Russian Investment Fuels Facebook’s Global Growth
“News that a Russian investment firm, Digital Sky Technologies, has invested $200 million in Facebook in return for a 1.96 percent stake, has raised several questions, not least of which is what the resulting $10 billion valuation actually means for the social networking company.
Facebook did not need the money, Mr. Zuckerberg said. Its revenue is growing 70 percent year over year. He said the company would be able to run its operations from cash flow in 2010, even without the additional capital.
‘The financing will serve as a cash buffer to support our continued growth, allowing us to scale,’ he said.
Yet some Facebook observers have questioned whether a company growing so quickly, particularly overseas, where the online advertising market is smaller, can achieve these financial goals.
Facebook had 307 million visitors worldwide in April, almost triple the number a year ago, and 79 percent of them are outside the United States, according to comScore. It is quickly using cash to pay for the bandwidth and storage needs of the exploding user base abroad.
Digital Sky Technologies, which will not get a seat on Facebook’s board, will be able to help Facebook, which makes most of its money from ads, figure out new ways to make money outside the United States. It is a prominent Internet investor in Russia and Europe, where it owns stakes in Web companies that account for 70 percent of all page views on the Russian-speaking Internet, according to the firm.
Its portfolio companies include two large social networks, Forticom and vKontakte, and a Russian Web portal, Mail.ru. They have various business models, such as collecting micropayments from users and selling virtual goods.
These companies have figured out how to make money outside the United States much better than Facebook has, said Yuri Milner, chief executive of Digital Sky Technologies. He said that he was confident that Facebook would also be able to tap into these sources of revenue. ‘We believe the current valuation reflects that,’ he said.
Digital Sky Technologies also plans to buy at least $100 million of Facebook stock from current and former employees, the companies said. Details of the transaction will be announced in a few months. This will let some Facebook employees receive cash before the company is sold, something Mr. Zuckerberg said would not happen in the near future.
‘It’s not something we’re thinking about right now, it’s not something we’re rushing toward,’ he said. ‘We’ll do it when it’s the right thing for the company.’”
Facebook Investment Raises Questions, by Dealbook — May 27, 2009: https://dealbook.nytimes.com/2009/05/27/facebook-investment-raises-questions/
‘D.S.T. Deals’ — Shareholders Consolidate Before the Public Offering
“A FEW years ago, Facebook, which brought social networking to college students and grandparents alike, was expected to be a public company by now. Founded in 2004, it is cash-flow positive and is expected to bring in $1 billion in revenue this year.
Yet it is stubbornly staying private and has turned to a new kind of investor for the money that otherwise might have come from a public offering.
In May, Facebook raised $300 million from a Russian investment firm called Digital Sky Technologies, known as D.S.T. In November, Elevation Partners, a private equity firm in Silicon Valley, quietly invested $90 million, according to a person briefed on the deal.
Such big investments so late in a Web start-up’s life are unusual. But these deals have another twist: $100 million of D.S.T.’s investment and all of Elevation’s millions went to buying shares owned by employees or early investors.
The deals have earned the nickname ‘D.S.T. deals,’ a reference to the firm that started the trend. In addition to its $300 million investment in Facebook, in December, it led a $180 million investment in Zynga, which makes online games.
‘Transactions of this nature are proving to be pretty efficient for the fast-growing business where the founders are focused on optimizing for the long term, not necessarily doing an early I.P.O.,’ Yuri Milner, chief executive of D.S.T., said after making the Zynga investment.”
For Start-Ups, Late Bursts of Private Cash, by Claire Cain Miller — Apr. 1, 2010: https://dealbook.nytimes.com/2010/04/01/for-start-ups-late-bursts-of-private-cash/
‘The Social Network’ Publicity Stunt
“During Allen & Company’s annual mogul-fest in the Idaho mountains in July, Mark Zuckerberg, the founder of Facebook, devised a plan with Mayor Cory A. Booker of Newark to donate a $100 million challenge grant for the city’s troubled schools.
The gift, announced with much fanfare Friday on ‘The Oprah Winfrey Show‘ attracted $40 million in matching gifts so far by Monday from the likes of William A. Ackman, the hedge fund manager, and John Doerr, the venture capitalist. But Mr. Zuckerberg’s donation has some scratching their heads.
How is he going to pay for it? After all, Facebook has yet to go public. In Silicon Valley’s parlance, Mr. Zuckerberg is ‘paper-rich, cash-poor.’
Mr. Zuckerberg is giving away $100 million worth of Facebook shares to Startup: Education, a new foundation he has started and on whose board he will sit. The foundation, in turn, will sell the shares for cash in what’s known as the ‘secondary market,’ a nebulous world where big-time investors buy into companies before they go public, through the back door.
Yuri Milner, a Russian entrepreneur, has managed to amass a 10 percent stake in Facebook largely through the secondary market. His Digital Sky Technologies paid $200 million for a 2 percent stake, then raised that amount by buying up shares from employees.
Once more than 500 individuals or institutions own shares in Facebook, securities laws mandate that the company go public. Google staged an I.P.O. in part because it hit that same threshold.
Facebook isn’t saying how Mr. Zuckerberg, or the New Jersey school system, plan to value his shares. (Cynics have suggested that the donation is a publicity stunt to polish Mr. Zuckerberg’s image ahead of Friday when ‘The Social Network,’ a fictionalized story of Facebook’s founding, opens in theaters. Give the guy some credit, he just gave $100 million to a needy school system.)”
The Value of a Piece of Facebook, by Andrew Ross Sorkin — Sept. 27, 2010: https://www.nytimes.com/2010/09/28/business/28sorkin.html
Corporate Investment Further Delays IPO
“Goldman Sachs and Facebook have friended each other. In investing $450 million in the social networking giant, Goldman has established itself as the leading candidate to win the lucrative and prestigious assignment of Facebook’s initial public offering, whenever that day comes. It also positions itself to reap millions of dollars in banking fees. Goldman has already begun the process of wooing its wealthy clients to invest alongside it in Facebook, forming an investment vehicle that seeks to raise as much $1.5 billion for the Internet company.
But Goldman’s bold move is also likely to focus the attention of regulators at the Securities and Exchange Commission, which last month began an inquiry into the surge in trading shares of privately held Internet companies. While the investment by Goldman is being hailed as a huge coup on Wall Street, the deal — in particular the investment pool being formed for its clients — could become a lightning rod for regulators and policy makers as they examine the growing shadow market in Facebook shares.
In addition to the potential banking fees generated by an initial public offering of Facebook, there is the unlocked paper wealth realized by Mark Zuckerberg, Facebook’s 26-year-old chief, and his fellow executives. Goldman, as a lead Facebook investor, will most likely have a leg up in winning the assignment to manage that money, too.
The firm’s Facebook investment came together over the last month, according to a person involved in the deal who spoke only on the condition of anonymity. After the spike in trading in Facebook over the last several months — in a November auction, Facebook shares traded at a $56 billion valuation — Mr. Zuckerberg expressed an interest in raising money to legitimize the $50 billion valuation.
Mr. Zuckerberg felt that gaining the imprimatur of a major investor at such lofty levels would validate Facebook in the eyes of its Silicon Valley competitors with whom it is negotiating deals, this person said.
Helping play matchmaker was Yuri Milner, chief executive of DST Global, a Russian firm that invested $50 million alongside Goldman. Goldman has a close relationship with DST and Mr. Milner, a Russian businessman who has emerged as a leading venture capital investor in Internet companies.
Mail.ru, the publicly traded sibling of DST Global, has an existing stake in Facebook, as well large positions in Groupon and Zynga, two other popular Web-based businesses. Goldman was a lead underwriter of Mail.ru’s successful $1 billion initial public offering on the London Stock Exchange in November.
The Facebook investment, made from Goldman’s balance sheet, also sheds light on the firm’s private equity strategy in the wake of the Dodd-Frank regulatory overhaul.”
Why Facebook Is Such a Crucial Friend for Goldman, by Peter Lattman — Jan. 3, 2011: https://dealbook.nytimes.com/2011/01/03/why-facebook-is-such-an-important-friend-for-goldman-sachs/
‘A Strategy of Total and Unconditional Focus on the Social Internet’
“MOSCOW — What do the Russians want from Facebook?
For people with money in the Russian investment company DST Global, the focus is social networking. The private company, which is generally known here as DST, may seem but a footnote in the move by Goldman Sachs to invest $450 million in Facebook.
But DST’s additional $50 million now raises it and its sister company’s combined investment in Facebook to more than $500 million. As a result of their earlier investments, they now own about 10 percent of the company, making the DST siblings among Facebook’s biggest owners.
When DST, previously known as Digital Sky Technologies, first started putting money into Facebook in 2009, some analysts chalked it up to an effort by novice Russian investors to burnish their technology credentials and gain entree to Silicon Valley. But DST, which is bankrolled by a coal and steel mogul with Kremlin ties, has placed some ambitious, and so far successful, bets.
DST’s chief executive, Yuri Milner, has said his focus on social networking reflects insights gained from watching the Russian Internet market develop in the last few years. In 2005, DST began investing in Internet companies in Russia and Eastern Europe, where, as in parts of Asia, people adopted social games and the trading of virtual goods faster than in the United States. This, Mr. Milner, has said, led to an understanding that social networking business models involving tiny payments from large numbers of users have vast potential in emerging markets.
‘We chose a strategy of total and unconditional focus on the consumer Internet, and I would say, even the social Internet,’ Mr. Milner said, according to an interview published Dec. 28, before the Goldman Sachs deal became public, in the Russian business newspaper Vedomosti. ‘Global investors with this level of focus, it turns out, are few,’ he said. ‘People usually think more broadly, and then have to follow a large number of sectors and process lots of information.’ But the approach meant that Mr. Milner needed to engage in some social networking of his own — in Russia’s business world.
He linked up with Alisher B. Usmanov, the owner of a Ural Mountain coal and iron ore business and a member of a tight coterie of insider businessmen in Russia known as the oligarchs. ‘Thanks to a common acquaintance, I contacted Alisher,’ Mr. Milner said in the Vedomosti interview. Despite his brick-and-mortar businesses, Mr. Usmanov keeps a keen eye on Internet developments, Mr. Milner said. The pairing of Mr. Usmanov’s finances and Mr. Milner’s strategic bets on the direction of the Web form the core of the company, though DST says it is now also reinvesting proceeds from its earlier successes.
One of those was the public offering of Mail.ru, a Russian-language e-mail service and collection of Web properties, on the London Stock Exchange in November that raised more than $900 million. As a result of that public offering, Mail.ru now owns about 2.4 percent of Facebook, while the still-private DST Global owns about 7.6 percent. Responding in the past to questions about Mr. Usmanov and his role at DST, Mr. Milner has said that he and his partner owned 40 percent of the firm and made all of its management decisions.
In the Vedomosti interview, Mr. Milner had only praise for the business skills of Facebook’s 26-year-old co-founder, Mark Zuckerberg, saying he ‘continues to impress with the dynamism of his development as a personality.’
DST’s interest in the increasingly hot private market for shares in social networking sites comes as the Securities and Exchange Commission has opened an inquiry into such trading. And while it remains to be seen whether the Russian involvement will raise any questions for S.E.C. investigators, there is no question that the Russians and their American investment targets come from vastly different business cultures.
Mr. Usmanov earned his billions in the post-Soviet business world, managing steel mill subsidiaries for Gazprom before they were spun off as his own businesses. Dating from his work with Gazprom, he is said to be close to President Dmitri A. Medvedev, a former chairman of the Gazprom board.
A native of Uzbekistan, Mr. Usmanov spent six years in an Uzbek prison on a conviction of fraud and embezzlement in the 1980s, charges he contends were politically inspired. A Soviet court later dismissed them, and expunged his record. The year Mr. Usmanov was doing time in that prison — 1984 — was the year that Mr. Zuckerberg was born.”
Russians’ Large Stake in Facebook Grows Larger, by Andrew E. Kramer — Jan. 3, 2011: https://dealbook.nytimes.com/2011/01/03/russians-large-stake-in-facebook-grows-larger/
The Real Problem is That Journalists Are Ignored
“Silicon Valley has understood Russia’s technological savvy for some time. Right now, the Valley’s hottest investor hails not from Sand Hill Road, the epicenter of the region’s famous venture capital community, but from Moscow. Yuri Milner was such an aggressive and pioneering supporter of companies like Facebook and Zynga that he earned his way onto the Forbes billionaire list this year and has an investing approach (lots of cash, no board seat) named after him. Soon, Mr. Milner will be a physical presence, too: Last month, he paid a reported $100 million for an estate in Los Altos Hills in the Valley, though he and his family will continue to make Moscow their main home.
In the case of Russia, we may be discovering that authoritarianism and invention can coexist more easily than liberal democrats might hope. That is largely because Prime Minister Vladimir V. Putin’s genius has been to devise a form of government you might call authoritarianism lite. State rule in Russia isn’t exactly soft — just ask Mikhail B. Khodorkovsky, whose conviction on embezzlement charges was upheld by a Moscow court this week — but it isn’t Big Brother either.
In the world of ideas, Mr. Putin has understood the state doesn’t need to rule everything — only the mass, opinion-forming media, which in Russia is broadcast TV. On the radio, in elite newspapers and on the Internet, the intelligentsia can say pretty much what it chooses. This isn’t entirely new for Russia: Both czars and commissars allowed the intelligentsia some latitude, on the theory that the chattering class didn’t really count. But Mr. Putin has taken this much further than the apparatchiks did, allowing, for instance, extensive foreign travel.
As the Russian journalist Valery Panyushkin wrote in a New York Times op-ed article, ‘In Russia today, journalists are murdered like Anna Politkovskaya, beaten like Oleg Kashin and intimidated like me, but — as terrible as this will sound — that is not the real problem. The real problem is that journalists are ignored.'”
The Russians Are Coming, by Chrystia Freeland | Reuters — May 26, 2011: https://www.nytimes.com/2011/05/27/world/europe/27iht-letter27.html
‘The largest newspaper in the United States is only reaching 1 percent of the population, compared with 25 percent for Internet media‘
“YALTA, Ukraine — The Americans, among them the economists Lawrence H. Summers and Paul Krugman, were glum about their country’s economic stagnation and its political inability to adopt policies that could end it. The Europeans, a group that included the foreign ministers of Sweden and Poland, and Jürgen Fitschen, who has been named co-chief executive of Deutsche Bank, were worried about the sovereign debt crisis.
Even the Turks and the Indians, whose economies grew more than 8 percent last year, were anxious about uneven development at home, and the threat of economic tsunamis coming from abroad.
Yuri Milner’s perspective was entirely different. For one thing, at a time when where you sit so often determines where you stand, Mr. Milner almost perfectly represents a global technology elite whose frame of reference is planet Earth. He mostly lives in Moscow, but has recently purchased a palatial home in Silicon Valley. He addressed the Ukrainian conference by video link from Singapore.
From that vantage point, the most pressing issue in the world today isn’t recession and political paralysis in the West, or even the rapid development and political transformation in emerging markets, it is the technology revolution, which, in Mr. Milner’s view, is only getting started. Here are the changes he thinks are most significant:
• The Internet revolution is the fastest economic change humans have experienced, and it is accelerating. Mr. Milner said two billion people are online today. Over the next decade, he predicts that that number will more than double.
• The Internet is not just about connecting people, it is also about connecting machines, a phenomenon Mr. Milner dubbed ‘the Internet of things.’ Mr. Milner said that five billion devices are connected today. By 2020, he thinks more than 20 billion will be.
• More information is being created than ever before. Mr. Milner asserted that as much information was created every 48 hours in 2010 as was created between the dawn of time and 2003. By 2020, that same volume of information will be generated every 60 minutes.
• People are sharing information ever more frequently. The pieces of content shared on Facebook have increased from 140 million in 2009 to 4 billion in 2011. We are even sending more e-mails: 50 billion were sent in 2006, versus 300 billion in 2010.
• The result, according to Mr. Milner, is the dominance of Internet platforms relative to traditional media. ‘The largest newspaper in the United States is only reaching 1 percent of the population.’ he said. ‘That compares to Internet media, which is used by 25 percent of the population daily and growing.'”
The Advent of a Global Intelligence, by Chrystia Freeland | Reuters — Sept. 22, 2011: https://www.nytimes.com/2011/09/23/world/europe/23iht-letter23.html
Credit: Natalia Kolesnikova/Agence France-Presse — Getty Images
‘Stabilization Devours Its Own Children’
“MOSCOW — The Kremlin on Tuesday announced the reassignment of Vladislav Y. Surkov, the architect of the highly centralized political system that has come under waves of protest from middle-class Muscovites over the last month.
Vladislav Y. Surkov, a former advertising prodigy, coined the term ‘sovereign democracy’ to describe his system, which preserved the electoral process but hollowed out institutions capable of challenging the Kremlin’s power.
He created an array of political tools — the youth movement Nashi, the United Russia party and the overwhelming force of fully controlled television — that helped Vladimir V. Putin consolidate his authority during his first two presidential terms.
The last several months have exposed many of those tools as outdated, and Mr. Surkov had become a lightning rod for a rising generation of Russians raised on the Internet, who are calling for an end to the manipulations.
Aleksei L. Kudrin, a former finance minister, called Mr. Surkov’s transfer a ‘serious bid to renew the political system,’ and said it had been agreed upon by both President Dmitri A. Medvedev and Mr. Putin, the prime minister.
‘I consider him one of the designers of the system,’ Mr. Kudrin said of Mr. Surkov in an interview with the Kommersant-FM radio station. ‘Now the system is being reconsidered. Other organizers are needed, with other views on the political system.’
Mr. Surkov, 47, will now oversee modernization and innovation as a deputy prime minister, but will take no role in domestic politics. His position, deputy head of the presidential administration, will be filled by his rival Vyacheslav Volodin, a top United Russia official and longtime Putin loyalist who is vacating a spot as deputy prime minister.
Mr. Surkov’s low profile and extraordinary clout have earned him the title ‘gray cardinal,’ an object of fascination and occasional loathing in the capital. Asked by a journalist from Interfax on Tuesday why he was leaving, Mr. Surkov first answered, ‘Stabilization devours its own children.’
Then he laughed, and said he had overstayed the job and had requested a reassignment. Asked whether he would take a role in settling down the protests, Mr. Surkov said no.”
Architect of Russia’s Political System Under Putin Is Reassigned, by Ellen Barry — Dec. 27, 2011: https://www.nytimes.com/2011/12/28/world/europe/putin-takes-another-swipe-at-russian-protesters.html
An Extended Lockup Schedule Agreement
“For some investors, Facebook shares came with extra restrictions.
Mark Zuckerberg, who extracted voting rights from shareholders to retain control of the social networking company he started, also set the terms for when at least one major investor could sell stock, according to a recent regulatory filing. In a contract agreement dated February 2010, DST Global, the investment firm founded by the Russian billionaire Yuri Milner, agreed to an extended lockup schedule.
Typically, early shareholders have to wait about six months after an initial public offering before they can sell shares on the public markets. In DST’s case, only 50 percent of its shares can be sold after six months, rising to 75 percent after a year and the remainder after 18 months.
The structure benefits Facebook because Mr. Milner, a large shareholder, will not be able to flood the market with Facebook shares soon after the I.P.O.
Mr. Milner has been a big fan of social networking start-ups.
His firm owns about 5 percent of the online game company Zynga, which had its I.P.O last year. It holds a similarly sized position in the newly public Groupon, the daily deals site.
Mr. Milner has been steadily increasing DST’s stake in Facebook. The firm and its related entities, for instance, made dozens of purchases from August 2009 to early 2010, according to the offering documents. In January 2011, he put an additional $50 million into the company, at a $50 billion valuation. According to the offering documents, DST-related entities own 36.7 million Class A shares and 94.6 million Class B shares.”
DST Global’s Deal With Facebook, by Evelyn M. Rusli — Feb. 9, 2012: https://dealbook.nytimes.com/2012/02/09/dst-globals-deal-with-facebook/
The Second Economy
“Futurists and fantasists have been dreaming about the rise of intelligent machines for centuries. Now it is actually starting to happen.
For a drier but in many ways even more astonishing account of what is going on, read ‘The Second Economy,’ an essay in McKinsey Quarterly by W. Brian Arthur, a visiting researcher at the Intelligent Systems Lab at the Palo Alto Research Center in California.
Mr. Arthur’s contention is that a second, machine-to-machine economy is emerging and that it will bring deep economic, social and political change comparable to the transformation wrought by the Industrial Revolution.
‘Business processes that once took place among human beings are now being executed electronically,’ Mr Arthur writes. ‘They are taking place in an unseen domain that is strictly digital. On the surface, this shift doesn’t seem particularly consequential — it’s almost something we take for granted. But I believe it is causing a revolution no less important and dramatic than that of the railroads. It is quietly creating a second economy, a digital one.’
Mr. Arthur describes this economy as ‘vast, silent, connected, unseen and autonomous (meaning that human beings may design it but are not directly involved in running it).’ The second economy is manifest in transactions as quotidian as checking in for a flight with a machine and as esoteric as the algorithm hedge funds of Mr. Harris’s thriller, which use information produced by machines to trade with other machines.
Economists and novelists aren’t the only people musing about the rise of the machine-to-machine economy and its transformative potential.
Yuri Milner is one of the savviest technology thinkers in the world; he was a pioneering investor in Facebook, a bet that was wildly vindicated last week.
Mr. Milner has a presentation in which he describes the nine most important changes in the world today. Three of them are about what Mr. Arthur has dubbed the second economy: the rise of what Mr. Milner calls ‘the Internet of things,’ or the machine-to-machine economy; the growing power of artificial intelligence; and the emergence of a ‘global brain,’ which is the network of all of the people and the machines in the world and their connections to one another.
I’m not afraid our smart machines will try to exterminate us, but I do worry that the second economy may be a jobless one.
Mr. Arthur doesn’t offer much comfort on that score. In an exchange with a reader after his essay was published, the economist wrote: ‘Since the second economy began, in the early and mid-1990s, we’ve had wave after wave of downsizing and layoffs, and now we have ongoing structural joblessness. I hope jobs will be created, and maybe they will. More likely, the system, as so many times before in history, will have to readjust radically. It needs to find new ways to distribute the wealth.'”
A Revolution of Machines Quietly Hums, by Chrystia Freeland | Reuters — Feb. 9, 2012: https://www.nytimes.com/2012/02/10/us/10iht-letter10.html
Joking in Moscow about the Importance of Facebook in the American Presidential Campaign
“MOSCOW — The hoodie stayed back at the hotel when Mark Zuckerberg, the founder of Facebook, met Russia’s prime minister and former president, Dmitri A. Medvedev, on Monday.
‘Good conversation with Prime Minister Medvedev,; Mr. Zuckerberg wrote on his Facebook wall beside a picture of the two, in suits and grinning, at the Russian leader’s residence outside Moscow. Mr. Zuckerberg also visited Red Square — in his hoodie — ate at McDonald’s and helped judge a competition for Russian programmers under way in Moscow in his first visit to Russia, a country that is in important ways pivotal for Facebook.
The country is an important test case for the balancing act Facebook is undertaking as a new media company in countries that are important commercially but have traditionally heavily regulated their old media, if not censored it. And two of Facebook’s largest investors are Russian.
Mr. Zuckerberg and Mr. Medvedev talked about Facebook’s role in politics, though only jokingly in reference to its importance in the American presidential campaign, according to Mr. Medvedev’s press office.
Facebook, in Russia as elsewhere, plays a double role as a tool for posting silly party pictures and a tool for political organizing.
Facebook played an integral role in political dissent in Russia last winter, allowing street protests to coalesce when handing out fliers or posting notices on corkboards would not have worked.
Russia is also home to two large and early Facebook investors, Alisher Usmanov, a steel tycoon, and Yuri Milner, an expert on monetizing social network traffic in emerging markets. The two partly cashed out in the initial public offering of Facebook stock earlier this year but still own billions of dollars’ worth of shares.”
Zuckerberg Meets with Medvedev in a Crucial Market, by Andrew E. Kramer Oct. 1, 2012: https://www.nytimes.com/2012/10/02/technology/zuckerberg-meets-with-medvedev-in-key-market.html
There Is No Truth In Russia
“LONDON — IMAGINE if you grew up lying. Not a little bit, for convenience, but during every public moment of your life: at school, at work, at social events. You had to lie to survive, because the punishment for telling the truth was the loss of your academic or professional career, or even prison.
For Russians who came of age before 1991, this is the only way they know. The mature generation grew up with this behavior during the later years of the Soviet Union: reading Aleksandr Solzhenitsyn and listening to clandestine BBC reports in private while pretending to be good Communist Youth League or party members.
When I went to work as a TV producer in Moscow in the early 2000s, I would ask my peers which of the ‘selves’ they grew up with was the ‘real’ them. How did they locate the difference between truth and lies? ‘You just end up living in different realities,’ they would tell me, ‘with multiple truths and different ‘yous.”
When members of this generation came to power they created a society that was a feast of simulations, with fake elections, a fake free press, a fake free market and fake justice. They are led by religious Russian patriots who curse the decadent West while keeping their children and money in London and informed by television producers who make Putin-worshiping shows during the day, and listen to energetically anti-Putin radio shows the moment they get into their cars after work.
It’s almost as if you are encouraged to have one identity one moment and the opposite one the next. So you’re always split into little bits, and can never quite commit to changing things.
But there is comfort in these splits, too. That wasn’t you stealing from that budget, making that propaganda show or bending your knee to the president — just a role you were playing. All cultures split the public and private selves, but in Russia that split is often total.
The Kremlin’s goal is to control all narratives, so that politics becomes one great scripted reality show. The way it wields power illustrates and reinforces this psychology. Take Vladislav Y. Surkov, an adviser to President Vladimir V. Putin who is said to manage, among other things, the public image of the Russian-speaking separatist leaders in eastern Ukraine. He helped invent a new strain of authoritarianism based not on crushing opposition from above, but on climbing into different interest groups and manipulating them from the inside. On his desk in the Kremlin, Mr. Surkov had phones bearing the names of leaders of supposedly independent parties. Nationalist leaders like Vladimir V. Zhirinovsky would play the right-wing buffoon to make Mr. Putin look moderate by contrast.
With one hand Mr. Surkov supported human rights groups made up of former dissidents; with the other he organized pro-Kremlin youth groups like Nashi, which accused human rights leaders of being tools of the West. In a novel presumed to be written by Mr. Surkov, who is also an art-loving bohemian when not waging covert wars, he celebrates the triumphant cynicism of a post-Soviet generation that has seen through the illusions of belief in any values or ideology.
‘Everything is P.R.,’ my Moscow peers would tell me. This cynicism is useful to the state: When people stopped trusting any institutions or having any values, they could easily be spun into a conspiratorial vision of the world. Thus the paradox: the gullible cynic.
As the Kremlin plays the West, we see it extend the tactics it uses at home to foreign affairs. The Kremlin courts the West’s financial elites, including the German and American business lobbies that opposed new sanctions… and encourages the European far right with money and support to parties such as France’s National Front. The Kremlin can’t hope to dominate the West as it does the domestic situation, but its aim is to sow division, to ‘disorganize’ the enemy through an information war.
At the core of this strategy is the idea that there is no such thing as objective truth. This notion allows the Kremlin to replace facts with disinformation. We saw one example when Russian media spread a multitude of conspiracy theories about the downing of Malaysia Airlines Flight 17 over eastern Ukraine in July, from claiming that radar data showed Ukrainian jets had flown near the plane to suggesting that the plane was shot down by Ukrainians aiming at Mr. Putin’s presidential jet. The aim was to distract people from the evidence, which pointed to the separatists, and to muddy the water to a point where the audience simply gave up on the search for truth.
Sadly, this mind-set resonates well in a post-Iraq and post-financial-crisis West increasingly skeptical about its own institutions, where reality-based discourse has already fractured into political partisanship. Conspiracy theories are prevalent on cable networks and radio shows in the United States and among supporters of far-right parties in Europe.”
Russia’s Ideology: There Is No Truth, by Peter Pomerantsev — Dec. 11, 2014: https://www.nytimes.com/2014/12/12/opinion/russias-ideology-there-is-no-truth.html
Facebook Is Not The Public Square
“Dissidents in Russia and elsewhere are upset that Facebook has blocked an event page for a demonstration to support a leading opposition figure at the behest of the government of President Vladimir Putin. While their outrage is understandable, Facebook’s decision serves as an important reminder that social media companies are under no obligation to support free speech if doing so would harm their business.
Facebook officials have declined to address publicly their decision to remove the page for the Jan. 15 event for Aleksei Navalny, a vocal critic of Mr. Putin; the page is still available outside of Russia. But the company says that it will restrict content in countries when a government asks it to do so if it determines that the information violates local laws.
Data from Facebook show that it has increasingly blocked content in response to government requests. For example, in the first six months of 2014, it removed content in Russia 29 times, up from four times in the last six months of 2013. The increase on removals was even more stunning in Pakistan — 1,773 times in the first half of this year, up from just 162 times in the previous six months.
Because social media businesses have become such a fixture in modern life, many people might think of them as the digital equivalent of the public square where opinions can be freely shared. But these companies are more like privately operated malls — the management always reserves the right to throw you out if you don’t abide by its rules.
Social media companies and their supporters argue that they have no choice but to follow local laws when they operate in other countries. If Facebook made a practice of defying requests from Russian officials, it would be entirely conceivable that Mr. Putin and his officials would block the site in the country altogether. And some would say that it is better for these companies to have some presence in Russia than to be blocked completely.
As much as free speech advocates would like Facebook and other Internet companies to uphold liberal values, these companies are unlikely to do so if that means sacrificing lucrative business opportunities.”
Donald J. Trump — A Russian Agent, Wrecker, and Traitor 