Mozilla has responded to a lawsuit from Yahoo Holdings and Oath for  improper termination of the agreement to make Yahoo the default search engine in Firefox by filing a cross complaint for breach of contract. Will this impact the positive financial outlook Mozilla has just reported? 

In November 2014, Mozilla announced a new search strategy for Firefox whereby it would select the best search experience on a region-by-region basis and embarked on a 5-year arrangement with Yahoo as the default search engine in the United States, replacing Google which had formerly been the global default.

Almost exactly three years later, when Firefox Quantum was released,on November 14 2017, Mozilla reverted to making Google the default search engine in the United States, Canada, Hong Kong and Taiwan, while retaining Yandex In Russia, Turkey, Belarus and Kazakhstan and Baidu in China.

The decision to replace Yahoo by Google was described by Mozilla as:

part of our ongoing search strategy to evaluate and select the best search experience in each region as opposed to having a single global default. 

Given that Yahoo had been awarded a 5-year contract until 2019 you might expect that Mozilla would now have to pay compensation to Yahoo's new owner, Oath, which is part of Verizon.

In fact the opposite is true. In order to secure the Firefox deal in the first place Marissa Mayer had agreed that in any change-of-control scenario Mozilla had the right to leave the partnership if it did not deem the new partner acceptable. Moreover in that event Yahoo was still obligated to pay out annual revenue guarantees of $375 million.

So it seems Mozilla can switch search partners and still expect revenue. In her announcement of the cross-complaint  Denelle Dixon, Mozilla's Chief Business and Legal Officer writes:

We recently exercised our contractual right to terminate our agreement with Yahoo based on a number of factors including doing what’s best for our brand, our effort to provide quality web search, and the broader content experience for our users.

Immediately following Yahoo’s acquisition, we undertook a lengthy, multi-month process to seek assurances from Yahoo and its acquirers with respect to those factors. When it became clear that continuing to use Yahoo as our default search provider would have a negative impact on all of the above, we exercised our contractual right to terminate the agreement and entered into an agreement with another provider.

The terms of our contract are clear and our post-termination rights under our contract with Yahoo should continue to be enforced. We enter into all of our relationships with a shared goal to deliver a great user experience and further the web as an open platform. No relationship should end this way – litigation doesn’t further any goals for the ecosystem. Still, we are proud of how we conducted our business and product work throughout the relationship, how we handled the termination of the agreement, and we are confident in our legal positions.

This news comes within a week of the publication of State of Mozilla 2016 which reports an increase in Mozilla revenue for the year.

Commenting on its financial position the report states;

The majority of Mozilla Corporation’s revenue is from royalties earned through Firefox web browser search partnerships and distribution deals around the world. Mozilla Corporation’s revenue and income support for CY 2016 was $506M, as compared to $414M in CY 2015. 

As this chart shows the 2016 results continue a healthy trend over recent years:

While we haven't yet noticed any improvement in Firefox's share of the browser marked - at the end of November it was 13.54% compared to Chrome's 58.83% according to NetMarketShare, the fact that has achieved very real increase in performance should make an impact over the coming months.

Firefox Quantum's tag-line is "Fast for Good" reminding users that making a choice for a Mozilla product supports its mission. In the State of Mozilla 2016  this is summed up: 

Mozilla products are built to contribute to a healthy internet and deliver an amazing user experience. We measure our success not only by the adoption of our products, but also by our ability to increase the control people have in their online lives, our impact on the health of the internet, our contribution to standards, and how we work to protect and build the web that users need and want.

As we saw only yesterday (PyPI Granted $170,000) Mozilla plays a hugely supportive role in Open Source by distributing funds to projects that underpin the Internet. It is good to see that it will be able to continue this work.

 

 

Mozilla Audited Financial Statement 2015 (pdf)

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