Google Will Pay Mozilla Almost $300M Per Year in Search Deal
allthingsd.com
allthingsd.com
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.
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?
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...
[2] http://www.quora.com/How-much-revenue-does-Google-make-per-q...
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.
My hunch is that Google is only breaking close to even with this deal (i.e. making $300M for paying $300M) and bid high just to keep too many people from trying Bing.
Plus, Google tends to act at least a little altruistic when it comes to the web [1] and may mind less being generous to Firefox.
[1] http://wikimediafoundation.org/wiki/Press_releases/Wikimedia...
A month ago many people thought that Mozilla was going to be in financial trouble because "they couldn't re-sign the Google deal". That seemed to be based on little more than a hunch, which data showed that was clearly wrong (which I pointed out at the time).
Note that a donation to Wikipedia is very different (for tax purposes) to a business arrangement with Mozilla.
(I do agree that Google is good to the web though)
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...
[2] http://searchengineland.com/will-google-see-6-25-billion-in-...
[edit grammar]
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.
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?
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...
I think you're overestimating the degree to which the average user is willing to make any changes to any default functionality. Remember, these are the people who google "google".
So more like 30-40% of the 25% Firefox market share.
Still very worthwhile for Google, and explains why Firefox held out for more.
The same as with Google's previous deals with Mozilla, Opera, etc.
By being the default search engine, Google gets more prominent placement in the browser. Were Google to no longer be the default in Firefox, some users would use alternatives to Google - either because they just leave the non-Google default because it is good enough, or because they are exposed for the first time to the alternatives, and they find they like them - all of which Google wants to prevent at all costs.
Another way to look at this is that there were some estimates thrown around during the Flock days of how much advertising revenue a browser generates for a search engine (this was Flock's proposed business model). I think I remember $1-2 per user per year. That should actually be higher today, assuming in the ensuing years search engines have gotten better at monetizing traffic which seems reasonable. Given that, $300M sounds about right given the amount of users Firefox has - apparently Firefox was receiving below market value before.
As a rough napkin calculation, Firefox has 25% of the market share. So, roughly, 25% of Google's revenue comes from FF users. That's ~ $7.5BB annually. Now, as to how many of those users would manually choose to use Google for search, I don't think anyone can say for sure (although I'm sure Google has made a good estimate). Suffice to say, Google clearly sees it as worth their while to pony up and keep those users directed towards them by default.
Secondly, whilst most of google's income is advertising, not all of it is income from advertising on their main search results page- doubleclick, adwords, etc, etc. Lots more stuff there.
I would place it for a rough guess AT MOST 10% of google's income comes from firefox.
The default Firefox home page (about:home) is a branded Google search. Combine that and the Firefox search box and I would bet you cover 90% of the searches Firefox users do.
Anyway, even if it is 10% it doesn't change the outcome substantially - it drops the revenue to $3-4 billion instead of over $7 billion. Either way it is worth paying $300 million for.
But yeah, def still worth it, I was just questioning the "25% of google's income" claim.
Edit: In fact, I found a source for these numbers: http://news.softpedia.com/news/Firefox-Google-Search-Box-Tra...
According to this [April 2010 - but I don't think firefox's market share has actually changed a lot since then], 82% of the search market is google, and 9.18% of the search market is searches from firefox via google. That puts firefox at 11% of google's searches. I think then about 8-9% of google income would be a good estimate- couldn't quickly find any data on what % of their income comes from search, but http://www.coastdigital.co.uk/news/google-gives-breakdown-of... shows that it def isn't 100%.
Google doesn't care, financially speaking, if Chrome or Firefox does better in the marketplace. They care about the eyeballs that Firefox, Chrome, and any other browser can deliver to Google ads.
Advertising is not their product, it's their revenue stream. Their product is _everything_ that sits between a user and monetizing an ad. Just look at what they have done from an engineering, offensive and defensive position here. It's all about that ethereal space between users and monetization. That's the battlefield, and they want all of it.
They need FF because when Chrome dominates, FF needs to be a viable competitor. With Bing, it would be worse off.
That and that they can use Chrome to lock people into Google services in the future.
Oh no, not more Chrome proves Google is evil...
The only thing I've seen from Google that is a move in this direction is that it will share the oAuth cookie between Chrome Sync and google.com pages to auto login if you're already logged into the browser.
I don't see how Chrome "locks people into Google services" any more than simply enabling them to get there faster (V8, SPDY, etc).
For this - http://img585.imageshack.us/img585/7109/googlevy.png
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.
- Mozilla isn't a company, it's a non-profit (this deal was done by Mozilla Corp, yes, but that's a wholly owned branch of the foundation). Reducing their reliance on Google for cash is never going to be Mozilla's aim as a whole.
- Three years is a hell of a long time. When the last deal was negotiated, there was no Bing, and no Chrome. The world was a very different place. No matter how good their strategy is, it's going to be a terrible one for the world in 3 years time.
- The interests of the Mozilla foundation and Google are broadly aligned - they both care about an open, free web. That's a rare thing to find in large industry players these days.
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.
So all in all I don't doubt they could raise some money, but chances of success would be extremely slim.
I don't think that Mozilla has a BATNA to Bing/Google which is why the economics are so different in each round. It's entirely based on Google and Bing bidding against each other.
Thus, there's only such deals and donations. An investor would therefore need to donate, to support Mozilla.
2) Bid $300 million for Mozilla's search spot.
3) Raise $600 million, build search engine
4) Profit
(Yeah, in practice steps 2 and 3 would need to happen simultaneously)
99% of FF users would just switch to Google as soon as they install it. It's not like anybody has made a competent enough search engine yet...
I assume you can back that up somehow? Most evidence I've seen indicates that the majority of people don't change defaults.
It's not like anybody has made a competent enough search engine yet
There would be more if there was an easy way around the distribution problem. Becoming the default search engine in Firefox would sure help with that problem.
Then the evidence you've seen is wrong. If people "don't change defaults" how come they switched to FF in the first place, which is not the default browser on Windows, but is (or rather, was until it lost to Chrome) an extremely popular windows browser?
Maybe naive users don't change defaults, but those users are sticking with (duh) the default IE. Users that moved to FF are more likely to change defaults.
Also, they won't even have to change the default: they just navigate to google.com and search from there, instead of using the search in the toolbar with this unfamiliar "Bing" thing.
"""http://blekko.com/ http://duckduckgo.com/ (...) """
Note the use of the word: "competent". None has results that good that make people actually want to switch to it. (For example, DDG's main selling point is privacy).
The only example I agree with, Baidu was made from a similar algorithm to Google's and with a remarkably similar history (RankDex vs PageRank etc). And even that is mainly popular in China for national/cultural/political reasons, methinks.
(Btw, why do you quote like that? HN docs on formatting are here: http://news.ycombinator.com/formatdoc)
No, "my argument" was on the topic of the comment I specifically responded to.
You know, where you said that by getting the FF default search && making your own search engine, you'll "profit". To which I responded something akin to: "bollocks --even if you do that, FF users will just switch search engine back to Google".
It wasn't that hard to follow, check it again.
"""(Btw, why do you quote like that? HN docs on formatting are here: http://news.ycombinator.com/formatdoc)
Ever noticed how the "HN docs on formatting" say NOTHING about quoting?
"Italics", which you use, is not for quoting is for emphasis. Other people use your method, other people use ">", I use mine.
Pre Google people switched search engines all the time -as soon as a better one come along.
There is no share holder. No one has to be worried, except people who support Mozilla's point of view.
That's why it's a company worth supporting. If you support it, you win. If you don't, well, they might eventually die, and there aren't really many (read: any) replacement. It's pretty atypical.
Per the new business arrangement between Mozilla & Yandex
in Russia, we need to make some changes to the ru build's
search defaults.
...
This bug is marked confidential until the agreement
has been announced publicly.
PS I don't suggest that Yandex is not the best choice for Russian users (it may be), but we'll never know, because nobody asked them.
I find that very hard to believe. How can Yandex possibly outbid Google? Google's revenue is 60 times bigger. If Google wanted to win, it would have won.
Since Yandex was chosen, clearly there are other factors than money here. Perhaps Yandex is better for Russian users? I don't know, I don't speak Russian.
What would to suggest as an alternate revenue source?
Chrome: http://blog.chromium.org/2011/01/html-video-codec-support-in...
Opera: See an opinion piece at http://my.opera.com/haavard/blog/2011/01/13/openness
In other words, Mozilla would need to be able to buy the entire H.264 patent pool. Even at $300M/year, they're nowhere near that.