Google Pays Up
Not too long ago, there was a bit of uncertainty over the fate of Mozilla and its popular Firefox browser.
With its biggest cash cow up in the air, who was going to pay the bills to keep Firefox alive? There was talk that Google (NAS: GOOG) was plotting to undermine Firefox in the public eye to help promote its Chrome browser. The speculation was short-lived, as the two soon announced that they were settling down together for the long haul with a new agreement to last at least another three years.
The happy couple declined to disclose terms of the deal, but last year Google had paid about $101.7 million to the Mozilla Foundation for the precious default search spot. Thanks to a recent report by AllThingsD, we now have some figures. Firefox still claims about a quarter of the browser market, and that chunk had other search rivals, such as Yahoo! (NAS: YHOO) and Microsoft (NAS: MSFT) , licking their lips.
The trio had something of a bidding war for the default search spot, and despite Bing's continued losses, it was gunning pretty hard to cut in during the dance and go steady with Firefox. How much was Mozilla able to garner for its services? The final price tag on the deal landed just under $300 million per year. That's a hefty jump from the amount paid in 2010, and it shows that Mozilla was really never in danger, since other search partners were ready and waiting to move in if Google moved out.
Over the next three years, Big G will be paying up almost $1 billion, which was the minimum revenue guarantee that Mozilla demanded. Yahoo! was at the bargaining table but had supposedly dropped out once the price got too high, and it has a little less motivation since Bing powers its search anyway. Yahoo! still wants to stop its falling market share, but at what cost?
Some of Mozilla's other search partners include Amazon.com (NAS: AMZN) , Russia's Yandex (NAS: YNDX) , and eBay (NAS: EBAY) , but they represent relatively specialized queries compared to broader domestic Web searches, so the pricey default spot wouldn't make sense for them.
It looks like Firefox is here to stay, and Mozilla's top-line revenue may see an approximately 200% jump. That will sure cover its rising R&D costs, and it will still have enough left over for a Christmas party.
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At the time this article was published Fool contributorEvan Niuowns shares of Amazon.com, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Yahoo!, Amazon.com, Microsoft, and Google.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, eBay, Google, Amazon.com, and Yahoo!, creating a bull call spread position in Microsoft, and writing puts in eBay. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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