Focus on Companies: VK.com

VK LogoVK (formerly known as Vkontakte) is the Russian phrase for “in touch,” and that is exactly what netizens are doing as this enormously popular Russian Facebook look-a-like sweeps through Europe and the territories of the former Soviet Union.

Launched in 2006 by Pavel Durov when he was only 21 years old, VK is today Europe’s largest homegrown social network platform, boasting over 210 million registered users who log on at a rate of almost 50 million users per day.

When VK started back in 2006 Durov had just graduated from St. Petersburg State University. Registration to the site was by invitation only, but within a few months VK could already claim 100,000 users and was considered Russia’s second most popular site in that country’s newly emerging social network marketplace. By July 2007 VK claimed 1 million registered users, and in less than one year after that its popularity had multiplied tenfold once again to 10 million users. By December 2008 VK overtook the first place social network site becoming Russia’s favorite place to keep “in touch” on the web.

Durov incorporated his company on January 19, 2007 as a Russian limited liability company. While in the earliest phases of the company’s expansion Durov realized he would need additional financial backing to give his company the powerful boost it needed. At the same time Durov’s old school friend Vyacheslav (Yitzchak) Mirilashvili was studying abroad at Tuft’s University in the United States. Mirilashvili had heard about Durov’s project while also witnessing first-hand the development of the spectacularly successful Facebook social network, which also began as a student’s-only platform in the highly concentrated student population of the Boston area, where Tuft’s is located. Excited by Durov’s burgeoning VK site, and educated by US growing popularity of social media, Mirilashvili borrowed money from his father Mikhael, and recruited another schoolmate, Lev Leviev to invest in VK with Durov.

These three investors supplied the bulk of the funds which got the business growing exponentially. Vyacheslav Mirilashvili, his father Mikhael Mirilashvili and Lev Leviev (not the same Leviev from Africa-Israel Investments) contributed 60, 10 and 10 percent of the financing, while Durov’s share was the remaining 20 percent.

By 2011 the website was opened up to the public, no longer requiring people to receive invitations to sign on to VK. Most VKontakte users are between the ages of 18 and 24 and enjoy all the same services which Facebook offers their peers in the West, plus a few added benefits Amerikanskis do not enjoy. VK users, in distinction to Facebook users have unhindered access to every type of pirated media available on-line, most notably music, television and movies. Copyright laws have not hindered the users of VK at all, adding to the popularity of the networking site.

In mid-April 2013 Vyacheslav Mirilashvili, Mikhael Mirilashvili and Lev Leviev sold their remaining stakes in VK to a Russian investment firm, United Capital Partners. Durov still owns 12 percent of VK, but still controls a majority of the votes.

As Western celebrities realize the value of reaching out to their fan base in Europe and Russia, they are beginning to become a presence on VK. Hollywood star Tom Cruise; hip-hop rapper Eminem; and American-Colombian pop-star Shakira all have pages on VK. When it comes to social networking on the other side of the ‘puddle,’ Facebook will have to contend with VK if they want to stay “in touch.”

Michelle Grathers

About Michelle Grathers

Michelle Grathers is an international tax expert. She has consulted for a variety of firms and high net worth individuals on all tax- and legal-related issues. She also helps new companies develop payroll services, statutory audits and mergers and acquisitions. Contact Michelle at michelle[at]businessdistrict.com