Mozilla can get rich after selling Yahoo

Marissa Mayer recklessly inserted a clause into the contract with Mozilla that “should never have been realized”

Marissa Mayer. Photo: Magnus Höij / Wikimedia Commons / CC by 2.0

The main source of profit Mozilla - an affiliate program with search engines that pay for the transition to the search pages from the omnibox in the browser Firefox. From such contracts, Mozilla gets about 90% of its income.

For a long time, Mozilla collaborated exclusively with Google, and it was almost perfect collaboration. Mozilla had a browser, Google had a search engine. The two companies shared common values, complementing each other superbly. Google even distributed Firefox in the standard Google Pack utility package. Google has been installed by default in Firefox since 2004.

Relationship deteriorated slightly in 2008, when Google released its own Chrome browser . After that, the Mozilla leadership began to probe the options of similar agreements on the division of profits from search advertising with other companies, including regional search engines. Plans implemented after six years.
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The main event took place in 2014: after many years of cooperation with Google, Mozilla decided to change the default search engine in Firefox browser . The change of search engine was announced simultaneously with the conclusion of a strategic agreement with Yahoo .

For Firefox users in different regions, other default search engines have been suggested. For example, a search for Yahoo has started in the US. The changes took effect from December 2014.



Alternatively, Google, Bing, DuckDuckGo, eBay, Amazon, Twitter and Wikipedia are offered.

In Russia, the default search engine has changed from Google to Yandex.



Alternatively, Google, DuckDuckGo, OZON.ru, Price.ru, Mail.ru, and Wikipedia were offered in Russia.

In China, Baidu has become the main search engine. Yahoo expected that, over time, their search would become the default choice in other regions, but this did not happen. For most of the rest of the world, Google remained.

The signing of the contract with Mozilla was the main achievement of the new Executive Director Marissa Mayer, who transferred to Yahoo just from Google. For her, it was not just a deal, but the most important, key agreement. Marissa did her best to incline Mozilla to an alliance with Yahoo.


Marissa Mayer. Photo: REUTERS / Elijah Nouvelage

As it has now become known, in 2014, Marissa Mayer included a special unprecedented item in the contract with Mozilla. Under the terms of the contract, whoever buys Yahoo will transfer Mozilla annual payments of $ 375 million until 2019 if Mozilla finds the buyer inappropriate and decides to terminate the contract .

The terms of this agreement were obtained by Kara Swisher (one of the most reputable journalists in the Western community), co-founder of the Recode publication and, by the way, the winner of the 2011 Leba Professional Award for a series of reports on Yahoo activities.

Cara Swisher writes that Mozilla has decided to leave Google, because Yahoo has offered much more favorable contract terms. And this unprecedented clause of the contract on annual payments in case of termination of the contract is part of the attractive deal that Marissa Meyer prepared.

For Mozilla, such a clause is protection against a possible change in the parties to the transaction (the term “change-of-control“ is indicated in the contract). From the point of view of Marissa Meier, this could not happen in principle, so she supported the inclusion of a potentially problematic clause in the treaty.

We are talking about paragraph 9.1. According to it, Mozilla has the right to withdraw from the contract at its own discretion within a limited period of time, if it does not consider the new partner acceptable. After that, she has the right to conclude a new contract with Google or another company, but she will still receive $ 375 million annually from Yahoo.

Attracting search traffic and reviving the search engine was one of the elements of Marissa Meyer’s strategy as Yahoo’s executive director. She relied on the fact that she would be able to beat Google in her own field and return Yahoo to a strong position in the Internet search market. Indeed, it was once a long time ago, in the days of AltaVista - as we remember, Yahoo eventually bought that daring search engine that dared to bypass Yahoo in the search market. Unfortunately, she cannot buy Google now. This possibility was in 2002, but Yahoo refused the deal, considering the price of $ 3 billion too high .

With the arrival of Marissa Mayer, Yahoo has become much more money to allocate to attract search traffic. The chart is compiled according to the official financial statements of Yahoo, the cost of attracting traffic is designated as Traffic Acquisition Costs (TAC), the cost of attracting search traffic - Search TAC .



One way or another, but Marissa Meier's bet did not play, and now everything goes to the fact that the “impossible” scenario is close to that which can be realized.

Who will buy Yahoo?

According to information from reliable sources , negotiations are currently being completed on the sale of Yahoo for an amount from $ 3.5 billion to $ 5 billion, depending on additional conditions (whether patents and real estate objects will be included in the transaction). In the last round of talks, only two potential buyers for Internet assets remained - Verizon and a group of investors led by Quicken Loans, Dan Gilbert.

Selling Yahoo - the issue is almost resolved, and quite unexpectedly, Mozilla receives the greatest benefit among all participants from this transaction!

Here is a twist. It remains the case for small - after completing the sale of Yahoo to find a new partner and terminate the contract with Yahoo.

Kara Swisher says that such terms of the Yahoo-Mozilla contract were an unpleasant revelation to potential buyers of Yahoo’s assets. Apparently, the risk of paying mandatory deductions to Mozilla until 2019 is immediately included in the amount of the transaction. It turns out that the beautiful Marissa "nakosyachila" about a billion dollars.

Kara Swisher writes that this was not Marissa’s only dubious decision. For example, potential buyers will also have to pay about $ 1 billion in compensation for shares owned by employees - Yahoo has plentifully loaded employees with options to keep them from dismissal and care to competitors. They say Marissa was overly generous, rewarding stakes in many top managers.

Open Source Victory

Whatever happens to Yahoo, users of the Firefox browser and the Open Source community can only be happy for Mozilla. Ultimately, most of the money received will go to the development of Firefox and other free projects.