#108 How Does Mozilla Make Money?

Mozilla is the entity that makes the Firefox web browser. But where do they get the money for Firefox's development? They have an unusual corporate structure. We'll talk about it today.

Our, um.

Welcome to COPEC Explain Software, the podcast where we make computing intelligible. We've done a few of these episodes on how various tech companies get their revenue. Today, we're talking about something a little bit different. Mozilla is actually structured as a nonprofit foundation that has for profit subsidiaries. That's a very unusual structure for a technology organization.

Before we dive into the structure, though, let's talk a little bit about Mozilla's history. Really broad strokes.

Mozilla started as an open source project out of Netscape. We covered Netscape versus Internet Explorer, the browser wars of a previous episode that I'll link to in the Show Notes. Mozilla arose to be a steward of the open source version of the Netscape Web browser known as Mozilla. The open source version wasn't very successful until a stripped down version called Firefox launched in the early OS to support Firefox's development and the open Internet more generally. The Mozilla Foundation was formed, and that's.

Where we are today, with the Mozilla.

Foundation, which has these two for profit subsidiaries within it, one of which is responsible for developing the Firefox web browser. I want to give credit, the idea for this episode came from an article done by Brian Lunduke that I'll link to in the Show Notes. And we, of course, have also looked through Mozilla's Financial consolidated financial statement. And I will link to the consolidated financial statement in the Show Notes as well.

The Mozilla Foundation has some core things that it believes in or is working towards on the Internet, and those are openness innovation and participation on the Internet.

Right. And Firefox is just one part of that. They do all kinds of other activities. They're kind of beyond the scope of our show today because I really want to focus on where their money comes from and how much of it is actually used on Firefox.

So where is their for profit revenue coming from?

Yeah, if you look at their consolidated financial report, a huge part of the revenue comes from what's called royalties. And they note that a lot of these royalties are from search engines paying to be the default search provider within Firefox. In fact, of their $600 million of total revenue in 2021, 527,000,000 was from these kind of royalty arrangements. And we know from other documents that $400 to $450,000,000 is from Google. Google is the default search engine right now in Firefox in most of the Western world. And so Google is actually providing the vast majority of Mozilla's revenue. And these royalty deals altogether comprise 88% of Mozilla's overall revenue. Now, as a nonprofit, Mozilla does actually take contributions so literally, donations from individuals or entities that want to support the nonprofit, but that's a very small amount of their overall revenue. In fact, contributions on their Consolidated 2021 statement was just 7 million. So you have a very strange situation here. You have a nonprofit that has a subsidiary that's a for profit, that makes the vast amount of the revenue for the nonprofit, and the nonprofit lets a lot of that revenue be used for things like software development within the for profit. But one thing that's interesting is it's actually not even a majority of the way that the money is spent. So in 2021, they took in $600 million, but they only spent 200 million on software development.

So only a third of their money goes towards software development.

Yeah, it seems strange because Mozilla is really just known for Firefox. Sure, they have this much larger mission. They're known for a few other things, like, for example, developers love their developer documentation, and they have other products and initiatives, including some political initiatives, we might call them. But what they're really known for, and the way that they really make an impact, is through the Firefox Web browser. And yet they're a nonprofit that is only directing about a third of what's coming in towards the thing that they're the most impactful for doing. In fact, they even had layoffs of some of their engineering staff within the last couple of years. Despite the fact that they're actually accumulating assets each year, they're taking in more than they're spending each year. And they've actually developed quite a cash pile, which I also find a little bit strange. For a nonprofit to have such a large amount of cash, you expect maybe to have an endowment that you're drawing from on a yearly basis, but to just have a huge amount of assets just sitting in cash is pretty unusual, I think, for a nonprofit. I'm not an expert, I'm not a lawyer, so take what I say with a grain of salt. But I do find everything about their financial structure a little bizarre.

And it's a bit of a conflict of interest that most of their money is coming from Google.

Yeah, I think so, because I want to paint this picture a little more broadly by talking about Firefox, which is what they're really known for, and its market share in relation to Google's Web browser, Chrome. So if you look at the latest statistics and depending on the source you look at, they're going to vary a bit. Chrome has approximately 65% to 70% market share, and Firefox has three to 4% market share. That's a huge difference. In fact, it makes you wonder almost, why does Google pay 400 to 450,000,000 a year to be the default search engine on Firefox when Firefox has such minuscule market share? It probably is profitable for them. I mean, even 3% of the global Internet audience is still a huge amount using Google searches every day. At the same time, it's propping a competitor up. Right. So Google makes the Chrome Web Browser mozilla. Firefox is a competitor to chrome and Google's payments to Mozilla are the vast, vast majority of Mozilla's revenue. So Mozilla couldn't exist as an ongoing entity supporting the development of Firefox without these payments from Google. Now, if Google wasn't providing them, another search provider would they might not be quite as large. For example, Yahoo was providing these default search engine payments to Mozilla for a number of years. However, it's still a very strange situation, and a situation that I do think is a conflict of interest, because Mozilla is not even taking all this money and putting it into the development of Firefox. And at the same time, Google doesn't want to be seen as monopoly. And so it's to their benefit for there to be browsers around that are competitors, quote, unquote, but are actually still directing traffic to them and also still small enough that they're not really a threat in market share to Google's dominance. So I see it as a conflict of interest. Now, is that like a legal term? I don't know. This is my personal opinion, and I don't want it to be misconstrued as me having some kind of legal expertise that I don't actually have, but just on a kind of moral level or an intuitive level. I think it's a conflict of interest to be funding your competitor who's sending traffic back to you, but funding them just enough that they kind of stay afloat, but they're not really a threat to you. And then that competitor is not even using all the money to try to strike back at you. Only a fraction of it is actually going to developing the competing products.

It almost makes them seem like just another arm of Google.

Right. And I will say it's also been a very lucrative arrangement for the CEO of Mozilla, but other people have covered that quite extensively. So Brian Linduke's article, for example, goes into that in some detail. So I don't think we need to here.

I think overall, one of the things that really struck me was that it's this nonprofit, but it just doesn't quite behave as one would expect a nonprofit to behave.

And it's not structured like a typical nonprofit. It almost feels like a loophole, having this huge for profit entity as part of the nonprofit, as a subsidiary of.

It, and something to think about if you're using Firefox because you don't want to use Chrome as a consumer. Something just to be aware of where your traffic and your money is going.

Yeah, and full disclosure, I'm a Firefox user. It's not like I'm anti firefox. Safari is my default browser, and my alternative browser is Firefox. And only on rare occasions when something's incompatible will I actually reach for Chrome. So I'm a fan of firefox. I think they do good work on Firefox. But this is certainly the most bizarre of any of these episodes we've done about technology organizations and where their money comes from.

Absolutely.

Thanks for listening to us, be sure to check out our prior episode on the browser wars and the show notes. Don't forget to leave us a review on your podcast player of choice. And also don't forget to follow and subscribe to us and we'll see you in a couple of weeks. Bye.