Google's Russian Deal Blocked by Regulators

A Russian regulatory body, the Federal Anti-monopoly Service (FAS), has refused to let Google acquire ad agency ZAO Begun in a proposed $140 million deal.

“We are very disappointed to hear that FAS has come to this decision,” wrote a Google spokesperson in a statement e-mailed to ClickZ News. “We strongly believe that this acquisition will enable us to significantly improve opportunities for Russian users, advertisers and publishers as well as the entire industry. At this time we are reviewing FAS’s decision. Once this process is complete, we will decide on our next steps.”

According to a statement on the regulatory body’s Web site, “FAS refused to allow purchase of 100% of [ZAO Begun].” FAS received a request from a private firm, Kokuna Holdings Limited, to purchase 100 percent of Begun’s stock. The Russian Service based its October 22 denial on federal “Protection of the Competition” law. No more information about Kokuna is available at this time.

Rambler Media, Begun’s British holding company, agreed to sell the six-year-old contextual ad network to Google in July. Google and Rambler had initially expected to close the transaction in September.

Rambler currently owns 50.1 percent of ZAO Begun, and under the terms of proposed deal would acquire the remaining 49.9 percent stake from Bannatyne Limited before selling all of Begun to Google.

Begun’s keyword-targeted site network has distribution relationships with about 143,000 Web sites, and offers pay-per-click, pay-per-call and other performance-based ads. Founded in 2002, Begun also offers an agency licensing and training program for resellers of its network inventory.

In July, a Google spokesperson told ClickZ News no decisions had been made regarding plans for Begun’s management structure. “We see this acquisition as a strategically reasonable step in our development in Russia, as we consider Russia as an important country and are committed to it,” the spokesperson said at the time.

Google’s proposed acquisition followed a series of purchases in the region by major digital ad players during the summer.

Aegis announced in June that it was acquiring full service digital agency AdWatch, and WPP bought a majority stake in Alite Ltd. in June. In addition, WPP bought Czech ad services company Advertures in July, citing a goal of growing its offering in fast developing regions.

In August, comScore reported that Russia now has the fastest growing online population in Europe, rising 27 percent year-on-year between ’07 and ’08. Last week, the measurement firm increased the number of Russian Web properties it tracks by 244, also recognizing the region is one of many increasingly important markets.”