From the head offices for Mozilla in Mountain View, Calif., executives can see Google (GOOG) in several directions. The search giant's sprawling Googleplex buildings dominate the landscape. "We are physically surrounded by Google," says Mitchell Baker, who became chair of the Mozilla Foundation after stepping down from its chief executive post last year.
Google also shows up all over the balance sheet of Mozilla, creator of the Firefox browser and other software. Under an agreement between the two, Google's search engine enjoys a default position on the toolbar of Firefox, the second-most-used Web browser after Microsoft's (MSFT) Internet Explorer.
To date, the arrangement has proved mutually beneficial. Google accounts for more than 88% of Mozilla's revenue, which totaled $75 million in 2007. And as Mozilla wins over users of Internet Explorer, it helps Google grab share in the lucrative Web search market. Firefox has about 22% of the browser market, making it by far the strongest competitor to Internet Explorer, which maintains a 67% share, according to Net Applications.
"Firefox Needs Google More"
How much longer this pairing can last has been called into question since September, when Google introduced its own Web browser, Chrome. The prospect that Google may not re-up the three-year contract set to expire in 2011 has Mozilla considering other search partnerships and ways to generate revenue, Baker said during a recent visit to BusinessWeek's offices in New York. "They could breach the contract or they could decide not to renew," Baker says. While she says she doesn't expect Google to take either approach, she's nonetheless considering alternatives.
Smart move, analysts say. "Firefox needs Google more than Google needs Firefox, and that situation will only become more pronounced" as Chrome gains new users, says Ray Valdes, research director at Gartner (IT).
The simplest alternative would be for Mozilla to sell Firefox's default search space to someone else. "There are probably other search engines that would pay us more money," Baker says. Yahoo! (YHOO) and Microsoft's MSN, Google's two main search rivals, come to mind, but Baker says smaller search engines wouldn't be discounted should such a situation arise. Firefox's valuable real estate would likely fetch a premium from any contender seeking a quick way to gain ground on Google. One player Baker won't identify "offered a blank check to replace Google," she says. She notes it wasn't Microsoft.
Monetizing the Browser
Losing Google would carry risks. "It's possible that Firefox's adoption rate could decline if Firefox users felt they were getting Microsoft or Yahoo shoved down their throat," says John Battelle, an Internet entrepreneur, author, and operator of John Battelle's Searchblog.
Baker says Mozilla will always give its users their choice of search engines. Today, Google is the default search box for Firefox, but the browser lets users change the default to any of dozens of alternative search engines. Ultimately, it may not make sense to have another company pay for the default search box if Mozilla users decide to switch back to Google. "If people want to use Google, they want to use Google," says Baker. She says keeping Mozilla's commitment to the needs of its users and its development community is a higher priority than cashing in on its potential as a promotional vehicle.
Search partners are just one of several options for Mozilla to generate revenue in the future, Baker adds. "It's not hard to monetize the browser," she says. "There have been more opportunities for money than people think." She's mum on what these may be, but two of Mozilla's coming projects may offer clues.
Set to launch on certain Nokia (NOK) phones in late spring, Fennec is the first Mozilla browser optimized for mobile platforms. If it gains traction with enough handset makers and mobile users, Fennec could represent another way to draw revenue from a partnering search engine. Of course, Google's Chrome has a head start in mobile search: The mobile browser began shipping on T-Mobile handsets in October.
Plug-Ins Could Be Lucrative
Currently in beta testing, Weave is an online service Mozilla designed to help users synchronize their personal information, passwords, and browsing history as they move from one device to the next—as well as provide greater control over how Web sites such as social networks can collect the data and share it with others. Weave will be free to users and Baker says Mozilla won't field a more robust, paid version.
Finally, Mozilla could attempt to profit from the growing use of third-party applications known as plug-ins, which are made available to users who download Web browsers. For example, someone who downloads Firefox might be prompted with a list of featured widgets that can be added to the browser. "There are a lot of companies willing to pay money to get their various wares promoted and distributed," Battelle says. "That economy is real." Baker says Mozilla will "resist" relying on plug-ins, noting that users tend not to like "buttons."
To be sure, Baker believes the most likely future for Mozilla is a continued partnership with Google. She believes that by ending its deal with Firefox, the search giant would cut itself off from the only viable challenger to Microsoft's browser for the foreseeable future. After all, Chrome only recently passed 1% in share of browser use.
Google also pledges loyalty to the partnership. "Obviously we are now in the browser space but we remain great supporters of Firefox," says Google spokesman Eitan Bencuya. "It was Mozilla that kicked off most of the innovation we have seen in browsers over the last few years."
Douglas MacMillan is a staff writer for BusinessWeek in New York.