Being financially dependent on your biggest competitor is not a great business strategy. But that’s the situation Firefox-maker Mozilla has found itself in for the best part of 20 years.
Mozilla is fed by the crumbs from Google’s table. $430m of Mozilla’s $451m total revenue in 2018 came from “royalties”, the money search engines pay browser makers to send traffic their way. 91% of that royalty revenue comes from contracts that expire in November this year — the contract to make Google the default search engine in many of Firefox’s biggest markets being by far the biggest of them.
To put it bluntly: Mozilla needs Google’s money. But what if Google decided it didn’t need Mozilla and the Firefox search traffic it sends Google’s way? Could Google really crush Firefox?
There are signs that Mozilla is bracing itself for a financial shock.
The company has — according to Techcrunch — laid off around 70 of its 1,000-strong workforce, after revenues from new products such as the recently released VPN service failed to materialise as quickly as Mozilla hoped.
“You may recall that we expected to be earning revenue in 2019 and 2020 from new subscription products as well as higher revenue from sources outside of search,” Mozilla’s CEO, Mitchell Baker, wrote in an internal memo to staff, acquired by Techcrunch. “This did not happen.”
Accordingly, the company has decided to cut its cloth. In a public blog post, Baker says that “Mozilla has a strong line of sight on future revenue generation from our core business,” which seems a little disingenuous, given that Google deal expires this year and there’s been no public announcment of a new one being signed.
“We can and must work within the limits of our core finances,” Baker adds. The question is what would happen to Mozilla and Firefox if those core finances took a severe haircut if a new Google deal can’t be reached?
Does Google need Firefox’s traffic?
It’s hard to argue that Google deperately needs the search traffic Firefox sends its way.
On the desktop, it has a worldwide market share of 9%, according to NetMarketShare. That makes it the second biggest desktop browser, but several furlongs behind Google’s own Chrome browser:
However, these days desktop traffic is a mere sidenote compared to mobile, where two-thirds of web browsing is performed. Here, Firefox is absolute nowhere, barely an also-ran:
Would Google suffer serious harm if Firefox’s default search engine went elsewhere? It would create a dent in revenue, for sure, but it would be far from a mortal blow.
Why does Google keep feeding Firefox?
So, why does Google keep feeding the fox? Wouldn’t it make better long-term business sense to eliminate a desktop rival and keep that search revenue for itself?
The answer may be one of political benefit. Google’s monopoly-sized share of the search and browser markets definitely generates regulatory scrutiny, especially in the EU.
Effectively eliminating Firefox by choking the search royalties would doubtless increase Chrome’s market share and lead to cries of anti-competitive behaviour.
As one of my Twitter correspondents, Ayden Férdeline, put it in a thread discussing Mozilla’s dependence on Google this morning:
Google needs a viable competitor to Chrome — one that can innovate, experiment, and make different mistakes than the ones Chrome makes. And Firefox keeps the EU and others from deciding that Chrome is a monopoly all by itself.
I think there’s some merit to that argument, in much the same way Microsoft threw money at Apple in the mid-90s to keep the company alive. But, as Charles Arthur replied to the above comment:
Where’s the evidence that Google needs a competitor to Chrome? I think that’s confirmation bias on your part. There’ll always be Safari. It’s not illegal to have a monopoly, even in Europe; only to abuse it. Hence browser *search* choice coming to Android — not *browser* choice.
As Charles put it an earlier tweet, “Mozilla survives on Google’s largesse”.
Could Mozilla survive without Google’s money?
Perhaps. It’s done so before. In 2014, Mozilla struck a five-year deal with Yahoo to make it the default search engine in the US and other markets. But that was in the days when Yahoo was still throwing silly money around to try and regain a foothold in the search market and that deal was terminated two years early so that Firefox could return to Google. I’m 99% sure that kind of offer wouldn’t be on the table again.
Who else could match the kind of search deal that Google offers Mozilla? There’s Microsoft’s Bing, although I suspect Microsoft has quietly given up on Bing ever making serious inroads in the search market and wouldn’t match Google’s offer.
Smaller competitors such as DuckDuckGo simply don’t have the resources to throw hundreds of millions of dollars a year at Firefox.
In 2020, it’s hard to see anyone offering Mozilla a lifeboat if Google decided a new search deal wasn’t in its best interests, or that it wasn’t willing to pay anywhere near the rates it offered to win Firefox back in 2017. That leaves Mozilla in a woeful bargaining position.
Will Google throw Firefox under the bus?
So, to summarise:
- Around 90% of Mozilla’s revenue comes from Google
- Google doesn’t really need the traffic Firefox sends it way
- There are no viable search rivals who will pay Mozilla anything like as much as Google does
Could Google crush Firefox this year? Yes, it genuinely could, although it’s likely that even if Mozilla Corp were driven out of business, someone else would pick up the bones of the browser. The user base still has enormous value and goodwill.
My hunch is Google will do another deal with Mozilla, for PR purposes more than anything else, but that it won’t be anywhere near as lucrative as the current deal. Those 70 job losses, sadly, might not be the last at Mozilla this year.