
Google Will Pay Mozilla Almost $300M Per Year in Search Deal - mbrubeck
http://allthingsd.com/20111222/google-will-pay-mozilla-almost-300m-per-year-in-search-deal-besting-microsoft-and-yahoo/
======
fpgeek
So the "OMG! Mozilla is dead without the Google deal" stories weren't just
wrong they were _backwards_.

The real story was "OMG! There's a bidding war over Mozilla's new search deal
that will get them a _lot_ more money."

It is enough to make you wonder whether a player in those negotiations started
the previous rumor in the first place (presumably as leverage). The timing
certainly fits.

~~~
maxerickson
There are still people convinced that the glass has a hole in it.

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scarmig
What's actually being paid for, here?

It could be the case that having Google as the default in Firefox will pay for
itself through advertising. Anyone have any feel for how likely that is?

If it isn't, is it an attempt to buy good will? Trying to gain some leverage
over Mozilla when it comes to taking sides in the standards war?

Or just the idea that any time Firefox gains a user is a time that Safari or
IE isn't gaining that user, and that any marginal hits to the adoption of
Chrome are disproportionately compensated by hits to the adoption of competing
browsers?

~~~
nl
_It could be the case that having Google as the default in Firefox will pay
for itself through advertising._

Of course it will, easily

(Seriously - people should understand that Google's business is search (and
advertising), and they want to commoditize its complements - browsers and
phones with browsers on them).

Google does roughly 1 billion searches a day[1], and makes conservatively
$0.08 per search[2]. Firefox has roughly 25% market share.

$0.08 * 1,000,000,000 * 0.25 = $20,000,000 per day.

Yearly revenue = $7,300,000,000 = $7.3 billion

Reasonableness check: Google's yearly revenue = $29.3 billion. $29/4 (ie,
Firefox at 25%) = $7.25 billion, which seems roughly right.

[1] [http://www.jeffbullas.com/2011/05/16/50-amazing-facts-and-
fi...](http://www.jeffbullas.com/2011/05/16/50-amazing-facts-and-figures-
about-google/)

[2] [http://www.quora.com/How-much-revenue-does-Google-make-
per-q...](http://www.quora.com/How-much-revenue-does-Google-make-per-query)

~~~
jackowayed
That estimate seems pretty far off.

First, I think it's only fair to attribute ~1/2 of their revenue to search.
You've got to give a lot to web ads, gmail ads, etc.

Second, I'm not sure it's quite fair to give FF 25% of their total search. It
may be 25% of their desktop search, but mobile search is getting bigger and
bigger. I'd say 25% is at best an upper bound.

Third, I think a large number of FF users would use Google search even if that
required changing the default. I'd guess that it's on the order of 50%. The
value of the deal is only the value of the searches they gain.

That said, even if you divide by 10, spending $300M to making $700M and get
goodwill with developers is a great deal.

~~~
nl
_That estimate seems pretty far off._

Well, it may well be 50% off, or even 80% off, but it does give you an order
of magnitude. 100% correct numbers aren't really material: this is a really
good deal for Google.

You are right that not all their revenue comes from search, and I should have
thought of that. 66% of their revenue is from Google websites[1]. They don't
break that down, but I'd suspect 90% is search (Youtube is probably a
reasonable contributor but search ads are very expensive, and Google gets
pretty good fill rates on them).

Mobile search is growing quickly, but they still "only" made $2.5 billion over
the last 12 months from it (and also I presume this deal covers the Firefox
mobile browser, which might not be popular now but Mozilla has been working
hard on).

But yes, 25% market share is probably an upper bound.

 _I think a large number of FF users would use Google search even if that
required changing the default._

It is possible that Mozilla could do a deal to change the search engine used
on existing installs. I would hope they wouldn't do that, but it is something
another search engine would probably have wanted to explore.

Also, about:home is the default home page on Firefox, and currently defaults
to a Mozilla branded Google search page. That could be changed on existing
browsers for sure.

All up, I agree that the $7.2 billion number is probably high, but it seems
likely it would be more than $1-2 billion.

[1]
[http://investor.google.com/documents/20100331_google_10Q.htm...](http://investor.google.com/documents/20100331_google_10Q.html)

[2] [http://searchengineland.com/will-google-see-6-25-billion-
in-...](http://searchengineland.com/will-google-see-6-25-billion-in-mobile-ad-
revenue-next-year-97280)

~~~
johno215
If this was such a great money making deal for Google why did Microsoft not
bid higher? They have similar monetization strategy for Bing and would have
similar ROI for gaining searches. Plus, MS is flush with cash and have a great
desire to compete with Google.

[edit grammar]

~~~
nl
Microsoft would love to, but they can't afford it. Bing is already losing huge
amounts of money, and doing yet another deal for market share isn't going to
be popular within MS unless it is profitable.

While MS could make money on a Firefox deal, they can't nearly make as much as
Google can simply because Microsoft can't monetize the users as well as Google
can.

You can see this on the demand side - many people try out new keyword
advertising campaigns on Bing because they are so much cheaper than on Google.

Once they are confident they have a good set of keywords, they switch straight
to Google (and at best keep the Bing campaign going). They'll pay more at
Google, but get so much more traffic it is worth it.

~~~
johno215
Good point.

Do you think Bing could be monetized at a similar rate to Google if their
market shares were similar? Or are there other things Google are doing (e.g.
better add targeting) that is making them more money per search?

~~~
nl
Hard to know. Google does have better targeting at the moment.

Back when Yahoo was a player they built a platform that was supposed to match
Google (Yahoo Panama[1]) that was their big hope of matching Google. It didn't
succeed.

[1]
[http://en.wikipedia.org/wiki/Yahoo!_Search_Marketing#Details...](http://en.wikipedia.org/wiki/Yahoo!_Search_Marketing#Details_of_current_service)

------
bobthebee
The dynamics behind the deal are interesting. Google probably paid just enough
to outbid Bing, the second highest bidder. Or Firefox played a great hand of
poker with Google. In either case it should trouble Mozilla that they are
dependent on not only Google, but Bing (by extension) for the majority of
their revenue.

Finding a sustainable way to reduce reliance on these companies should be the
#1 job of the Mozilla business team in the next 3 years, before the deal comes
up for renewal.

~~~
nl
Not really.

If Google or Bing hadn't paid enough then it would be pretty easy[1] to raise
the money from random investors.

There are precedents for that - Lycos (I think? or Infoseek?) raised capital
_after_ buying a default slot on the original Netscape browser with money they
didn't actually have.

[1] Not saying that building a web scale search engine is easy, exactly, but I
am saying that the default search engine for ~25% of the world web browsers is
a business a lot of investors would want to invest in.

~~~
zobzu
Investors don't invest if there are no shares to get. And, there are no shares
to get. And that's the _whole point_ of Mozilla's existence.

Thus, there's only such deals and donations. An investor would therefore need
to donate, to support Mozilla.

~~~
cpeterso
I think nl was suggesting that investors could raise money to buy Firefox's
search spot and _then_ create a search engine. Imagine if some VC firm raised
$301M to outbid Google and then signed a deal with DuckDuckGo.

~~~
bobthebee
If DuckDuckGo could really make $301+ M on search in Firefox, they would bid
that. Reality, they can't. There is no value created in the imagined middle
man investor.

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bugsbunnyak
Kind of curious: what is mozilla spending (or plan to) all of this cash on?
Wikipedia says the MozCo has ~600 employees. Even if they are paying average
$200k per person and spending another 80 million on rent, hosting, equipment,
etc. that still leaves ~$100mil. Executive compensation? Rainy day fund?

~~~
ianb
Mozilla has been hiring quickly, and still puts some money in the bank. Most
money is spent on employees.

------
jcampbell1
I hope mozilla can now afford H.264 licenses. They are the last holdout to
make web video easy.

~~~
azakai
Not true.

Chrome: [http://blog.chromium.org/2011/01/html-video-codec-support-
in...](http://blog.chromium.org/2011/01/html-video-codec-support-in-
chrome.html)

Opera: See an opinion piece at
<http://my.opera.com/haavard/blog/2011/01/13/openness>

~~~
Erunno
Chrome still supports H.264 and and there are no indications that Google is
planning to change that in the near future.

~~~
azakai
Isn't the indication that Google said it will remove H.264? Have you seen
Google go back on that statement?

