The graph above shows the consolidated revenues and expenses of the Mozilla Foundation and Mozilla Corporation from the Foundation’s founding in 2003 through 2018. Almost all of the revenues and expenses are associated with the Mozilla Corporation, and almost all of the revenues of the Mozilla Corporation are from Google and other search engine providers. Graph © 2020 Frank Hecker, made available under the Creative Commons Attribution 4.0 International license.
tl;dr: Some thoughts on Mozilla for people who don’t know Mozilla.
By now everyone in the tech world has heard of the major layoffs at the Mozilla Corporation, the organization that creates and distributes the Firefox web browser. (For those who haven’t heard, about 250 people were laid off, about a quarter of the work force.) Lots of people in the tech world have spoken their piece about the significance of this event and what it means for the future of Mozilla, the web, and so on.
Rather than write something of and for the tech world, I wanted to briefly explain what’s going on for those of my readers who don’t know HTML from XML, and who are more familar with the worlds of nonprofits and regular old businesses. I used to work for Mozilla, and have more knowledge of it and (I hope) insight into it than most people, but I’ve been gone from Mozilla for ten years now. Thus what I write below is based on observing it from a distance, like seeing an old friend whose life has long since diverged from mine.
Disclaimer: I work for a tech company, and I don’t usually write about other tech companies. So I will strongly emphasize that what I write here are my personal opinions only, and do not represent the positions of my present employer or past employers.
What is Mozilla?
Mozilla is actually two things, the Mozilla Foundation and the Mozilla Corporation, which are often confused and conflated in public discourse. (There’s actually at least one other piece, but these two are the main ones.) The Mozilla Foundation, founded in 2003 to take over development of the source code for the Netscape web browser, is a 501(c)(3) tax-exempt nonprofit organization, with a staff of 80 people and a budget of about $27 million in 2018, the last year for which figures are available. The Mozilla Corporation, founded in 2005, is a for-profit business, wholly owned by the Mozilla Foundation, with a staff of about a thousand and revenue of about $440 million, again from the 2018 financials.
This organizational structure was designed to allow the Mozilla Corporation to engage in business activities which would be incompatible with 501(c)(3) status, with a portion of the revenues from those activities directed to the Mozilla Foundation to help fund its activities. Having a nonprofit parent also means that the management and employees of the Mozilla Corporation can help serve the public benefit goals of the Mozilla Foundation, while still having interesting jobs, being paid reasonably well, and feeling themselves to be part of the overall Silicon Valley high-tech milieu.
Second: The customers of the Mozilla Corporation are not the users of Firefox (among whom you may count yourself). The Mozilla Corporation’s customers are large corporations like Google that pay for things that will help them make money, most notably having their Internet search service be the default in the Firefox browser. And to complete the old saying, “If you’re not the customer . . .,” then the 200+ million Firefox users are the product, potential viewers of ads served up by Google or others.
(The existence of the Firefox browser as a competitor to Google’s Chrome browser also supposedly helps Google avoid unwelcome antitrust attention, especially now that Microsoft has abandoned its own browser development efforts to base its own browser on the Chrome code. But it’s unclear how important this consideration actually is to Google senior management.)
In the early days of the Mozilla Corporation these search engine relationships proved extremely lucrative, jumping from less than $5 million in 2004 to over $50 million in 2005, the first year in which the Mozilla Corporation reported financial results, and eventually growing to a high of about $540 million in 2017.
But as the number of Firefox users decreases (due to the growing market dominance of the Chrome browser), and those users click on fewer online ads (for example, because they’re spending less during the COVID-19 pandemic), the willingness of Google and other customers to pay the Mozilla Corporation for those users decreases accordingly. Thus the Mozilla Corporation cutting a quarter of its workforce.
(In contrast, to my knowledge the Mozilla Foundation itself is not laying off anyone, at least at this time. It gets its funding from a combination of royalties from the Mozilla Corporation for use of the Firefox and Mozilla trademarks, government and foundation grants, and individual donations. For 2018 the royalties accounted for about half of the Mozilla Foundation’s budget, with grants and individual donations each accounting for about a quarter of the budget.)
So, if you’re an avid user of the Firefox browser and want to chip in a few dollars to help support its development, there’s actually no way for you to do so, at least not at present. Your donations will go to the Mozilla Foundation, which will use them to help fund its outreach and advocacy initiatives, of which it has several. The Mozilla Foundation itself does not develop Firefox—or any other software, to my knowledge.
Whence Mozilla?
How has Mozilla (or, more correctly, the Mozilla Corporation) come to its present pass? The best way I can explain it is that the Mozilla Corporation is not really a business in the way we’d normally think of a business, profit-focused and subject to market discipline.
Instead you can think of the Mozilla Corporation as being analogous to the Bell Labs or Xerox PARC of yore, R&D organizations funded by a seemingly-unending stream of profits earned by other businesses that enjoyed dominant positions in their respective markets. In this sense Google is to Mozilla as AT&T was to Bell Labs, or Xerox to Xerox PARC.
Like Bell Labs and Xerox PARC, the Mozilla Corporation provided a home for some of the smartest software developers around. Like those organizations, the Mozila Corporation has initiated a myriad of projects ranging from the mundane and useful (like the Firefox browser) to the esoteric and speculative. Like those organizations, the Mozilla Corporation has given away much of what it has produced in the form of public goods available to everyone at no charge.
Like Bell Labs and Xerox PARC, the Mozilla Corporation has indulged a taste for “build it yourself” vertical integration, and in particular for creating its own bespoke development tools and software stack. For example, like those organizations the Mozilla Corporation has created its own operating system (FirefoxOS), its own programming language (Rust), and (of course) its own graphical user environment in the form of the Firefox browser (not to mention yet another web browser, this one more research-oriented, and various experiments in software for virtual reality environments).
And finally, the Mozilla Corporation is engaged in the same struggle that Bell Labs and Xerox PARC found themselves in: trying to convert a research-oriented organization into an actual business, and capture for itself more of the value that it has been providing to the world (and to its past, present, and future competitors) for free.
Whither Mozilla?
What will happen to Mozilla, and to the Mozilla Corporation in particular? The basic situation is that Mozilla has tried to be at least three things simultaneously: an advocacy organization, a developer and distributor of mass market consumer software and related services, and (as noted above) a research lab.
Being an advocacy organization is relatively inexpensive, but the other two functions are not: software development (including research-related activities) and branding and marketing together consumed almost three quarters of the combined Mozilla Corporation and Foundation expense budget of $450 million in 2018. Thus when COVID-19 hit and the Mozilla Corporation hit a brick wall in terms of search engine revenue, its choice was apparently either to stop being a consumer software and services company, or to stop being a research lab.
In the end Mozilla Corporation senior management apparently decided to go for being a consumer software and services company, and to ditch any activities not related to that, including research projects. Having done so, the Mozilla Corporation faces a number of problems:
First, as noted above the Mozilla ethos is arguably more like that of an R&D lab than of a business proper. Just getting Mozilla employees to think of themselves as working in the service of a profit-driven business, and to act in accordance with that thought every single day, may be an uphill battle.
Second, Mozilla is arguably becoming superfluous, at least as far as its own largest customer, Google, is concerned. Google has its own browser and browser development team, its own research lab, and presumably an inclination to want to spend its R&D money on things it can control and direct itself. Google also has the ability and the opportunity to capture the remaining base of Firefox users, at least those that are monetizable.
There will always be a core of enthusiastic Firefox users, but a lot of them switch their search engine to something other than Google, run ad blockers, and don’t click on online ads. Thus they are for the most part irrelevant from Google’s point of view. At some point the major value Firefox has for Google will be as presumed insulation from antitrust enforcement efforts targeting Chrome, but such insurance, even if it’s of value to Google, doesn’t necessarily require a large Firefox user base.
Finally, it’s not at all clear how successful the Mozilla Corporation can be at the task of running a business for which individual consumers are the customers, not search engine vendors. The Mozilla Corporation has had a number of previous efforts to try to break out of its dependence on Google, et al., none of which were successful. Based purely on history one would be skeptical of their succeeding this time.
This is especially true given the basic math: To replace (say) $100 million of lost revenue from search engines Mozilla would need to make 50 cents or so per year from each of its $200+ million Firefox users. This seems reasonable, but remember that Internet users have been used to a world where everything is provided to them for free, so the number of Firefox users who would pay anything at all is likely to be low.
If we assume 2% of Firefox users would purchase Mozilla products and services (apparently a fairly typical conversion rate for “freemium” products), replacing $100 million of lost revenue with a user base of approximately 200 million users would require each paid user to be contributing about $25 per year to the Mozilla Corporation’s bottom line. Assuming the same conversion rate and no growth in the user base, matching the $500+ million of revenue the Mozilla Corporation had at its peak would require each paid user to purchase $75 $125 per year of Mozilla products and services. That’s a fair amount of money.
Assuming that the Mozilla Corporation can’t convert itself into a true profit-making business serving individual customers, what are the other possibilities?
One is to aggressively shrink the organization to a size that is sustainable long-term on greatly-reduced revenues, while still ensuring that Mozilla as a whole is able to do a reasonably good job of fulfilling its nonprofit mission. For example, this might involve cutting out all development except for basic maintenance of Firefox itself, in an effort to preserve a user base large enough to justify someone paying the Mozilla Corporation for access to it.
A problem with this approach is that it likely does not accord with the feelings and ambitions of either Mozilla employees or senior management, who are used to thinking of Mozilla as being on the cutting edge of web development. It would be a far step down from that to maintaining an aging browser code base in an attempt to sustain a relatively small revenue stream.
A more drastic approach would be to get out of the software development business entirely in a few years, liquidate the assets of the Mozilla Corporation and direct any remaining revenue into an endowment, and revert to being a pure nonprofit organization focused on Internet and web advocacy. I suspect such a conversion could be very complicated and time-consuming from a tax and legal perspective due to the money involved and the restrictions placed on how it can be moved around, but that’s why you hire lawyers and tax experts, to determine what’s possible and how to do it.
I consider this scenario even less likely than the previous possibility: senior management of the Mozilla Corporation seem very attached to the idea of software being a “force multiplier” for the Mozilla Foundation’s efforts, supplementing advocacy efforts by creating software that implements the public benefit ideals of the nonprofit.
Finally, a more “out there” possibility is leaning even more into the idea of being a “public interest R&D lab” for the Internet and the web, focusing on research activities primarily producing public goods, and looking for increased funding from foundations and governments as opposed to funding from corporations and end users. It’s certainly possible to build large nonprofit organizations this way, with billion dollar budgets and thousands of employees; see for example the Battelle Memorial Institute, the MITRE Corporation, and Howard County’s own Johns Hopkins University Applied Physics Laboratory.
However the way that Battelle, MITRE, and APL got to be that big is by aggressively pursuing defense contracts. I doubt that Mozilla management or employees are interested in the Mozilla Corporation becoming a DoD contractor, and it’s unclear to me how much government or foundation funding Mozilla could attract as an R&D lab focused purely on civilian applications in the Internet and web space.
In the end it’s possible and perhaps most likely that the Mozilla Corporation will continue down its present path, trying a variety of new business opportunities without any of them being a runaway success, drawing upon a steadily declining revenue stream, and slowly contracting the organization over time. In ten years it’s possible that the Mozilla Corporation may be just a memory, with the Mozilla Foundation surviving as a modestly-funded advocacy organization.
And, honestly, there are worse fates than that. The Mozilla Corporation has existed now for fifteen years, the Mozilla Foundation for seventeen, and the overall Mozilla project for over twenty. Mozilla as a whole has done many great things, greater than many organizations much bigger in size and public awareness. Even if it were to close up shop tomorrow, like Bell Labs and Xerox PARC its place in history would be secure.
For further exploration
The most recent State of Mozilla report gives an overview of the Mozilla organizations’ activities and finances. The 2019 report should be out later this year. The report is released concurrently with the release of the Mozilla Foundation IRS Form 990, i.e., its tax return, and the Foundation always requests an extension and files its tax return in November. Thus we won’t know the true impact of Mozilla’s current financial woes until late 2021.
Incidentally, doing a Twitter search on ”Mozilla” gives a good feel for public perception of Mozilla among technologists, but unfortunately most of the people commenting have no real idea what they’re talking about.