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Engineers for Google (NASDAQ:GOOG) and Mozilla’s desktop browser teams lashed out at media reports that questioned the companies’ renewed deal to put Google search in the Firefox browser toolbar.
Google and Mozilla renewed their deal to feature Google as the default search provider for the Firefox toolbar Dec. 20. Google pays Mozilla a portion of ad revenue generated from those searches.
Google and Mozilla both declined to provide financial terms of the new arrangement due to confidentiality agreements the companies inked. AllThingsDigital said the deal was worth $300 million a year for at least the next three years, valuing the deal at $900 million.
This sum, if true, is worth more than three times more on an annualized basis than the previous arrangement Google and Mozilla forged, when Mozilla reported earning nearly $100 million of its $123 million in 2010 revenue from its deal with Google.
Google clearly paid a premium to keep Mozilla from making Microsoft Bing or Yahoo its default search provider. What makes the deal particularly intriguing is that Google’s Chrome Web browser has made huge market-share gains in just three and a half years since it launched, growing to 19 percent while Firefox has fallen under 22 percent, according to the latest Net Applications numbers.
TechCrunch blogger-turned venture capitalist MG Siegler expressed surprise that Google would pay that much money to fund a competitor: “One thing is certain: Google is not paying Mozilla a billion dollars out of the kindness of their hearts. Doing so would be irresponsible to their shareholders. Again, they’re paying all that money to a competitor.”
This sentiment, echoed by other journalists, elicited some commentary from key Chrome and Firefox browser engineers.
Peter Kasting, who Google hired to work on Firefox before the company built Chrome, argued that Google is funding an open-source partner to help advance the Web, both in introducing a faster browser and spurring browsers, such as Firefox, Microsoft (NASDAQ:MSFT) Internet Explorer and Apple (NASDAQ:AAPL) Safari, to get better.
“It’s completely irrelevant to this goal whether Chrome actually gains tons of users or whether, instead, the Web advances because the other browser vendors step up their game and produce far better browsers. Either way, the Web gets better. Job done. The end,” Kasting wrote on Google+ Dec. 24.
“So it’s very easy to see why Google would be willing to fund Mozilla: Like Google, Mozilla is clearly committed to the betterment of the Web, and they’re spending their resources to make a great, open-source Web browser.
Firefox Desktop Browser Boss Speaks Out
He also acknowledged that Chrome can’t be all things to all people and that Firefox is an important product because it can be a different product with different design decisions and serve different users well.
However, he also admitted that Google created Chrome because it believed it could accelerate Web development even faster than it could through funding Firefox.
The truth is, Google and Mozilla compete with each other, and with a combined 40-plus percent market share, they compete together against Microsoft and the rest of the proprietary browser makers.
Kasting’s protest was joined by Aza Dotzler, product director for Mozilla’s Firefox desktop browser, who disputed the widely held assumption that Google is merely donating money to Firefox out of charity.
On his personal blog Dec. 25, Dotzler offered up a tutorial on the economics of the Web in defense of the deal. That is, advertisers pay content providers to include ads with their content, while content providers make most of their money from advertisers. Users get a “free” service.
Dotzler put “free” in quotation marks to underscore that consumers generally give Web service providers access to their data as “payment” to use a service without forking over money. So how does Google come to pay Mozilla to be included in Firefox?
It’s part of Google’s traffic-acquisition costs, or TAC. Google pays 24 percent to 26 percent per quarter to companies that drive traffic to it and help it generate more ad sales. These companies include browser makers such as Mozilla, as well as PC partners, mobile OEMs and others with a presence on the Web.
“For years, many in the tech press have presumed that Google is ‘donating’ money to Mozilla,” Dotzler wrote. “They’re not. They’re no more donating to Mozilla than they are to Opera or Apple, both of which derive significant revenue by sending search traffic to Google. … They’re no more donating to Mozilla than they are to the handset makers and carriers they pay to distribute Android. It’s a simple business deal. They sell ads and they do what they can to put eyes in front of those ads.”
While any controversy around Mozilla and Google’s deal may have fallen into the media abyss between Christmas and New Year’s, the companies’ increasing competition between Chrome and Firefox will surely continue in earnest in 2012. Chrome could pass Firefox in browser market share in the next few months.