(7) CPC revenues are defined as revenues from price comparison services priced on a CPC (cost-per-click) basis and recognized only when a user clicks on product offerings placed by merchants on Yandex.Market. Whereas marketplace revenues (from sales of goods (1P) and commission and other marketplace revenues (3P)) are priced on cost per action model.

The GMV of Yandex.Market marketplace accelerated to 144% year-on-year in Q2 2021 compared with 126% in Q1 2021 despite high growth recorded in the Q2 2020. The acceleration was driven by the combination of factors, including audience growth, significant expansion in assortment and logistics infrastructure, swift transition of merchants from CPC to CPA (powered by dropship by seller "DBS" model), as well as support from the integration with our Yandex Plus program.

Yandex.Market total revenues grew 23% in Q2 2021 compared with Q2 2020. The slower-than-GMV revenue growth is explained by the changes in marketplace revenue mix (increase in the share of 3P GMV to 70% in Q2 2021 compared with 56% in Q2 2020), the decrease of the merchants commission as well as the decline in the price comparison revenue (by 43% year-on-year on the back of the conversion of merchants from CPC to our 3P marketplace model). Revenues from sale of goods (1P) grew 67% and were influenced by overall business growth and partly offset by a decrease in 1P as a share of GMV. Commission and other marketplace revenues (3P) decreased by 13% driven by the decrease of the merchants commissions and 3P blended take-rates (on the back of the expansion of the DBS model) partially offset by the overall growth of 3P GMV.

Adjusted EBITDA loss of Yandex.Market business was RUB 9.9 billion in Q2 2021, compared to a loss of RUB 1.8 billion in Q2 2020, primarily as a result of investments in the expansion of our operations, including our assortment, fulfillment and delivery infrastructure, reduction of marketplace commissions as well as additional distribution and marketing support following the marketplace rebranding in Q4 2020.

Media Services

The Media Services segment includes our subscription service Yandex Plus, Yandex.Music, KinoPoisk, Yandex.Afisha and our production center Yandex.Studio.

Key operational trends: ? Number of Yandex Plus subscribers reached 9 million as of the end of Q2 2021, up 128% from the end of Q2 2020 


 
In RUB millions        Three months ended June 30,  Six months ended June 30, 
                       2020     2021       Change   2020     2021     Change 
Revenues               1,700    4,094      141%     3,133    7,580    142% 
Adjusted EBITDA        (857)    (1,732)    102%     (1,567)  (2,989)  91% 
Adjusted EBITDA margin -50.4%   -42.3%     8.1 pp   -50.0%   -39.4%   10.6 pp

Media Services revenues grew 141% in Q2 2021 compared with Q2 2020. The increase was primarily driven by the growth of Yandex Plus subscription revenues as well as by B2B revenues, which includes growth of advertising revenues on the back of overall recovery in advertising expenditures and licensing revenues due to increased activities in licensing sales of KinoPoisk Originals and sublicensing of exclusives. Increasing adjusted EBITDA losses reflect our investments in content and marketing to support the growth of our business.

Classifieds

The Classifieds segment includes Auto.ru, Yandex.Realty, Yandex.Jobs, and Yandex Classifieds. 


 
In RUB millions        Three months ended June 30,  Six months ended June 30, 
                       2020   2021     Change       2020    2021    Change 
Revenues               886    1,995    125%         2,374   3,778   59% 
Adjusted EBITDA        80     728      n/m          (24)    1,113   n/m 
Adjusted EBITDA margin 9.0%   36.5%    27.5 pp      -1.0%   29.5%   30.5 pp

Classifieds revenues increased by 125% in Q2 2021 compared with Q2 2020, due to a low base effect in Q2 2020 and was driven mainly by the recovering revenue from auto dealers' listings. Auto finance and insurance service revenue has grown more than 7x as compared to Q2 2020 due to the product development. On a 2-year stack basis Classifieds revenues grew by 24%. The Adjusted EBITDA margin has improved to 36.5% in Q2 2021 from 9.0% in Q2 2020 primarily driven by acceleration of Auto.ru revenue growth and consequent operating leverage improvement.

Other Business Units and Initiatives

The Other Business Units and Initiatives segment includes our self-driving vehicles business ("Yandex SDG"), Zen, Yandex.Cloud, Yandex.Education, Devices, and Yandex.Uslugi ("Services"), as well as several other experiments.

Key operational trends: ? Zen's daily average users was 19.2 million in June 2021, up 14% from June 2020 ? Share of video as percentage of time spent on Zen is around 28% as of the end of June 2021 compared to 14% in the

end of June 2020 


 
In RUB millions        Three months ended June 30,   Six months ended June 30, 
                       2020      2021      Change    2020     2021     Change 
Revenues               2,037     4,898     140%      3,782    9,628    155% 
Adjusted EBITDA        (1,870)   (3,169)   69%       (3,634)  (5,579)  54% 
Adjusted EBITDA margin -91.8%    -64.7%    27.1 pp   -96.1%   -57.9%   38.2 pp

Other Business Units and Initiatives revenues increased 140% in Q2 2021 compared with Q2 2020. The increase was primarily driven by the fast growth in Devices (revenue increased 196% year-on-year to RUB 1.6 billion in Q2 2021 on the back of the strong demand for our stations), Zen and Cloud.

Adjusted EBITDA loss amounted to RUB 3.2 billion, up from a loss of RUB 1.9 billion in Q2 2020, primarily driven by the increased investments in Yandex.Uslugi, Yandex SDG (where adjusted EBITDA loss was RUB 1 billion in Q2 2021) and other initiatives. The Adjusted EBITDA loss of Devices business came to RUB 222 million in Q2 2021 compared to RUB 172 million in Q2 2020, primarily driven by significant increase in sales, marketing activities and R&D expenses partly offset by improved profitability as a result of the growing economy of scale.

Eliminations

Eliminations related to our revenues represent the elimination of transactions between the reportable segments, including advertising revenues, intercompany revenues related to brand royalties, data centers, logistics service, devices intercompany sales and others. 


 
In RUB millions         Three months ended June 30,   Six months ended June 30, 
                        2020       2021       Change  2020     2021       Change 
Revenues: 
Segment revenues        43,308     87,354     102%    92,531   166,405    80% 
Eliminations            (1,901)    (5,952)    213%    (4,121)  (11,867)   188% 
Total revenues          41,407     81,402     97%     88,410   154,538    75% 
Adjusted EBITDA: 
Segment adjusted EBITDA 8,395      5,703      -32%    20,438   16,634     -19% 
Eliminations            76         77         1%      158      167        6% 
Total adjusted EBITDA   8,471      5,780      -32%    20,596   16,801     -18%

Eliminations related to our revenues increased 213% in Q2 2021 compared with Q2 2020. On a like-for-like basis (including Yandex.Market in both Q2 2021 and Q2 2020), eliminations related to our revenues increased 130% in Q2 2021. The increase was mainly attributed to higher intercompany TAC related to fast growing Zen business, intercompany revenue in Search & Portal (related to brand royalties, data centers rent paid by business units as well as cross-service advertising and marketing activities) as well as the intercompany eliminations related to Yandex Plus program (advertising and marketing support in Taxi and Media Services).

Adjusted EBITDA decreased 32% in Q2 2021 compared with Q2 2020. On a like-for-like basis (including Yandex.Market in both Q2 2021 and Q2 2020), adjusted EBITDA decreased 13%. The decline was mainly driven by investments in E-commerce (including Yandex.Market, Lavka and Yandex.Eats), Other Business Units and Initiatives and Media Services, which were partly offset by Search and Portal, Ride-hailing and Classifieds revenue growth and EBITDA margin improvement compared to Q2 2020.

Interest income in Q2 2021 was RUB 1,180 million, compared with RUB 971 million in Q2 2020, reflecting an increase in cash on deposits in Q2 2021 compared with Q2 2020.

Interest expense in Q2 2021 was RUB 861 million, up from RUB 678 million in Q2 2020, reflecting interest on the convertible bonds issued in February 2020.

Foreign exchange loss in Q2 2021 was RUB 555 million, compared with a foreign exchange loss of RUB 1,296 million in Q2 2020. This loss reflects the appreciation of the Russian ruble during Q2 2021.

Income tax expense for Q2 2021 was RUB 485 million, down from RUB 1,966 million in Q2 2020 mainly due to change in deferred tax asset valuation allowances. If we remove the effects of deferred tax asset valuation allowances, SBC expense, tax on dividends and tax provisions recognized, our effective tax rate for Q2 2021 was 23.9%, compared with 26.5% for Q2 2020 as adjusted for certain losses from equity-method investments, which are non-deductible, and similar effects in that period. The decrease in the tax rate without above-mentioned effects was primarily driven by the permanent difference between US GAAP and tax accounting in the books of certain of our subsidiaries.

Net loss was RUB 4.7 billion (USD64.4 million) in Q2 2021, compared with net loss of RUB 3.7 billion in Q2 2020. Net loss in Q2 2021 was driven by the consolidation of Yandex.Market, as well as significant investments in FoodTech and Media Services compared with Q2 2020.

Adjusted net income in Q2 2021 was RUB 1.0 billion (USD14.0 million), a 47% decrease from Q2 2020, primarily driven by the consolidation of Yandex.Market, as well as significant investments in FoodTech, Media Services and Other Business Units and Initiatives, which were partly offset by revenue growth and adjusted EBITDA margin improvement in Search and Portal, Ride-hailing and Classifieds compared to Q2 2020.

Adjusted net income margin was 1.2% in Q2 2021, compared with 4.6% in Q2 2020.

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