UPDATE 2024/01/04: This post originally appeared on my Civility and Truth Substack newsletter. I’ve moved it to my main site in an effort to collect all of my writing in one place.

In my last post I sort-of-promised that that would be my final commentary on all matters Mozilla. I am breaking that promise, but will console myself with the thought that this post is only going out to the handful of subscribers to my Substack newsletter (which I use for less formal posts), and I won’t be tweeting about it or otherwise promoting it. But of course every post of this newsletter is publicly viewable and sharable, and many of you have Twitter accounts too, so that’s not much of a concession.

Anyway, on to Mozilla. One thing I regret not discussing in my prior posts was the sort-of-announcement of the extension of the Mozilla Corporation’s deal with Google. I say “sort of” because there was no formal press release or blog post. Instead the news was leaked to the press through back channels. To quote The Register: “Within hours of the browser maker laying off a quarter of its staff this week, a well-placed source told The Register Moz had signed a three-year agreement with Google.”

The key words here are “within hours” and “well-placed source.” This has all the hallmarks of Mozilla Corporation senior management trying to correct a public communications problem, after a layoff announcement that not only was silent about the fate of popular Mozilla-sponsored projects like Rust or MDN, but also by implication cast doubt on the long-term future of the Mozilla project as a whole.

The Register’s story goes on to say, “Our source told us Moz will likely pocket $400m to $450m a year between now and 2023 from the arrangement, citing internal discussions held earlier this year.” The key words here are “likely” and “internal discussions”. The reference to “internal discussions” (within the Mozilla Corporation? between the Mozilla Corporation and Google?) might imply that the deal was anticipated at press time but not yet signed. However as reported in the same story, a Mozilla spokesperson did confirm that the contract had been extended.

So, if the deal was done, why is the amount of revenue to Mozilla characterized as a “likely” range rather than a fixed amount? A clue here is in Mitchell Baker’s blog post announcing the layoffs: “Economic conditions resulting from the global pandemic have significantly impacted our revenue.” If the contract was for a fixed amount, payable no matter what, then COVID-19 should have had no impact. So the implication is that the contract value was dependent on certain metrics whose values could fluctuate, for example, based on the number of active Firefox users and/or their web browsing activity.

That implies that the estimated annual contract value of $400–450 million is dependent on maintaining Firefox market share or even possibly increasing it somewhat (which was possibly the main subject of the “internal discussions”). By comparison, from the 2018 Mozilla consolidated financial statement [PDF] we see that “royalties” (the category used for search engine revenue) were $430 million in 2018 compared to $539 million in the previous year (page 4, “Consolidated Statement of Activities and Change in Net Assets”).

However, royalties include more than just search engine revenue. Actual search engine revenues were about $391 million in 2018, 91% of overall royalties, down from $501 million or 93% of royalties in 2017 (page 25, note 12). So the estimated annual $400–450 million in search engine revenue for the next three years, while a conservative estimate compared to the peak year of 2017, is still relatively optimistic compared to the actual search engine revenue in 2018.

The change from $501 million to $391 million represents a 22% decline in search engine revenues from 2017 to 2018. Even assuming that the estimated revenues of $400-450 million are achieved going forward, that’s still a 10–20% decline from the peak year of 2017.

The “2018 State of Mozilla” report noted that overall Mozilla employed over 1,000 people. (It’s unclear whether this is as of the end of 2018 or as of November 2019, when the report was released.) Almost all of these people work at the Mozilla Corporation, so we can take 1,000 people as an estimate of the size of Mozilla Corporation staff at that time. (This same report noted the Mozilla Foundation as employing 80 people, while Part VII, line 2 of the Mozilla Foundation 2018 Form 990 listed the number of Foundation employees with compensation greater than $100,000 as 43.)

The Mozilla Corporate laid off 70 people early in 2020. Combined with the more recent reduction in 250 “roles” announced in the Mozilla Corporation internal memo [PDF], that amounts to a decrease in staff of up to a third from its highest point. Presuming that the Mozilla Corporation had staffed in 2018 in anticipation of 2017-like revenues continuing, and that 2019 search engine revenues were comparable to those in 2018 (which we’ll find out this November), that explains why such a large fraction of the Mozilla Corporation workforce was laid off: That’s the reduction in staff that was needed to bring costs in line with anticipated revenues for the years ahead.

Another topic I wanted to expand on was the issue of individuals paying to support Firefox development. Anyone perusing Reddit, Hacker News, or other online forums will encounter comments urging people to contribute to Mozilla to help keep Firefox alive. As I previously noted, there is in fact no direct way for individuals to pay directly for Firefox itself, since donations to the Mozilla Foundation go to support Mozilla Foundation activities, and do not find their way to the Mozilla Corporation where the actual Firefox developers are employed. Even with new products like Mozilla VPN the money users pay will support Firefox development only indirectly.

However, even if users were able to directly fund Firefox development the resulting revenue would most likely fall far short of the funds needed. To get a sense for this, let’s look at the current level of Mozilla donations:

The 2018 Mozilla Foundation IRS Form 990 [PDF] reports just under $14 million in revenue from contributions and grants (Form 990, Part I, line 8). But of this almost $9 million was received in the form of large contributions (Schedule B, Part I). So the amount contributed to the Mozilla Foundation by ordinary Firefox users was no more than $5 million at most and may even be lower, since it’s not clear whether the list of large contributions includes the over $3 million from government sources noted on Part VIII, line 1e.

The disconnect is clear: in their generosity individual Firefox users collectively would likely directly contribute at most a few million dollars per year to Firefox development, while the actual cost of Firefox development is one or two orders of magnitude greater than that. I was probably guilty in my previous Mozilla post of being overly pessimistic about the long term prospects of the Mozilla project. But there’s no denying that this is a major gap to fill, and it’s understandable why Mozilla Corporation senior management have not yet found a way to fill it, beyond depending on search engine royalties from a third party that owns a “cash cow” business with a dominant market position.

This is a specific instance of a more general problem with software development today, which I may address in a future post. As for Mozilla, I’ll likely be back with an update after the 2019 Mozilla financials are released in November, unless there’s major news in the meantime.