The arrest of Telegram CEO Pavel Durov has put the messenger service in the spotlight. Little is known about the company behind it – just like its finances.
Pavel Durov was arrested in Paris at the weekend.
Chris Ratcliffe / Bloomberg / Getty
It wasn’t that long ago that Pavel Durov threw money out the window. In 2012, the Telegram founder was living in his native Russia and running the successful social network VKontake. One day, together with his deputy Ilya Perekopski, he folded 5,000 ruble notes (equivalent to 155 dollars) into paper airplanes and let them slide out of his office window onto the streets of St. Petersburg. Passers-by fought over the banknotes, while Durov watched from the sixth floor.
The paper airplane, the logo of the messenger service Telegram, is intended to commemorate this action. And of course the idea of freedom that the service embodies according to Durow: freedom from censorship, freedom from invasion of privacy, freedom from state supervisory authorities.
For Durov himself, freedom ended abruptly last weekend: when he landed in Paris, he was arrested by the French authorities. They accuse him of not doing enough on his platform to combat drug trafficking, the promotion of terrorism and violence against minors. The arrest sheds light on a company that operates in secret. Durov and his colleagues conceal their activities behind a network of front companies.
Difficult search for a company headquarters
The story of how Telegram came into being is one of fleeing interference. The app was developed in 2013 by Durov and his brother Nikolai. They had already founded VKontakte together in 2006. In 2014, they sold their shares in the social network on the grounds that the Russian state had gained too much influence. To prevent Telegram from suffering the same fate, the brothers left Russia.
In an interview with former Fox presenter Tucker Carlson, Durov talks about why he left Russia.
The search for a suitable company headquarters proved difficult. According to Durow, the planned branch in Berlin failed because it was unable to obtain residence permits for all employees.
The company then moved on to London, and until 2019, Telegram Messenger LLP was registered under the London address of a company headquartered in the Seychelles. Durow and the developers also stopped in Singapore. Today, Telegram is listed as a company in the British Virgin Islands and in Dubai, and the headquarters are said to be in Dubai.
A network of bogus companies
The emirate is of interest to Durow for tax reasons; with an estimated fortune of more than 15 billion dollars, he is considered the richest resident. However, the choice of company headquarters may also have something to do with the fact that the authorities in Dubai are much less interested in Telegram’s processes than the European ones.
It is unclear whether Durow and the Telegram developers actually stay in Dubai permanently. According to various media reports, no one is ever to be found at the official Telegram headquarters; Durow himself describes himself as a digital nomad.
It is not known exactly how many employees Telegram has, but estimates suggest that there are around 50. What is certain is that Pavel Durov has full control over the company. This means that he also determines which information is made public. Telegram’s data centers are located all over the world and are embedded in a complex network of shell companies. According to the company, this is to better protect data that is not end-to-end encrypted.
Failed crypto plans
Little is known about the company’s financial situation either – although it is clear that running the app consumes a lot of money. In the early years, Durow said, he invested hundreds of millions of his personal assets in Telegram. He and his brother Nikolai have always stated that they do not want to make money with the service. Nevertheless, they have to cover the costs somehow.
In 2017, the brothers pushed forward a plan to generate revenue for Telegram without breaking their promise of a free and ad-free app: They developed their own digital currency and a blockchain system called Telegram Open Network, or TON for short.
To this end, they raised $1.7 billion from investors, including well-known American investment companies such as Kleiner Perkins, Sequoia Capital and Benchmark, as well as Russian oligarchs and the now fugitive former Wirecard boss Jan Marsalek.
The project turned out to be a failure. In October 2019, the US Securities and Exchange Commission (SEC) imposed an immediate stop on the sale of the currency units, which it considered an illegal backdoor IPO. Telegram had to pay a fine of $18.5 million. In order to pay off the debts to investors, among other things, Durow raised new money in the traditional way in March 2021: Telegram issued bonds worth over a billion dollars.
Ads and subscription offers bring in money
The money was apparently not enough to cover the expenses. In 2021, Telegram introduced so-called sponsored messages in large chat groups, a kind of watered-down form of ads. There is now a paid subscription for professional users. According to the company, the measures serve the purpose of covering the costs of operations, infrastructure and developers.
In March of this year, Telegram announced that it had issued additional bonds worth $330 million. In an interview Pavel Durov said in the same month that the company was approaching profitability. Telegram has 900 million users and generates “hundreds of millions of dollars” in revenue through advertising and premium subscriptions. In the event that profitability is achieved, Durov also suggested an IPO – as a way to “democratize access to Telegram’s value.”
An IPO next year?
In such a case, they would consider issuing a certain proportion of shares to particularly loyal users, said Durow. An IPO would also be attractive for Telegram’s current creditors. If the step were to take place before March 2026, they would be able to convert their bonds into equity at a certain discount. Telegram’s debt to its bondholders now amounts to $2.3 billion.
However, it is unclear whether an IPO will actually take place. Even if the step would make sense for Telegram from a financial perspective, for Durow it would mean that he would have to give up control and disclose more information about Telegram.
At the moment, however, Pavel Durov has other things to worry about than an IPO. Although he is now free in France, an investigation is underway against him. He is not allowed to leave the country for the time being, and the proceedings could result in charges. Then Pavel Durov could be forced to be more transparent – and thus give up some of his freedom.
