread discontent among users, and some channels even started warning readers about the contents of adverts (over which they have no control). Telegram has a tempestuous relationship with the authorities and its immense popularity means it plays a key role in politics and business — any changes to its operating model are watched very closely.

  • When Telegram approached 500 million active users at the end of 2020, its founder, Pavel Durov, announced plans for an advertising platform that would allow the service to be monetized. For most of Telegram’s history, Durov had been paying the company’s expenses from his own pocket.
  • Advertising rates on Telegram start at €2 for 1000 impressions and the minimum spend is €1 million (an additional €1 million deposit is refunded only after the client has spent €10 million). These strict requirements were designed to ensure a high standard of advertising content. At the same time, Telegram itself does not control the adverts that it publishes, and is not expected to moderate them.
  • Adverts first appeared Nov. 7, and the majority of them were for other Telegram channels — mostly small Telegram channels with audiences of up to a couple of thousand subscribers. More than half of the adverts were related to crypto-currencies.
  • There was an immediate backlash to the adverts, with many users complaining they were irritating (even though they are marked ‘sponsored’). The owners of some high-profile media channels began warning readers that they couldn’t take responsibility for the reliability of any advertising. Durov did promise to roll out a paid function to disable advertising later this month, but it is not yet in operation.
  • Marketing agency Realweb said it had 10 contracts for Telegram advert campaigns, but refused to name its clients. “I can say that these are the biggest advertisers in Russia in different segments, from banking to fast-moving consumer goods,” Realweb managing partner Emin Avetisyan told The Bell. In conversation with media outlet Forbes, Avetisyan suggested that state-owned Sberbank and internet giant Yandex would soon be using Telegram adverts.
  • In the coming months, Telegram plans to allow platforms to connect automatically to the messenger’s advertising services. However, this is unlikely to be provided for everybody at once, according to Fyodor Skuratov, CEO of Telegram community management service Combot. Most likely, such a connection will come with a significant price tag.
  • Russia’s leading ad agencies appear to be adopting a ‘wait-and-see’ strategy. Telegram’s terms are tough and €10 million is a lot of money, according to Sergei Yefimov, director of marketing technology for media agency OMD OM Group. And, as this is a new service, there is no proven methodology, nor any understanding of how it will look and work.
  • However, it’s possible that Telegram may not be aiming all this at the Russian market. European agencies may find the financial terms much more acceptable, according to Yefimov — the price of contact with users varies significantly in Russia and Europe. A few years ago, the average cost of 1,000 impressions on YouTube was about €25 in Europe, while in Russia it was just €4.

Why the world should care

Telegram is not just one of the most popular messengers in the world, it’s also a major source of news and information for the Russian elite.

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