Mozilla, Apple and Google

The Mozilla Foundation, makers of the Firefox web browser, have announced the end of their partnership with Google to be the default search engine on the US version of the browser in favor of Yahoo. I wanted to pen a few thoughts for Tech.pinions Insiders on the significance of this deal, especially when taken together with Apple’s recent moves away from Google. I’m going to share some quick stats and some thoughts on each of them.

Browser market share – Firefox waning, Chrome gaining

First, off, let’s look at desktop browser market shares. Firefox has been in steady decline and Chrome has been steadily increasing, and it’s amazing how the two have largely traded places over the last couple of years:

Chrome and Firefox share change

Just in the last year or so, Chrome has risen from 16% to 21%, while Firefox has fallen from 18% to 14% or so, according to those same NetMarketShare stats. Arguably, Google no longer needs Firefox anywhere near as much as it once did, since it’s been slowly taking browser share from Firefox over the last few years. Interestingly, Internet Explorer’s share has barely moved over the same period and it remains dominant at around 58%. Firefox is becoming less and less relevant, and driving less and less traffic to Google as a result, which may be one reason why Google was willing to allow the agreement to lapse.

US search market share: Google constant, Microsoft and Yahoo trading places

In the US, which is where the new deal between Firefox and Yahoo applies, the positions are rather different. Here, it’s Google that’s been virtually static, at around 66-67%, while Microsoft and Yahoo have largely swapped users:

US search market share

Interestingly though, Yahoo’s share has started to stabilize in the last few months, as has Microsoft’s. The shift seems to have stalled recently, perhaps as a result of some of Yahoo’s successes in transforming its search products. The funny thing about that, of course, is both providers use the same underlying provider: Bing. Microsoft benefits both from Yahoo’s share (I estimate a large majority of Yahoo’s search revenue goes straight to Microsoft), and from its own share, so to some extent this doesn’t matter. The percentage of US searches powered by Bing hasn’t moved more than half a percentage point in the last year and a half:

Powered by Bing share of search

The key thing, therefore, is for Microsoft and Yahoo to find a way to stop taking share from each other, which is expensive but ultimately doesn’t benefit Microsoft much either way, and to start taking share from Google instead. Hence this deal.

Google’s traffic acquisition costs: climbing as a percentage of revenue

Google has long provided the vast majority of the funding for Mozilla – around 90% by most estimates. This partnership has been mutually beneficial, as Firefox has very few other sources of funding and Google has derived a great deal of traffic from Firefox. However, just as Google and Apple began as complementary partners but became competitors, so Mozilla and Google have slowly become competitors too, as Mozilla launched Firefox OS in competition with Google. What began as an alliance against the dominance of Microsoft has become a philosophical fight between erstwhile partners who now see the world differently. Mozilla has tried to out-open Google in recent years, both in its browser and in its mobile OS, and it’s possible these philosophical differences also played a part in the move away from Google and into the arms of Yahoo.

Despite Firefox’s slow decline however, traffic acquisition costs (TAC) paid to partners like Mozilla have been rising steadily as a percentage of Google’s revenue from its own sites:

Sites TAC

So, even as Google is able to drive more and more traffic to its own search engine through browsers it directly controls on both the desktop and mobile, its cost of acquiring that traffic has been rising faster than its revenues. Why is that? Well, this is where Apple comes in. An increasing amount of Google’s total search traffic comes from mobile and Apple is a very significant source of search traffic in mobile, through iOS, where Google is the default search provider. Much of the almost $1 billion in revenue Google pays out to partners each month goes to Mozilla and Apple, with the majority now likely going to Apple.

The likely impact of Google’s two biggest external referrers moving away

So we now have a situation where Google’s two largest external referrers for search are moving away from it. Mozilla explicitly, in the form of the new partnership with Yahoo, and Apple less explicitly with the insertion of Siri and Spotlight search (both powered by Bing) between users and a search results page. On the plus side, Google’s TAC should start to fall as it stops paying Mozilla for US search, and to a lesser extent as iOS and Yosemite start to drive less traffic to Google. But more significantly, Google’s search revenue growth may be dented somewhat by both moves. Neither is going to damage Google’s dominant position in search, but together these moves may finally start to move market share not just between Microsoft and Yahoo but between the Google and Bing camps. To be clear, with Google now in second place in desktop browsers and dominant in mobile browsers, it will drive an increasing amount of its own traffic from properties it owns. But more and more of the traffic it doesn’t own will now start to shift away to others by default, and apathy is a strong force in these areas – default options tend to become actual options for many users.

The biggest risk to Google remains Apple

The only thing that could cause more significant damage for Google is if Apple switched the default search provider from Google to Bing or Yahoo in Safari. So far, all its moves away from Google have been subtle and barely discernible to users, because they’ve occurred in scenarios that don’t involve a page of blue links. I think that’s in part because Apple recognizes Google really is superior to competing search engines when it comes to traditional search results. I’ve tested both Bing and DuckDuckGo as default search engines on iOS over the last few months, and found both to be noticeably inferior when it came to more obscure searches. Apple has shown before it’s willing to (temporarily) damage the user experience in order to make a strategic shift away from Google – the big question now is whether it sees that move in retrospect as a mistake or as a price worth paying.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

3 thoughts on “Mozilla, Apple and Google”

  1. I’ve always been of the opinion that the anti-trust regulators in the EU and US are Googles biggest risk.

    It wouldn’t surprise me at all if Google allowed this deal with Mozilla to lapse. After all, its not like Yahoo outbid them.

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