Mozilla Flies High on Google’s Coattails

Mozilla’s revenues for 2006 were up roughly 26 percent from 2005, reaching US$66.8 million, the company said Monday.

In a report including both the Mozilla Foundation and Mozilla Corporation, the maker of the Firefox browser also said that expenses for the year were just $19.8 million, leaving it with a rosy financial outlook in 2007.

“The highlight is that Mozilla remains financially healthy: We’re able to hire more people, build more products, help other projects, and bring more possibilities for participation in the Internet to millions of people,” wrote Mitchell Baker, the company’s CEO, on her blog. “The Mozilla project is growing in almost every way — size, scale, types of activities, new communities and in reach.”

Growth All Around

Much like in 2005, roughly 85 percent of Mozilla’s 2006 revenues came from Google as a result of an arrangement in which Google is the default option in the Firefox search bar, and a Firefox-branded Google page is the default home page for Firefox.

Search revenue and the sheer size of the Firefox user base both increased since 2005, and the Mozilla Store contributed revenue as well, Baker said.

The majority of Mozilla’s expenditures were focused on people and infrastructure, she added.

“By the end of 2006, Mozilla was funding approximately 90 people working full- or part-time on Mozilla around the world,” she noted. “Expenditures on people accounted for roughly 70 percent of our total expenses in 2006.”

Mozilla plans to use its healthy financial reserves for increases in people and infrastructure and to launch significant new programs, such its recently introduced mobile program, the company said.

The Google Factor

While there’s no denying that Mozilla’s report is a cheerful one overall, the fact that the company relies so heavily on its agreement with Google is widely noted.

It’s always risky for an organization to be heavily dependent on a single customer the way Mozilla is on Google, Raven Zachary, senior analyst and open source practice head with the 451 Group, told LinuxInsider.

“There are also some pretty serious rumors that Google will be launching its own Web browser in the coming year,” Zachary noted.

“That’s potentially troubling, but at the same time, it doesn’t mean an immediate end to Firefox’s opportunity,” he added. “Mozilla can still derive revenue from directing traffic to Google. As long as Firefox continues to grow market share, revenue will continue to grow with it.”

Independent Initiatives

Mozilla’s activities are not unduly affected by the relationship with Google, the company asserts.

“We develop our product and technical direction as part of an open process unrelated to the search relationship with Google,” Mozilla said on its 2006 Financial FAQ. “We talk to Google about the parts of the product that offer Google services (i.e., the Firefox Start Page) and the services they provide, like anti-phishing. Otherwise Google does not have any special relationship to Mozilla project activities.

“We do not vet our initiatives with Google,” it added. “We spent months talking to Google and Yahoo before entering relationships with them to make sure they understood the separation between a search relationship and the rest of our activities.”

Contract Expiration

The contract between Mozilla and Google is due to expire in November 2008, causing widespread speculation about what will happen then.

“We have a range of options,” the company said. “We may continue to work with Google which has so far provided a good fit with what our users find useful in the product. If for some reason that doesn’t make sense then we could look at other potential partners. We have significant retained earnings, which allows us a good degree of flexibility.”

Indeed, “Mozilla’s results are a pretty straightforward function of their growth,” Greg Sterling, founder of Sterling Market Intelligence, told LinuxInsider. “That makes them a desirable partner for somebody else, potentially — it’s just a question of whether they come to terms when they renegotiate with Google.”

A ‘Golden Age’

Should those negotiations not go well, “the reality is that Mozilla would just turn around and strike a better deal with Yahoo,” Zachary said. “It’s worth it to the search engines to pay Mozilla for preferred placement. Right now, Google has the best deal, but I would easily imagine that Yahoo could outbid it next time around.”

Mozilla is currently in a kind of “golden age,” Zachary added. “The question is whether that will still be as rosy a picture in five years.”

Internet Explorer and Safari have a solid base of content users, so it’s unlikely Firefox will ever capture more than 20 percent of the market, he added.

Overall, the financial report “is great for Mozilla,” Zachary concluded. “Let’s just hope they put that money back into developing new future product initiatives.”