How a Firefox, Bing Deal Could Pose a Threat to Google Search

About a year ago Google’s then-CEO Eric Schmidt said the biggest threat his company faced was Bing–not Apple, not Facebook. Bing, he said, was a well-run search engine, one that had done a fairly good job of cutting into Google’s market share.

At the time, many–including his interviewer–were incredulous: how could Bing, which commands a mere 14 percent of the search market possibly cause concern? Given the amount of advertising dollars Microsoft had burned on Bing to snag less than 1/7 of Google’s traffic, what cards could it possibly play to corral more users?  Winning over this small fraction of the search market, after all, had been no easy task.

Enter Firefox

In an interesting post on ExtremeTech Sebastian Anthony explained how browsers make money, focusing on the relationship between Google and Mozilla Firefox.

Commanding 42.2 percent (450 million users) of the browser market, Firefox is the most popular web browser out there. Anthony explained that 97 percent of Mozilla’s $104 million-dollar income comes as royalties paid from the Firefox search box, and that 86 percent ($85 million) of those royalties come from a contract with Google. The contract ensures that Google is Mozilla’s default search engine. Therefore, the vast majority of Firefox users automatically use Google as their default search engine, making Firefox Google’s single largest driver of search traffic.

Despite Google having its hands in an array of businesses, its single biggest driver of revenues is search. In fact, according to Google’s most recent earnings report, 97 percent of its revenue in Q1 2011 came from search-based advertising. Putting two and two together, then, we realize that Google’s contract with Safari, the single biggest contributor of search traffic, is of paramount importance to Google’s bottom line.

That contract expires this November.

Why Schmidt was Right to Fear Bing

Come November, Google and Mozilla may simply renegotiate. Or the contract could lapse and Mozilla could court the other search stud in town: Bing.

Aware of the contract’s impending expiration, Microsoft has likely already begun courting Mozilla in earnest, showering them with offers boarding $100 million or more. In the words of Sebastian Anthony: “Do you think that Microsoft would blink an eye at spending $85 million for the majority share of Firefox’s 450 million surfers?”

Making matters better for Bing, Asa Dotzler, the Director of Firefox Desktop, wrote a blog post in 2010 announcing that he would be switching from Google to Bing, because he disagreed with the former’s privacy policy. This raises the possibility: maybe Mozilla doesn’t even want to renew the contract with Google. After all, Dotzler’s vote could for all practical assumptions go to Bing. At the least, one would think, Mozilla would turn attention to Bing or hear out offers from both search giants and select the highest bidder.

A Bing-Firefox alliance would be a massive disruption in the search game. If Bing already has slightly less than 15 percent of the search market, a contract making its search engine the default on Firefox would be a major inroad into that browser’s 450 million users. Bing could conceivably expand its influence to 20 percent or more of the search market.

Of course, this comes with a lot of “ifs.” Many would argue that Google has dominant market share because it is the superior search engine. If the Firefox execs agree with that assessment, they may be averse to turning users off by making Bing the default. Also, many Firefox users could simply switch the default setting back to Google if they so preferred. Still, a good proportion of users–either because of laziness or because they don’t know how–would likely stick with Bing. Microsoft’s search engine, then, would get a bigger chunk of the search-engine-market pie.

{Via ExtremeTech}

5 Responses to How a Firefox, Bing Deal Could Pose a Threat to Google Search
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  4. [...] Firefox, Bing Deal Could Pose a Threat to Google Search How Firefox, Bing Deal Could Pose a Threat to Google Search. Share this:StumbleUponLike this:LikeBe the first to like this [...]

  5. CodyRipley
    August 28, 2011 | 8:23 pm

    Wrong, You forgot to mention that the 450 million people already have firefox installed. The default search engine appears only on new installations.