Mozilla yesterday reported that revenue for 2015 was up 28% year-on-year, the largest increase in three years.
Nearly all the $421 million booked by the Mozilla Foundation came from royalty payments, the bulk of which originated from search deals that set defaults in the Firefox browser.
Mozilla Foundation is the nonprofit organisation that oversees Mozilla Corp, the commercial arm which builds and maintains Firefox for personal computers and smartphones.
According to a financial statement, $417 million, or 99% of all revenue, came from royalty payments. The percentage of revenue derived from royalties has never dipped below 91% – Mozilla’s fortunes have always been tightly linked to the Firefox search deals – but 2015’s portion was the highest since 2010.
Although Mozilla has tried to diversify its revenue sources, notably in early 2014 when it experimented with in-browser advertising, those attempts have not succeeded. Mozilla dropped the in-Firefox ad idea in December 2015.
Nor has it been able to monetise mobile to any extent: Its Android and iOS versions of Firefox – the latter is actually just a wrapper around Apple’s Safari browser – have never been able to collect more than a minuscule portion of the market. Mozilla’s revenues, then, largely rely on the desktop Firefox, which runs on Windows, macOS and Linux.
Search-based revenue was approximately $410 million, representing 98% of all royalty income and 97% of Mozilla’s total revenue. The $410 million was $119 million more than in 2014, representing a 41% increase.
Mozilla was able to squeeze more out of its Firefox search deals because of two decisions it made in late 2014. First, it dumped the global arrangement it had with Google – whereby Google’s search engine was the default for virtually all copies of Firefox – and instead struck country-specific or regional deals with a dozen different search and information providers. Secondly, it negotiated a lucrative deal with Yahoo, which was made the default search provider for US Firefox users.
Yahoo!
The second deal was the more important of the two. Yahoo paid Mozilla about $375 million in 2015 – and is contracted to continue payments of that size until 2019 – or approximately $100 million more than Google laid out in 2013, the last full year of its Firefox arrangement. According to Computerworld, other search contracts contributed $35 million to Mozilla’s coffers.
Mozilla trumpeted the change in search strategy even as it declined to point out the positive impact to its bottom line. “We decided that one global default search partner was no longer the right choice for our users or the web,” the organisation said in a State of Mozilla report. “Instead, we adopted a more local and flexible approach by country to control our own destiny and to diversify the user experience and competitive landscape of web search globally.”
Most of Mozilla’s expenses – 63% in 2015, a smaller percentage than the year before – were spent on software development, which climbed to $214 million, a 1% increase. Meanwhile, another line item, branding and marketing, jumped by 48% to a record $60 million in 2015.
Overall expenses increased 6% year-on-year, slightly less than the boost from 2013 to 2014. The difference between that and the much larger increase in revenue meant that Mozilla’s ‘profit’ – it tagged the line as ‘net cash provided by operating activities’ – soared to $80 million from $24 million the year before.
Mozilla Foundation’s 2015 financials were solid, thanks to the larger search deal payments from Yahoo, which accounted for most of the year-on-year revenue increase. But Mozilla’s cash, cash equivalents and investments were also healthy; they climbed to $298 million in 2015, up $70 million from the year before. With that much in the bank, Mozilla could survive at its 2015 expense pace for more than 10 months if all income vanished.
The trouble Mozilla faces was not in its financial statement or its tax return, but with the Firefox cash cow. The browser’s share of the desktop market slumped dramatically in the past 12 months, plummeting to a record low of 8% in user share, before waging a comeback to end up almost where it began. (Firefox slipped from a 12.3% user share in November 2015 to 11.9% in November 2016.)
The long-term deal Mozilla struck with Yahoo may provide Firefox with the breathing room needed to recoup its losses in the battle for browser share. In fact, Mozilla has been working on a major remodel of Firefox that will introduce significant technological changes to the browser next year. What’s unclear is whether the Mozilla-Yahoo contract contained a cancellation clause which could be triggered by a decline in, say, the number of active users. If such a clause exists, Mozilla may not have until 2019, when the Yahoo deal is set to expire, to boost its share.
IDG News Service
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