Mozilla released its annual State of Mozilla report, which shows the company in great financial shape. However, the income share of advertising/royalties, which is dominated by income drawn from Google, has grown to a new record 98.2%. As Firefox markets hare declines and as Mozilla increases the criticism that targets Google’s product strategy, is Mozilla’s future walking on thin ice?
Mozilla’s revenue for 2010 was $123.2 million, up from $104.3 billion in 2009. The royalty portion, which mainly covers the integration of search engines in Firefox, were $121.1 million and now exceed 98% of Mozilla’s revenue, up from 97% in 2009. Mozilla did not say just how much of those royalties came from Google, but we know that the share was 86% last year and we don’t think that has changed much in 2010.
As far as expenses go, Mozilla spent more than $65 million on software development and program services. $9.8 million went into marketing and $12.2 million into administrative services. Total expenses were $87.4 million for the year. At the end of the year, Mozilla had about $34.9 million in cash on hand and $105.7 million locked up in investments.
As we know that Mozilla depends on advertising revenue, and we know that Firefox market share is falling, while Google’s Chrome is rising, there are obvious question how the future of Firefox will look like. Mozilla’s contract with Google will be up for renewal in November and one may wonder if there is any incentive for Google in screwing Mozilla?
Mozilla is changing and there is a very subtle indication of this change in this report. Mozilla still claims that it has about 450 million users (which, indirectly, could also be used to describe the value of each user to Mozilla: About $271,000 per year). However, the Foundation is not discussing browser market share in this latest report anymore. It discusses the future and its intention to cater to open web apps, open media, as well its Boot-to-Gecko platform for mobile devices. Even if we do not know whether the absolute number of Firefox users has grown in 2011, we believe that Mozilla’s revenue based is, at least, challenged and its current operation will have to support Mozilla’s change.
If Mozilla’s user base declines, it is more than likely that Mozilla’s revenue will drop, especially since Firefox has lost more than 3 points of market share since the beginning of this year, according to StatCounter. However, it is unlikely that a complete disaster will strike as we do not think that Google would not renew its contract with Mozilla. As much as Mozilla depends on this revenue source, Google depends on advertising revenue as well and Mozilla is one of its biggest revenue sources out there. Even if Mozilla staff is attacking Google’s Chrome and Android product strategy as yet another closed environment, it would be silly for Google to cut the cord. As long as Mozilla can support Google’s advertising engine, there is no reason to be concerned.
Mozilla’s expenses appear to be in line with what it should be doing. It’s future is in nurturing product ideas and the fact that it spends more than two thirds of its expenses on software development, indicates that Mozilla is focusing on that scenario. If there is a concern, then it is Mozilla’s thin cash layer, but then we also know that Mozilla’s revenue is unlikely to hit a scenario in which it evaporates from one day to the other.
Daniel Bailey in Business on October 11
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