Google and Mozilla renew search deal, but on what terms?

Mozilla and Google announced today that they've renewed their search agreement for another three years. The deal ends a period of uncertainty for Mozilla, but the devil is in the details. Here's why it's still hard to see a bright future for Firefox.
Written by Ed Bott, Senior Contributing Editor

Earlier this month, I reported that the three-year deal making Google the default search provider for Firefox had expired at the end of November. That was potentially bad news for Mozilla, which depended on the Google payments for 84% of its operating revenue—a total of more than $100 million—in 2010.

Today, in a carefully worded blog post, Mozilla announced that the partnership had been renewed for another three-year period. Although Mozilla CEO Gary Kovacs characterized the deal as "significant and mutually beneficial," the blog post pointedly omitted additional details: "The specific terms of this commercial agreement are subject to traditional confidentiality requirements, and we’re not at liberty to disclose them."

The new deal ends the uncertainty for Mozilla, but the devil is in the details. Without knowing those numbers it's unclear whether this is really good news for Mozilla or for millions of Firefox fans.

When Mozilla and Google renewed their previous search deal in 2008, the announcement was made public in August, months before its expiration. The fact that this renewal was announced weeks after the previous deal ended suggests that the negotiations were more contentious this time around. But unless someone with access to the contract terms leaks it to the media, we won't have any idea of the exact terms until late 2013, when Mozilla will be required to disclose its 2012 revenues. (There might be some clues in the 2011 results, which will be published at the end of 2012, but the revenue in that report will be from the final year of the just-ended search deal.)

If Google was able to reduce the amount of money it pays for Firefox-driven search results, that could put a big squeeze on Mozilla's development efforts. During the past three years, Mozilla has ratcheted up its spending tremendously. The growth on the Software Development line has been eye-popping, as these numbers from the Mozilla financials indicate:

Software development

  • 2008: $31.3 million
  • 2009: $40.2 million
  • 2010: $62.8 million

Total expenditures in this category doubled from 2008 to 2010. More importantly, that category as a share of unrestricted revenue and support went up from 40% in 2008 to 51% in 2010.

So how much will Mozilla have spent on software development when it closes the books on 2011? We won't know until the end of next year, but the number is highly unlikely to drop from that 2010 total. A Bloomberg BusinessWeek story from early this month suggests that Mozilla has dramatically increased its spending in an attempt to catch up in the mobile market, where it's well behind. Reporter Sarah Frier described Mozilla's situation as "something of an existential crisis."

If it can’t gain traction in mobile, [CEO] Kovacs says, the project will lose relevance and be unable to spur innovation in areas it considers important, such as privacy and user control. He’s started to take steps to address the situation. A year ago, Mozilla’s mobile team was a separate division with fewer than 20 engineers. In July, Kovacs made mobile a priority for the full 250-person engineering team. They’re on a “massive hiring spree” for mobile designers and developers, he says.

The good news for Mozilla is that they have plenty of cash in the bank—or did, as of the December 31, 2010. The 2010 audited financial statement (PDF) for the Mozilla Foundation and its subsidiaries listed the value of total investments (money market funds, bonds, mutual funds, and commercial paper) at more than $105 million. Even with a significant drop in Google revenues, that cushion can sustain a significant development effort for a long time.

Can a full-court press in mobile reverse Firefox's fortunes? That's an open question.

Mozilla has announced it will not develop Firefox for iOS devices, including the iPad:

We have no plans to release the full Firefox browser for iOS. The iOS SDK agreement requires apps to use Apple's own JavaScript engine (or none at all, like Opera Mini which downloads pre-rendered pages from Opera's servers and cannot run JavaScript code in the client). Because of this, we have no supported way to distribute Firefox's rendering and JavaScript engine to iPhone users. 

The Windows Phone 7 platform is also a nonstarter:

We have stopped developing for Microsoft's mobile platform because Windows Phone 7 no longer allows developers to build C++ applications like Firefox, and Microsoft's new policies ban open-source software like Firefox from the Windows Phone Marketplace.

That means the only widely used mobile platform that Mozilla supports is Android, where the company recently released a Firefox beta that's "optimized for tablets." Unfortunately for Mozilla, it's an open secret that Chrome for Android is coming soon. It's hard to imagine that Firefox for Android can make much of a toehold in an ecosystem that Google controls.

The renewed Google deal and a healthy stockpile of cash mean that Mozilla can look forward to at least three more years of existence. But it's hard to see a bright future for Firefox.

Reached for comment, a Mozilla spokesperson referred me to the blog post I reference above and said, "We have no additional information at this time."

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