Mozilla Firefox & Yahoo Deal: The Past, The Present and The Road Ahead...

Mozilla Firefox & Yahoo Deal: The Past, The Present and The Road Ahead...

Firefox users in the US will no longer see Google from December when searching on the browser, but will be offered Yahoo as their default search engine which outbid Google for the deal. It is not clear if Firefox was looking to end its 10-year-relationship with Google. But it is suspected that, because Firefox has been performing poorly on key mobile platforms, Google allowed itself to be outbid by rivals.

A spokesman for Mozilla, which develops Firefox, told the Guardian that “In most European countries, including the UK, Firefox users will not see a change [from Google as the default search provider]. “In the US, Yahoo will become the default search, Baidu in China and Yandex in Russia.”

The Google-Firefox deal, first made in 2004 and since renewed repeatedly, had for years been a relationship of mutual strengths: when Firefox was the principal alternative to Microsoft’s dominant Internet Explorer, Google was able to leverage its popularity to bring more people to its search engine.

Such deals have a price: typically the browser maker gets a guaranteed income, and is paid a slice of the advertising revenue that the search engine gets from people who come via its default setting. 

Google paid $280m to be Firefox’s browser

For Mozilla, which develops Firefox, the income was important. Google’s payments made up about 90% of Mozilla’s $311m revenues in 2012. Newer figures for 2013 may become available in the next few days.

For Google, the payments were “traffic acquisition costs” (TAC) - what a search engine has to pay to get traffic to its site. Google’s TAC since it re-signed its deal with Mozilla in December 2011 has totalled $33bn, because that includes not just payments to Mozilla, but also to Apple (for making Google the default search provider in Safari on iOS devices such as the iPhone and on the Mac) and to a multitude of other sites and services. As a proportion of revenues, Google’s TAC hovers around the 22%-23% mark.

Being the default on Firefox was relatively cheap compared to Google’s other TAC; over the lifetime of the deal that has just expired, it cost Google about $300m per year - or $1bn over the life of the just-expired deal - even though Firefox drives about 100bn search requests worldwide each year. (On that basis, Google is paying about 0.3 cents per Firefox search.) Google surely could have outbid Yahoo to continue the deal - it’s rich enough.

Firefox losing out on mobile

So why has it turned away from a deal that effectively gave it a monopoly of every non-Microsoft browser? Simply, because Firefox isn’t that important any more in a world where mobile browsing is an increasingly large part of online activity; and because Yahoo bid enough to claw back some relevance in its most important market, the US.

In other words, Firefox doesn’t have any presence in mobile - its browser has fewer than 100m downloads on Android, which gives it less than one-tenth of the Google-Android market, and the fact that it doesn’t show up in Statcounter’s mobile data suggests that it’s the default for very few people.

While Yahoo gains face - Firefox still has 16.8% of the North American desktop browser market - the story is still not good in the overall context of the US market. Chrome’s share passed Firefox’s there last year, so that it now has about 34%, or double that of Firefox.

The New Partnership between Yahoo! and Mozilla

However, to the surprise of many following the negotiations, Mozilla replaced Google with Yahoo!. Terms of the deal have not been disclosed, but the partnership will last for at least five years.

Mozilla’s CEO Chris Beard said in a blog post on Wednesday that the change in search engines is to promote “choice and innovation.” However, it has been speculated that privacy settings were one of the points that broke down the agreement. Firefox supports Do Not Track browser privacy standards that Google may not have supported. Yahoo! has ignored Do Not Track requests since last May, but it will recognize Do Not Track for Firefox users.

Yahoo! CEO, Marissa Mayer, wrote in her blog post that this is “the most significant partnership for Yahoo! in five years” and that she believes that search is “a key growth area.” In her post she also shared images from a new “clean, modern, and immersive search experience” that Firefox users would see when searching Yahoo!.

How Does This Changing Partnership Impact Marketers?

There are several factors that may impact online marketers:

• The deal may improve Yahoo!’s market share – According to the latest figures from comScore, Yahoo!’s site currently have about a 10.3% market share from October’s 18.8 billion searches. This percentage is similar to previous months and still lags behind the 11.3% Yahoo! had a year ago. Mozilla’s diverted traffic from Google to Yahoo! may help improve those figures, which may in turn drive more traffic to ads served on the Yahoo!Bing network.
• The deal could create more advertising opportunities – According to a Mozilla blog post, the agreement establishes a framework for future product integrations. As both companies continue to work together and develop services, new ad placements could be created to drive more revenue for both companies.
• If the partnership fails to meet Mozilla’s expectations, it could put Firefox’s future in doubt – In 2008 Google released their own browser, Chrome. When Mozilla and Google re-negotiated their partnership in 2011, Chrome had just passed Firefox in market share. Today, Chrome dominates desktop, tablet & mobile devices and sees more usage than the top three competitors combined. Meanwhile, Firefox’s market share has decreased from 25% in December 2008 to 12% in October 2014. With a shrinking market share, separating from their partner responsible for generating most of their revenue is a huge risk. If Firefox users switch their default engine from Yahoo! to another engine or back to Google, Mozilla will not see that revenue if their Yahoo! deal shares ad revenue like their Google deal did