How Russia’s Ivideon CCTV Service is Conquering the World
To create the technology for remote surveillance, a programmer and a banker sold their apartments. It was all worth it, however, as they now have 200,000 customers and a global contract with Philips that promises them even more.
Sep 18, 2014
Every day, the founder of the Dodo Pizza Fyodor Ovchinnikov checks in on his chain of restaurants scattered across Russia — three of his own and a dozen franchises serve pizza to the residents of Belgorod, Samara, Sarapul, Smolensk, Ukhta and Chelyabinsk. Sitting on the beach in Thailand, Ovchinnikov simply chooses one of the outlets using an app on his tablet. What he finds is pandemonium in Samara, where it is clear that only one cashier is working and there is a huge line of customers waiting to be served. Ovchinnikov calls the manager in Samara and then switches to another city.
The webcams at the pizzerias transmit images over the Internet via the Ivideon server. The picture is encrypted and made available to clients who have paid for the installation of Ivideon cameras and services. From his computer, tablet or smartphone, Ovchinnikov can view or record the images the cameras capture at any of his pizzerias from anywhere in the world.
Ivideon was created three years ago by two Russian businessmen and now has almost 200,000 clients worldwide, including Rosneft and Honda. Its annual revenue this year is projected to surpass $1 million and the Ivideon application is currently the most popular download in its market segment on both the iTunes and Google Play stores.
A graduate of Moscow State Technical University, Vladimir Yeremeyev began creating surveillance systems for mobile devices in 2003, when the apex of the technology was a Nokia phone running Symbian. Yeremeyev worked for several IT companies, the last being a division of Megafon, where he worked on video compression for smartphone transmission. The project was a failure and some developers, including Yeremeyev, were fired. The young engineer decided that instead of looking for a new job, he would try to find the money to launch a project of his own.
Yeremeyev’s excitement inspired his friend Andrew Yudnikov, who was then a member of the board at Derzhava Bank with contacts in the financial sector, and they set out to find investors. They initially met with little success.
"We did not see any interest in Ivideon from venture capital funds or institutions, so we financed the company with our own money," said Yudnikov. They raised 4.5 million rubles ($121,814.00) to launch the startup by selling their apartments in Kaliningrad and just outside Moscow.
Yudnikov may not have been able to find investors for the startup but he did secure a large client: Ivideon began to provide its services to the rapidly growing fast food chain Kroshka Kartoshka.
"The chain was faced with significant fluctuations in revenue from different locations," said Yeremeyev. Point-of-sale cameras were installed that led to the discovery that staff were selling food and pocketing the money, and even offering "surplus" ingredients for sale.
"The staff met the installation of the cameras without much enthusiasm — they even broke them or turned them to face the wall," said Yeremeyev. "The project has helped us to understand that video cameras in retail locations have an important psychological effect. Is not important how often the owner checks a particular camera but rather that the employees know that they can be watched at any time."
Six months after launching, Yudnikov found the company’s first investor. Andrei Fatakhov is a co-founder of NetPrint, which offers printing services via the Internet in use by Yandex and Mail.ru, and had been familiar with Yudnikov since his days at the bank. So far, 54.5 million rubles ($1.47 million) has been invested in the company, 35 million rubles ($945,418) of which came from Fatakhov and 15 million rubles ($405179) from a friend of the owners’, who remains unnamed.
Going against advice, the partners set out to bring the service to as wide an international market as possible from the outset.
"The investment funds with which we spoke tried to convince us that it was necessary to establish ourselves in Russia first, gain a foothold and then go on to capture foreign markets," said Yeremeyev. "However, from the very beginning we decided to pursue international development."
The Ivideon service was launched publicly in February 2011, when the application that allowed users to gain remote access to cameras first appeared on the company’s website. There was no money for advertising, so the customer base was built by providing the service free-of-charge for the first six months.
To ensure uninterrupted operation for users, Ivideon has servers deployed in several Russian cities, including Moscow and St. Petersburg, as well as in Ukraine and Kazakhstan. They also have servers in Europe, on both coasts of the United States and in Singapore. There is a possibility the company will soon deploy the service in China.
The money the pair received from investors was used to buy or rent servers, and to develop software to coordinate video traffic so that if one of the data centers fail, the software immediately redirects customers’ video via another network.
In December 2011, Russian energy giant Rosneft appeared on the books of Ivideon. How did a six-month-old startup manage to get business from the state-owned company? Yudnikov says that a representative from DMSoft, an integrator that had won a tender from the oil company, called up Ivideon and offered it a contract to implement surveillance systems.
"Frankly, I don’t know how much the entire project is worth but we got about 8 million rubles ($216,559)," said Yudnikov.
According to Yudnikov, the ambitious project to install surveillance systems across the country included a number of specific tasks. Ivideon even equipped an all-terrain vehicle with a tracking system to oversee the construction of pipelines.
"Rosneft has been an interesting project for us but we are not focusing on the public sector and large corporations," said Yeremeyev. "You can earn a lot of money very quickly, but just as quickly lose everything because of the political risks. Our business will always be focused on the mass market."
Dodo Pizza’s Ovchinnikov decided to put cameras from Ivideon in their pizzerias in mid-2012.
"It was quite interesting from a marketing perspective," said Ovchinnikov. "Each client can now monitor the cooking of his pizza via the company website. In terms of profit, the marketing effect is difficult to judge but such measures invariably attract customers."
In addition to attracting customers, the installation of cameras has replaced the use of "mystery shoppers." A visit by a mystery shopper costs between 1,500 and 2,000 rubles ($40.52-$54.02) before travel expenses. A camera costs about 4,000 rubles ($108) plus another 150 rubles ($4) a month for the Ivideon service.
Ivideon is also used by the Russian division of Honda.
"We already had a solution in place for our showrooms and repair shops based on analog security cameras, but we decided to introduce internal monitoring," said the head of IT for Honda Motors Russia Pavel Blinov. "We compared offers from a number of companies and the Ivideon proposal was four times more attractive. In addition, we were comfortable knowing that we could move the camera quickly from place to place on our own."
Ivideon only began to attract private clients in September 2012, when an agreement was reached with PayPal. Offers for home users start at 60 rubles ($1.62) a month.
The years spent on bringing the system to life, have borne fruit. In 2012, the company earned 12.8 million rubles ($345,666), while the first half of 2014 has already brought them 22 million rubles ($594044) in revenue. Soon the company will reach yet another milestone: Yeremeyev and Yudnikov have signed a contract with Philips.
In an effort to make its service available on the greatest possible number of platforms, Ivideon’s co-founders have bypassed all of the world’s major manufacturers of surveillance cameras, such as Samsung and D-Link, in favor of Philips. They began negotiations with the electronics giant at the Consumer Electronic Show in Las Vegas.
"Before us, Philips had seven contractors to create solutions for their new M120 camera. The previous contractor had been working on the project for one and a half years. We only had a few weeks to create our version and we met the deadline," said Yeremeyev.
By this fall, Philips will start selling a co-branded solution for video surveillance worldwide with service from Ivideon. Philips is giving its Russian service partner 300,000 new customers from around the world who have been using another platform. As part of the agreement, Ivideon will pay Philips 50 percent of its revenue from the new customers. According to Ivideon’s forecasts, the partnership should bring them $5.5 million per year.
The company now serves a total of 250,000 cameras worldwide (excluding the 300,000 from Philips) and Ivideon users have downloaded the company’s app from the iTunes and Google Play stores 182,000 times. Their largest competitor, Dropcam, which received a $47 million investment, has been downloaded less than 50,000 times.
In May 2013, Ivideon received resident status at Skolkovo but cooperation with the IT cluster has been uneasy from the very start.
"We applied for the first time in early 2012 and were twice denied because, while we fulfilled all the other requirements, we lacked foreign employees on our team," said Yudnikov. As a result, Ivideon hired a programmer from the U.S. and gained access to the cluster. While Skolkovo may have provided the Russian company with tax breaks, it has not been tapped for any grants.
Ivideon now plans to launch a "smart home" sensor solution. If it succeeds, Fyodor Ovchinnikov will be able to see whether or not a pipe has broken in his home back in Russia as well as keeping an eye on the pizza business.
The webcams at the pizzerias transmit images over the Internet via the Ivideon server. The picture is encrypted and made available to clients who have paid for the installation of Ivideon cameras and services. From his computer, tablet or smartphone, Ovchinnikov can view or record the images the cameras capture at any of his pizzerias from anywhere in the world.
Ivideon was created three years ago by two Russian businessmen and now has almost 200,000 clients worldwide, including Rosneft and Honda. Its annual revenue this year is projected to surpass $1 million and the Ivideon application is currently the most popular download in its market segment on both the iTunes and Google Play stores.
A graduate of Moscow State Technical University, Vladimir Yeremeyev began creating surveillance systems for mobile devices in 2003, when the apex of the technology was a Nokia phone running Symbian. Yeremeyev worked for several IT companies, the last being a division of Megafon, where he worked on video compression for smartphone transmission. The project was a failure and some developers, including Yeremeyev, were fired. The young engineer decided that instead of looking for a new job, he would try to find the money to launch a project of his own.
Yeremeyev’s excitement inspired his friend Andrew Yudnikov, who was then a member of the board at Derzhava Bank with contacts in the financial sector, and they set out to find investors. They initially met with little success.
"We did not see any interest in Ivideon from venture capital funds or institutions, so we financed the company with our own money," said Yudnikov. They raised 4.5 million rubles ($121,814.00) to launch the startup by selling their apartments in Kaliningrad and just outside Moscow.
Yudnikov may not have been able to find investors for the startup but he did secure a large client: Ivideon began to provide its services to the rapidly growing fast food chain Kroshka Kartoshka.
"The chain was faced with significant fluctuations in revenue from different locations," said Yeremeyev. Point-of-sale cameras were installed that led to the discovery that staff were selling food and pocketing the money, and even offering "surplus" ingredients for sale.
"The staff met the installation of the cameras without much enthusiasm — they even broke them or turned them to face the wall," said Yeremeyev. "The project has helped us to understand that video cameras in retail locations have an important psychological effect. Is not important how often the owner checks a particular camera but rather that the employees know that they can be watched at any time."
Six months after launching, Yudnikov found the company’s first investor. Andrei Fatakhov is a co-founder of NetPrint, which offers printing services via the Internet in use by Yandex and Mail.ru, and had been familiar with Yudnikov since his days at the bank. So far, 54.5 million rubles ($1.47 million) has been invested in the company, 35 million rubles ($945,418) of which came from Fatakhov and 15 million rubles ($405179) from a friend of the owners’, who remains unnamed.
Going against advice, the partners set out to bring the service to as wide an international market as possible from the outset.
"The investment funds with which we spoke tried to convince us that it was necessary to establish ourselves in Russia first, gain a foothold and then go on to capture foreign markets," said Yeremeyev. "However, from the very beginning we decided to pursue international development."
The Ivideon service was launched publicly in February 2011, when the application that allowed users to gain remote access to cameras first appeared on the company’s website. There was no money for advertising, so the customer base was built by providing the service free-of-charge for the first six months.
To ensure uninterrupted operation for users, Ivideon has servers deployed in several Russian cities, including Moscow and St. Petersburg, as well as in Ukraine and Kazakhstan. They also have servers in Europe, on both coasts of the United States and in Singapore. There is a possibility the company will soon deploy the service in China.
The money the pair received from investors was used to buy or rent servers, and to develop software to coordinate video traffic so that if one of the data centers fail, the software immediately redirects customers’ video via another network.
In December 2011, Russian energy giant Rosneft appeared on the books of Ivideon. How did a six-month-old startup manage to get business from the state-owned company? Yudnikov says that a representative from DMSoft, an integrator that had won a tender from the oil company, called up Ivideon and offered it a contract to implement surveillance systems.
"Frankly, I don’t know how much the entire project is worth but we got about 8 million rubles ($216,559)," said Yudnikov.
According to Yudnikov, the ambitious project to install surveillance systems across the country included a number of specific tasks. Ivideon even equipped an all-terrain vehicle with a tracking system to oversee the construction of pipelines.
"Rosneft has been an interesting project for us but we are not focusing on the public sector and large corporations," said Yeremeyev. "You can earn a lot of money very quickly, but just as quickly lose everything because of the political risks. Our business will always be focused on the mass market."
Dodo Pizza’s Ovchinnikov decided to put cameras from Ivideon in their pizzerias in mid-2012.
"It was quite interesting from a marketing perspective," said Ovchinnikov. "Each client can now monitor the cooking of his pizza via the company website. In terms of profit, the marketing effect is difficult to judge but such measures invariably attract customers."
In addition to attracting customers, the installation of cameras has replaced the use of "mystery shoppers." A visit by a mystery shopper costs between 1,500 and 2,000 rubles ($40.52-$54.02) before travel expenses. A camera costs about 4,000 rubles ($108) plus another 150 rubles ($4) a month for the Ivideon service.
Ivideon is also used by the Russian division of Honda.
"We already had a solution in place for our showrooms and repair shops based on analog security cameras, but we decided to introduce internal monitoring," said the head of IT for Honda Motors Russia Pavel Blinov. "We compared offers from a number of companies and the Ivideon proposal was four times more attractive. In addition, we were comfortable knowing that we could move the camera quickly from place to place on our own."
Ivideon only began to attract private clients in September 2012, when an agreement was reached with PayPal. Offers for home users start at 60 rubles ($1.62) a month.
The years spent on bringing the system to life, have borne fruit. In 2012, the company earned 12.8 million rubles ($345,666), while the first half of 2014 has already brought them 22 million rubles ($594044) in revenue. Soon the company will reach yet another milestone: Yeremeyev and Yudnikov have signed a contract with Philips.
In an effort to make its service available on the greatest possible number of platforms, Ivideon’s co-founders have bypassed all of the world’s major manufacturers of surveillance cameras, such as Samsung and D-Link, in favor of Philips. They began negotiations with the electronics giant at the Consumer Electronic Show in Las Vegas.
"Before us, Philips had seven contractors to create solutions for their new M120 camera. The previous contractor had been working on the project for one and a half years. We only had a few weeks to create our version and we met the deadline," said Yeremeyev.
By this fall, Philips will start selling a co-branded solution for video surveillance worldwide with service from Ivideon. Philips is giving its Russian service partner 300,000 new customers from around the world who have been using another platform. As part of the agreement, Ivideon will pay Philips 50 percent of its revenue from the new customers. According to Ivideon’s forecasts, the partnership should bring them $5.5 million per year.
The company now serves a total of 250,000 cameras worldwide (excluding the 300,000 from Philips) and Ivideon users have downloaded the company’s app from the iTunes and Google Play stores 182,000 times. Their largest competitor, Dropcam, which received a $47 million investment, has been downloaded less than 50,000 times.
In May 2013, Ivideon received resident status at Skolkovo but cooperation with the IT cluster has been uneasy from the very start.
"We applied for the first time in early 2012 and were twice denied because, while we fulfilled all the other requirements, we lacked foreign employees on our team," said Yudnikov. As a result, Ivideon hired a programmer from the U.S. and gained access to the cluster. While Skolkovo may have provided the Russian company with tax breaks, it has not been tapped for any grants.
Ivideon now plans to launch a "smart home" sensor solution. If it succeeds, Fyodor Ovchinnikov will be able to see whether or not a pipe has broken in his home back in Russia as well as keeping an eye on the pizza business.