Mozilla could walk away from Yahoo deal and get more than $1B | Hacker News Reader

Mozilla could walk away from Yahoo deal and get more than $1B

recode.net

421 pointsdblohm7197 comments

Wow, I'm really surprised that I've never heard of this before, not because I'm some sort of all knowing cyborg, but because its not like Yahoo acquisition talk just started last week.

This is a company that's essentially had multiple parts of it for sale for the better part of 4 years and this hasn't once come out.

I'm running through all the Yahoo corporate filings that Bloomberg has indexed and I can't find any link to this clause.

I mean this is a very material issue!

If you are to be a share holder in a company that's trying to broker a 3-4 Billion sale of some of its assets, then knowing that the buyer may be on the hook for an additional 1 billion bill probably means that the asset you thought you owned is probably worth 20-25% less than you originally thought.

Someone isn't going to be very happy with the yahoo leadership today:)

Yeah, I'm not seeing it either. I see this:

> Affiliate Commitments. The Company is obligated to make payments, which represent TAC, to its Affiliates. As of December 31, 2014, these commitments totaled $2,087 million, of which $505 million will be payable in 2015, $401 million will be payable in 2016, $400 million will be payable in 2017, $375 million will be payable in 2018, and $375 million will be payable in 2019, and $31 million will be payable thereafter.

as a $375mm reference but that's to all TAC; not just Mozilla. Not in research so def could have missed it.

> Wow, I'm really surprised that I've never heard of this before

Kara Swisher doesn't seem to provide any indication of where the information she's reporting came from. Furthermore, the link she provides at the end (as a well-done "warts-and-all" account of the deal) claims that Mozilla stands to lose money if a deal goes through...

https://techpinions.com/is-firefox-search-worth-375myear-to-...

I noticed that the submitter is dblohm7.

As I read it, that analysis (about Mozilla losing money from a Yahoo sale) doesn't factor in the $1 billion payment Mozilla would be owed if they walk away, and is based on the assumption that Mozilla won't be able to make another search deal to replace its revenue with Yahoo. It's probably true that they can't replace 100% of it, but if they partially replace it, and then make up for the shortfall with that billion, that probably takes care of them for many years.

Another possible scenario: Mozilla pockets $1B, several months later Yahoo goes bust and then they're free to do whatever they want because Yahoo can't perform any more.

The question is, if there's no healthy competition in the search space, isn't Mozilla (and the web) ultimately still f----ed?

Long term quite probably yes, but if they manage that money wisely and concentrate on their core product rather than on all kinds of funky (and costly) stuff it could last for a long time.

Yahoo isn't offering healthy competition anyway, really.

"pockets $1B", I think that's it's still over several years, I suspect if they go "bust" they won't have that 1B

I had a deal with a big provider in NL to pay a fixed fee every month, when they backed out I forced them to pay the full amount over the duration of the contract in one go.

Not saying that will always work, but it did work for me (it wasn't a billion though (obviously), but a few hundred K).

Kara Swisher doesn't seem to provide any indication of where the information she's reporting came from

She claims to have seen the contract in the first line of the article.

>...deal point has been a new and unwelcome surprise to potential buyers of the company, many said. The remaining bidders only recently got details of search deals that Yahoo has struck.

Given $YHOO price hasn't moved materially this week, it seems likely that the market (including potential buyers) was aware of the Mozilla deal and priced it in.

If this information wasn't public but insiders were able to price it in, then it's time for an SEC investigation.

Perhaps the question is "Can they really walk away and get a much better deal today?"

But yes, this does look like yet another miscalculation and failure of vision.

Marissa Mayer sure makes some interesting contracts. Remember that she was the one who recruited Henrique De Castro from Google and personally got his contract approved by the board (though curiously withholding his name and exact compensation details). He worked at Yahoo for 15 months and earned a $58m severance. That is in addition to the ~$50m he made while working there. Again, in 15 months.

http://www.bloomberg.com/news/articles/2016-02-02/yahoo-hold...

To be fair this is generally the last acts of any dying company. Try to buy/hire your way out of irrelevance only to burn up the last bits of liquidity your investors could hope to get back.

Maybe? At least anecdotely I almost always see spending cuts over and over until the workforce is dwindling with no promises of job security. This seems bizarre to me but I don't have data to say how common it is. Maybe it's different with a more media focused company?

What would you call Google's billion dollar payout to Apple to be the default search engine?

Or Google's other traffic buying programs.

Last acts of a dying company?

Google is light years ahead of Yahoo in PR.

I would call it roughly 5% of Alphabet's Q1 2016 revenue.

So yay monopoly and cartels?

Yup... I think she was out of her league in terms of negotiation. She's a talented and user-focused product person, but not a leader/negotiator/employer.

As I noted before, she was never at the senior VP level at Google (i.e. reporting to the CEO). So she just didn't have enough experience at that level.

It seems like she got the CEO job based on name recognition, and not a track record of leadership and business acumen.

It's interesting to consider the outrage about CEO pay in light of this. Sure, there are plenty of shitty CEOs who don't deserve their compensation. But you have to respect the fact that, at this level, if you aren't sharp, you'll be fleeced by your peers (i.e. De Castro, and whoever negotiated the Mozilla deal). You don't want to work for a CEO who is getting the short end of the stick all the time.

In addition to Steve Jobs' talents as a product person, he also never got the short end of any deal. (I'm saying that as a person who has never really used Apple products.) I was astounded that he basically did a reverse takeover of TWO COMPANIES -- Apple when he returned, and Disney via Pixar. He negotiated with all the thugs in the movie and music businesses. There aren't many tech CEOs who can do that.

I forget where, but I recall some anecdotes about being on the other side of the table with Bob Iger... saying that those guys basically threatened to physically harm you, and that their threats were actually credible!!! Like you should be scared for your life when messing with those guys :)

> Sure, there are plenty of shitty CEOs who don't deserve their compensation. But you have to respect the fact that, at this level, if you aren't sharp, you'll be fleeced by your peers (i.e. De Castro, and whoever negotiated the Mozilla deal). You don't want to work for a CEO who is getting the short end of the stick all the time.

I always assumed there were some shark lawyers behind these deals, does the CEO really ignore advice and go it alone? In Mayer's case it really does seem so, but a non-sharp CEO should still be able to not be eaten alive if they bring good counsel to the table (though I guess that itself is the sign of being sharp!).

> I always assumed there were some shark lawyers behind these deals, does the CEO really ignore advice and go it alone?

The leadership / negotiation prowess includes the ability to pick, hire, delegate and trust good people.

It is not a coincidence that she was neither able to negotiate a good deal but also failed to negotiate hiring competent advisors. There is a large overlap there.

Perhaps behind De Castro is a competent group of lawyers or advisors as well.

> It is not a coincidence that she was neither able to negotiate a good deal but also failed to negotiate hiring competent advisors. There is a large overlaps there.

Though she did negotiate herself one hell of a contract. When it personally counts she finds competent people to negotiate!

That's a good point.

Right, you need to be knowledgeable enough to delegate. It's genuinely a tall order to be able to figure who is a good product leader, who is a good CTO, who is a good CFO, who is a good litigator, head of HR, etc. Those fields are so disparate, and if you don't know enough about them, you won't be able to judge talent.

It's exactly the same reason that programmers need to be interviewed by programmers, and programmers prefer to work for managers that were programmers. You really do have to understand something about someone's job if you will manage them (and potentially fire them).

People with specialized knowledge will do all sorts of things to mislead you about their job performance -- doesn't matter if it's an engineer, lawyer, or finance person.

I think it's selling Marissa short to say she just didn't understand the contracts or her legal options and potential consequences.

I think she understood the consequences but thought that the risk was worth the reward. In some cases I think personal hubris was involved.

I don't do Billion dollar deals but I've done my share of 7 figure ones. At some point in every negotiation you need to tell your attorney that you understand the risks and you're willing to accept those risks or nothing would ever get signed. I think Marissa was convinced the Mozilla deal would be huge for Yahoo. She likely didn't think or care if the company got sold (honestly in that case she's probably out so there's no personal risk for her) and she was convinced DeCastro would be able to do at Yahoo what he was able to do at Google.

> I think it's selling Marissa short to say she just didn't understand the contracts or her legal options and potential consequences.

So she understood the consequences, but just had no clue as to their likelihood or didn't care because she would be set financially? It's horrible either way, she should not be negotiating deals at all.

there is a favorable interpretation of this for Meyer.

they're in a bidding war for mozilla with Google and Bing. Yahoo needs their traffic and is willing to exceed the price of the other buyers.. but it's well known that Yahoo has been struggling for years. So a cautious Mozilla would not take their offer unless it was substantially higher, or had some kind of protection if yahoo fails. Yahoo offers this clause, since Mozilla wouldn't do the deal otherwise.

Remember Mozilla wasn't desperate. They could have accepted another offer for at least $300m/year. Yahoo would have been seen as higher risk... people talk every few months about yahoo like it's a miracle they still exist.

Now, I don't know what happened. but yahoo agreeing to this does not necessarily mean Marissa is incompetent or didn't care or whatever.

Right. I have a feeling that this is shocking mostly because of the context, and not necessarily because of the agreement itself. How many other high risk agreements have been made in the world? I'm pretty sure most of the human universe runs on this kind of thing, we just either don't find out about it because it pays off, or it doesn't matter, because the context isn't exciting. I said "wow" when I first read it, but only because of what I know about the whole Yahoo and Marissa situation, not because it seems like a particularly crazy deal by itself.

> but just had no clue as to their likelihood

Likelihood is probability based on factors, each of which has different weight and is again based on other factors. In hindsight, the likelihood seems obvious; when she was making the decision, not so much.

Back in the nineties Excite did a similar deal with Netscape. Not a billion dollars but it was something like $70 million when Excite only had a fraction of that in the bank.

It worked for them in the short term. The traffic enabled them to raise more money and eventually IPO.

Mayer probably thought a similar shoot-the-moon risk was necessary for Yahoo.

> At some point in every negotiation you need to tell your attorney that you understand the risks and you're willing to accept those risks or nothing would ever get signed.

Amen to that!

i mean, sure, you have to be sharp to be the CEO. and she is sharp. she's earning millions and giving millions to her friends, is she not? i mean, are we looking at the same information here?

but giving someone a $58m bonus (severence... lol) for a year of work is not a consequence of 'sharp' vs. 'not sharp', it's a consequence of simply not giving a shit about the money because half (or more) of your motivation is probably pilfering the company coffers for you and your cronies to begin with.

none of the yahoo story seems like incompetence to me. it seems like a straight up robbery. everyone calling her incompetent, or dumb, or whatever, has got 'naive' stamped across their forehead.

Well yeah, the answer is probably somewhere in between -- it's partly that she gets paid no matter what the deal is, and part naivete. Even if you are purely self-interested, then you will be motivated to:

1) develop a reputation for being a good negotiator, because that will help in future negotiations

2) actually build the company rather than raid it, because that will lead to better jobs down the road / better reputation.

I mean, she's not a finance type. Those guys do just raid and rob. Someone who wants to raid companies doesn't join a 10 person startup out of college, toiling away to acquire users.

> Someone who wants to raid companies doesn't join a 10 person startup out of college.

haha. dude. she's in her 40s and worth $500M (and growing) now. she is obviously pilfering yahoo and enriching herself and her friends. things change. people change. sometimes for the worse.

ironically, the corporate raider types are the ones who are currently trying to stop her, because she is killing the golden goose that has lined their pockets for decades.

to be quite honest i wouldn't be surprised if her loyalties still lay with the google cabal. you know what one great way to get rid of a major competitor is? become ceo and sack the joint. genius!

> become ceo and sack the joint.

I believe that is now known as "Elop-ing."

Or "pulling a Trump".

As someone already pointed out, she filled her bank and made her friends rich as well. It will be enough for her, her family, her children, grandchildren and all their friends.

It is not like she'll need to quickly look for a job and will be ruined if nobody hires her afterwards. She could retire any second and do nothing for the rest of her life, which she might as well do.

This discussion is almost too silly to have, but: She was the 20th or so Google employee. All that was true before she took the job at Yahoo. So if that was really her goal then there was no reason to even take the job. Some people actually like doing things.

Do you really think her plan all along was to steal from Yahoo? She was already incredibly rich, and no amount of pilfering was going to get her onto the billionaire list.

Quite opposite, in fact. The only way for her to get to the billionaire club would be if Yahoo was a wildly successfully turnaround. She clearly wanted to be Big Boss pretty bad, though.

> Do you really think her plan all along was to steal from Yahoo?

uh, does it matter? that's how it ended up.

agreed. Jobs' negotiation skills are "legendary" in the valley.

I think she is what Game of Thrones would call a "summer child". Her entire career prior to Yahoo had been spent at a company where a) they had only experienced an upward trajectory, and b) she was never exposed to the real business side of things (as you pointed out).

Basically, she negotiated every deal, acquisition, etc. as if the absolute best case was a certainty, because that was the limit of her experience. Now she knows that cargo-culting free food and fancy parties does not a successful business make.

> Basically, she negotiated every deal, acquisition, etc. as if the absolute best case was a certainty

Sometimes the situation calls for rolling the dice and hoping for the best. Before we call her business acumen in to question, we should know the incentives set forth to her by the board, and what agenda they may have set for her. Incentive wise, stock options often push executives towards riskier plans of action.

And agenda wise, it may be that she's been brought in to sell to a competitor like Google. Outbidding Google for the FF contract seems like a reasonable plan to buy more things Google is interested in. Recruiting executives from Google to help negotiate a buyout might also be a good plan if they bring enough information with them.

I seem to remember that many companies handle compensation on the CXO level with a committee of members of the board. It seems they dropped the ball as much as she may have, or she did suddenly show those supposedly lacking skills when dealing with her superiors.

Coming from the Middle East, it's obvious to me that Americans overestimate the difficulty and importance of negotiation, and this is because they never negotiate outside of a business context. The responsibility of the negotiator is to evaluate the available offers and be able to come up with constructive counteroffers. The only way you get screwed is if you act rashly or irrationally. In other words, you're saying that CEOs get astronomical compensation because they can be relied on not to act in gross negligence.

How does a middle eastern background help here?

In some places you can negotiate for a sack of rice. A television. A taxi ride. A dress.

When you live in such places you become used to the ebb and flow of negotiating, the give and take.

If the only time you negotiate anything, it's worth millions, you might not be well practiced.

You've explained practice as a component, but not what that yields.

What are the lessons of haggling, then?

If you haggle on an everyday basis, you eventually start trying out different strategies, from lowballing to starting with a high offer to anchoring.

Dont know how effectivr that would be in an 8 figure deal, but I reckon the lessons are somewhat applicable

Jobs's skill in negotiating was such that there was a standing order at Sun that no contract could be finalized with Apple, While Steve Jobs physically present in the room. The objective was to allow his reality distortion field to dissipate, such that a more dispassionate assessment could be made. I'm wondering if that suggests that Steve didn't have a particularly good negotiating strategy, but simply a force of emotive presence. I guess that is actually a form of negotiating, but probably one that is difficult to teach others.

> Jobs's skill in negotiating was such that there was a standing order at Sun that no contract could be finalized with Apple, While Steve Jobs physically present in the room.

wow. if true, that's the strongest evidence i've ever heard in favor of jobs' negotiating skills.

have you got a source for that? not that i don't believe it, i'd just like to read more about it, in context.

Here is one: https://books.google.com/books?id=m_B9vFa0H1AC&pg=PT34&lpg=P...

i just bought it. only four bucks for the kindle edition. here's a link, for anybody else who might be interested.

https://www.amazon.com/Steve-Jobs-1955-2011-Bloomberg-Busine...

Thanks, fantastic cite.

This makes me wonder what effect will having a celebrity CEO have on the negotiating table.

Would you be as good at negotiating if you're dealing with Leonardo DiCaprio? Or would the 'halo effect' be too overwhelming?

Chief Operating Officer is rather high up. 108m for 15 months is not actually that crazy depending on their role and risks.

PS: I know it seems crazy but CXX jobs other than CEO can really make ~85million per year. Often because they could be the CEO of another company.

Presumably you should be generating that much of value. It's crazy because I'm pretty sure a single person at Yahoo isn't generating $108m worth of value.

That is certainly crazy compensation for someone who was fired after 15 months. It was so crazy that shareholders actually sued the company for authorizing it.

> PS: I know it seems crazy but CXX jobs other than CEO can really make ~85million per year. Often because they could be the CEO of another company.

$85m a year would be top 5 CEO and that top 5 typically changes based on who got a big grant that year. It's certainly not typical compensation. In fact he was the highest paid COO in the country.

Depends on how you calculate it. CEO's want to minimize taxed income so they play a lot of accounting games. The ever popular 1$ salary is often very expensive on net.

I think everyone here is discussing total compensation.

Does that include use of a company jet and a personal assistant for non work items? However, I am more thinking of stock options. Jobs for example was given options that would have been worth 10 billion with a B when they vested. Sure short term options have a market price but options you can exercise in 10 years are hard to come by.

Damn, I would have done his job for ... well, let's say just $25M and only another $10 or so in severance ... It would have been a bargain!

I think she's trying to buy more time with this decision. Think about it, she's not stupid, nor blind. She knows what she's doing and she screwed up with Starboard. She's trying to buy additional time with a rough contract like this. Who will want to buy Yahoo when they are on the hook for $1 Billion? No one, that's who. It's wise but...it might be too little too late.

I don't know a ton on how to take a company private, especially after she's in a position she's in now but...if I were her, I'd leverage everything I had and take Yahoo private. Just like Dell did and turn the company around without all the public pressure.

Wow, Marissa Mayer.

That she agreed on Mozilla's change-of-control clause—so Mozilla can just walk away in case of a M&A deal and still get $1B—is simply disconcerting.

I do not have any insights and why she gave in on this point but I know that one of her main skills and responsibilities in her position is to negotiate well and do proper deals. She had to negotiate this change-of-control clause away or to let Mozilla sacrifice on the payout if they walk away. Moreover and considering that Mozilla doesn't have that many financial potential search partner options (Google has been with Chrome rather a competitor for many years now), this should have been possible, I'd assume with my limited knowledge.

I do not like if random forum guys like me are bashing CEOs, I know that this is the toughest job and I don't want to pass judgement on decisions I don't have insights on. But this is really, really weird and Marissa should have known that this bummer will pop up at the next due diligence and create distrust ('are they more time bombs at Yahoo? lets dig deeper') or just reduce the deal value or just increase deal complexity later.

Maybe she didn't think about M&A at that time and she was rather in a fire-and-forget mode but a CEO is always supposed to think about what happens if new shareholders join, about the next due diligence, heck just about the future of the company and eventually, to keep the company always in a proper and clean state and not leaving time bombs for potential successors.

> That she agreed on Mozilla's change-of-control clause—so Mozilla can just walk away in case of a M&A deal and still get $1B—is simply disconcerting.

If you assume the board offered her the position in with the expectation of negotiating a purchase by Google, then the M&A deal costs Mozilla very little -- Google was the previous contract holder, and remains so in many markets.

A clause like this could actually make sense for negotiation. Consider the following two hypothetical deals from Yahoo's perspective:

- $375M/year to Mozilla, with the clause to keep paying for 3 more years if Mozilla doesn't want to do business with Yahoo's new owner.

- $450M/year to Mozilla, with no such clause.

The former seems like the smarter deal for Yahoo to make if they want to focus on being successful rather than on being bought. It only sounds problematic if you start focusing primarily on getting acquired.

I'm not sure why they'd reject the deal if Aol buys them, given that the Mozilla foundation owes its existence to Aol.

AOL doesn't seem any worse a choice than Yahoo, no; on the other hand, I can think of other companies they might want to reject doing business with, and they probably could too. Hence that clause had enough value to make it a point of negotiation, and it cost Yahoo less to offer that contingency clause than to offer more money.

> Mayer has handed out excessively generous deals to many top execs, such as its chief revenue officer Lisa Utzschneider.

Right. Wonder if she honestly thought this would have fixed anything or she knew the train is headed to the final station and just wanted to be surrounded by a group she picked and the only way to get them to do that was was to buy her friends.

It is always fascinating to watch a company like that, and wonder if executives still privately believe it is a salvageable situation or they just put up a face and ride the gravy train with some nice golden parachute contract clauses. They probably have to use euphemisms and hints with the board and other top level people to convey their suspicion of viability, as they don't want to be negative and just too pessimistic as it makes them look like liars in press releases, but they can't also be completely oblivious either, that looks bad as well.

Looks like everyone gets to milk the Yahoo cash cow - board, investors, business partners, execs, friends of execs and management except engineers. Yahoo still pays engineers terribly hoping to compete with the likes of Google and Facebook. Why don't they just give up at this point and expedite selling. Why bother with all the posturing.

My information on this is secondhand/word-of-mouth but it is my understanding that at least some engineers at Yahoo have in fact been very handsomely compensated.

A friend of mine involved in offer negotiation at another company who was at one point (this was perhaps 5-6 years ago) trying to poach some high level Yahoo infrastructure folks told me that a lot of senior Yahoo engineers had straight cash compensation packages that rivaled what Google or Facebook would pay in cash + RSUs.

Presumably these were folks involved in directly maintaining core revenue generating ad systems who would be very expensive and painful to lose / replace.

They may be exceptions. I can't imagine engineers at Yahoo are pulling in $400k+. Only engineers who got in through acquisitions have packages comparable to what engineers at Google and Facebook make. Majority of Yahoo engineers make 30-50% less than people of comparable levels at Goog/Fb. Check http://h1bdata.info/

I do not think they are working for yahoo out of loyalty.

I think part of this is how much search traffic firefox can swing on the Internet. Remember that Google and Yahoo (and maybe Microsoft's Bing) were probably courting Mozilla for that contract.

In the context of that negotiation I could certainly see it coming up that Yahoo! might be acquired and Mozilla wanted some assurances if they went with Yahoo!. So neither Bing nor Google has that concern, so Yahoo! is the only one exposed.

Honest question: what in the world does Mozilla do currently with $375 million a year?

Pay about 1000 employees and host a ton of infrastructure for a bunch of open source projects (including of course Firefox, but also things like Rust, Valgrind, Opus, etc.).

And hopefully saves some part of that for rainy days when search deals will no longer be this profitable.

I think the Firefox OS project was just that, but it didn't work out.

I am not talking just about projects, but about cash in the bank. Once the funding stops you should have enough funds to bridge the gap until you find the next big project. Hopefully as great as Firefox and Rust are. Kudos to Mozilla!

Yes, in principle they should be able to put away enough to operate in perpetuity (albeit on a small budget). It would be interesting to know whether it's happening, presumably the finances are public so it shouldn't be too difficult to to find out.

https://static.mozilla.com/moco/en-US/pdf/Mozilla_Audited_Fi...

90M USD cash, 140M USD investments in 2014.

Yeah, the Finance Report does have a 2 year delay, though, so some guesswork is still necessary...

Why should they wait and not try to find the next big project right now?

and also influence policies that protect the Internet or support hundreds of local communities that teach the web worldwide [1]

[1] https://www.mozilla.org/en-US/contact/communities/

2.6 million per employee? And infrastructure hosting, especially just for bugtracker / source repo / CI cannot be that expensive.

At that, what are the employees doing? Rust is fantastic and important, but Opus has been pretty done for years, Daala is still DOA, isn't Xiph an independent organization?

I think you made a rather basic maths error, it's 375k per employee.

Firefox still gets an enormous amount of development effort. I think people don't notice because Chrome likely just gets an order of magnitude more.

Xiph is independent but I believe Mozilla employs all the core developers. They're currently working on doing for video codecs what Opus did for audio.

I actually think Firefox is currently seeing more development than Chrome and it's just not as noticeable, because a lot of that development goes into unearthing some of the technical debt that they have (Electrolysis for multi-processor integration, WebExtensions for a proper, stable add-on API), or is an investment into the far-reaching future (Servo).

That being said, I'm not actually that well informed about Chrome's development, so it could also be that I've simply missed some of their development plans...

Keeps the Web a little more free, I'd say.

maintaining their byzantine build system for firefox and related projects. it's pretty nuts.

I don't know, but they should really step up their marketing game.

Have you seen their SF office? That's probably a cool million/year alone if not more.

Pays (at least one person) over a million dollars a year? https://en.wikipedia.org/wiki/Mitchell_Baker#Mozilla_Foundat...

Would you prefer her to work somewhere else for 3x that?

A. Where?

B. Maybe?

As of 2014: $212 million on software development (presumably mostly salaries?), another ~$100 million on marketing/administration/etc. They appear to put away from $10 to $70 million per year from 2010-2014, and had about $140 million in investment assets (again, 2014).

https://www.mozilla.org/en-US/foundation/documents/

But that's the foundation, not to be confused with Mozilla Corp.

I've honestly never really understood how the two are actually related and how Mozilla can be both a nonprofit and a corporation. Talking to some Mozilla employees in IRC and in person, they never seem to think too hard about this either.

Yeah, I don't quite understand that either. What I know is that the for-profit is a subsidiary of the non-profit, and they only have it, because non-profits have some legal restrictions which they couldn't quite work with. I think, that's for example how much cash they are allowed to have on the side.

And while I would like to understand it better for curiosity's sake, I'm personally okay with it being the way it is, on the basis that people who understand this stuff better than me don't seem to complain about it.

Like, seriously, journalists just love to report how evil the innocent-thought Mozilla is, and often even drift off into pure nonsense to do so. So, if there really was anything to be said about their for-profit side, I figure, I would have heard of it by now.

Corp was established to accept business contracts and pay taxes under business tax laws, rather than non-profit tax laws (the famous anecdote of IRS at one point in the early days tried to convince Mozilla don't worry about paying as non-profit). But as Mozilla continued to grow, they hired more people and formed a whole corporation where people are paid to work on Mozilla's core projects like FireFox and keeping Mozilla secured. The confusion often occurs at figuring out the outreach programs. Foundation does some outreach, but Mozilla Corps as a whole also do outreach program. For example, I think people who manage ambassadors are Mozilla Corp employees, but correct me if I am wrong. Furthermore, there are developers hired specifically to work on Foundation applications last. My info could be wrong by now...

> The Foundation has a wholly-owned for-profit subsidiary, Mozilla Corporation (the Corporation). The Corporation serves the non-profit, public benefit goals of its parent and the vast Mozilla community.

...

> The consolidated financial statements include the accounts of the Foundation and its wholly-owned subsidiary, the Corporation (collectively “Mozilla”). All significant intercompany accounts and transactions have been eliminated.

IIUC, receiving revenue would be more complicated if the transactions were undertaken directly with the not-for-profit foundation. Certainly many "non-profits" do receive transactional revenue, i.e. hospitals, but in that case they often have a number of subsidiaries -- for example one subsidiary actually employs the physicians, another signs funding contracts with the NSF/NIH and distributes grant revenue, a holding company owns the buildings, etc. Accounting is complicated (perhaps more accurately: "the tax code is complicated").

Well, Firefox's architecture is currently being completely thrown over for Electrolysis, they are heavily working on their implementation of WebExtensions, and Servo+Rust are starting to take off at the moment, too.

Other than that, Thunderbird could certainly do with a bit of cash and Firefox OS is also currently being rolled out on a few TV sets, so could certainly use some financing to fix up initial bugs.

And if they really have nothing else to finance, they often also just redistribute money to other smaller open-source projects...

Apparently Thunderbird could since didn't they split it into its "own separate" project recently (meaning, stop funding it)? ...

> Honest question: what in the world does Mozilla do currently with $375 million a year?

Halfheartedly trying to catch up with Chrome.

Interesting and great, but ultimately Yak shaving exercises like supporting Rust.

With a deal like that what incentive does Mozilla have to not walk away if someone buys Yahoo? They'll get $1.1 billion dollars for free.

Excellent question.

If they buyer is interested in maintaining a search presence, they'll almost have to negotiate an extension right away?

The buyer will surely negotiate with Mozilla before they buy Yahoo and get a commitment from them (which might be worth extra $). That, or they will see it as sunk cost.

But Mozilla might have a bit of PR challenge on its hands if they walked away... :-)

challenge?

they would finally be free...

Free to do what, though?

Spend $1bn

Yea, seems by far most likely that whatever buyer emerges will negotiate directly with Mozilla to sort this out prior to the actual sale

Meh. I would expect that if Mozilla did not put in reasonable effort at "making things work" with the new owners the new owners would sue. Not sure on what grounds... but with a billion on the line spending a few tens of millions fighting a longshot is likely worth it.

It means having to court a new search engine provider for a revenue stream after those three years are up. Such a deal may not be as favorable for them as an agreement to stick around partnered with yahoo.

After leaving Google though, what else is there for Mozilla (after Yahoo)? I seems apparent that these search deals are no longer a viable source of income for the company, future funding might become problematic. I love Mozilla, they have smart folks there so I'm sure they will work it out.

Bing?

But yeah lack of competition in that space is an issue. Search is still hugely important.

Duckduckgo? Don't know how much cash they have to throw around, though. Certainly not as much as Yahoo or Google, but maybe it'd be enough? I hope so, anyways.

I don't know anything about the inner workings of DDG, but I'd have to assume $1m/yr would be a very large outgoing for them, never mind the $300m/yr of Google or $375m/yr of Yahoo.

I don't think it's anywhere near; DDG probably makes somewhere in the single digits millions per year, while Mozilla earns hundreds of millions from these deals.

As a comparison, DDG is serving about 10M searches/day. Google serves that amount every 5 seconds.

Is there any reason they can't just go back to Google? I thought they only switched to Yahoo because the contract was up and Yahoo offered a deal they couldn't walk away from.

No, they definitely could go back to Google. Problematic is just that while Google will probably pay, there's now essentially a third of the competition for that spot gone, so Google will have to pay significantly less.

Never mind also that Chrome has made leaps and bounds. I don't know the details of the history of Mozilla and Google's partnership, but featuring prominently in a major browser was probably a lot more valuable to Google back when Google didn't have a browser of its own.

It is also a bit of a conflict of interest on Google's part to support Mozilla. They have a competing app ecosystem, and while supporting the Firefox Marketplace and Chrome App Store are actually relatively simple for HTML5 apps, they probably would rather not have the competition at all.

The only conflict of interest left is the browser itself. A $300M deal for Google to keep a competitor's searches their way is almost too cheap.

Yandex? Baidu? (Somewhat serious here)

Yandex have market cap less than $7B and they simply don't have money to expand worldwide.

The point of a deal like that is to reassure Mozilla that Yahoo is not going to sell, at least not during the term of the agreement. It provides the party on the other end with a sort of insurance policy -- "we can show you how serious we are about not doing this thing you're afraid of by requiring ourselves to feel some serious pain if we ever actually do it."

This insurance policy is both literal -- if Yahoo does sell, whatever hardship that causes Mozilla will be eased considerably by all that cash -- and figurative -- Yahoo's willingness to offer such a payout should a sale happen signals to Mozilla that Yahoo's leadership is probably not actively pursuing a sale. (Or at least wasn't, at the time the deal was made.) The theory on the latter part being that no rational person would make that offer if they thought a sale was in any way likely.

The buyer gives them more money.

"Here's a payment and an increase in share worth $1.3B. If that's not acceptable, we'll publicly announce this afternoon that we're not renewing our deal."

>"There is a lot of hair hidden at the company..."

Is this a normal phrase in the enterprise world? I don't think I've ever heard it before.

I haven't heard it in this context, but in the No Hair Theorem, the eponymous "hair" refers to "other information," so I think it makes sense. There's lots of hidden "hair," or information, at the company?

https://en.wikipedia.org/wiki/No-hair_theorem

It's not a reference to that theorem; it refers to "hairy," used to describe something complicated or ugly.

It's a common term in the context of complex deals and sales - "that deal has a lot of hair on it" means it's complicated, ugly, and might not work out the way everyone hopes. It's shorthand for a deal that needs extra attention...

With $1B from a breakup it seems the dominant strategy for Mozilla could be to develop it's own search engine.

Pretty much, traffic is the hard part and they've got it

Traffic is the hard part? Have you tried search engines other than Google? They're all terrible.

Rephrasing: getting people to switch from Google (traffic) is the hard part, but Mozilla has the means to influence that (through Firefox's default search engine) more than, say, DuckDuckGo.

Assuming they walk away from Yahoo, though, whom would they select as their next US search partner? Return to Google?

With a billion in their pockets, it might not matter so much to them after all.

They could try new revenue streams such as entering the phone market with a fully open OS based on Gecko.

They already tried the phone market with FirefoxOS — it got canned shortly after its release, sadly (https://techcrunch.com/2015/12/08/mozilla-will-stop-developi...)

Whoosh!

Ok... I admit that made me chuckle out loud.

They probably couldn't make a better offer than Google in monetary terms, but DuckDuckGo seems much more philosophically aligned with Mozilla.

They need to make a deal with someone that monetizes search at a very high level. DuckDuckGo uses Yahoo! to monetize its search engine.

Which in turns get from Bing. So really, there isn't a better choice for Mozilla. I honestly don't have a preference on Google vs others. As long as there is a way to disable tracking as a preference, done deal. I am not too scared of Google's tracking, but I understand others are.

I could see that, but at the same time Mozilla and Google already work together quite often when it comes to implementing and standardizing new browser features. It's been my understanding that their relationship is more chummy than it is competitive. Though maybe this is different at the engineer level than "corporate".

Same goes for the IE team: http://thenextweb.com/insider/2012/10/27/mozilla-sends-the-i...

It's important not to conflate "Google that develops a web browser" with "Google the advertising and search company". The same applies to the parts of Mozilla that would interact with these parts of Google.

For both Google and Mozilla, the goals of these two (or more!) groups of decision makers will not necessarily align at all times. Ideally, whatever may be going on at the ad/search/business level shouldn't impact collaboration on web standards and implementation.

I think you're probably correct. Both Goog and Mozilla are large companies with many teams, and I may be putting undue emphasis on the specific interactions I've seen between their browser teams. Thanks for your input.

I suspect they'd enter talks with Bing.

With $1 billion in cash guaranteed, they could even try DuckDuckGo for a couple years and see if DuckDuckGo could grow enough to support them.

Details are hard to find, but I've heard that the price tag for the Yahoo deal was high due to a bidding war with Bing.

Yeah, iirc, that was the case as well which is why I'd assume Bing.

Details are in the article. Yahoo needed to overcome Google's guaranteed payments of $300M/year, thus the $375M/year amount and favorable exit clause in the event of a Yahoo acquisition.

Wonder if you could build a competitive search engine with $1b?

Could they go to Yandex or Baidu as a U.S. provider? I'm curious how that would work out...

Firefox has a great feature where after typing a query a menu of search engines appears immediately below. Very convenient and allows me to mix up my searches across the search engines very nicely and easily. Yahoo got bilked by Mozilla..and probably the best thing Yahoo ever accomplished.

Could that be her attempt at a poison pill? How the *7"( did the board approve that deal?

Everyone here is decrying the decision-making process of the CEO - which obviously is already in question - but I'm left pondering a different perspective.

Yahoo has cash. Sure, they're not Apple in terms of liquidity, but they're not a startup either. Mozilla is - and I may need to solicit your agreement here - a Good Thing for the world.

I'm not convinced that being a Bil in the hole to Mozilla is so bad.

By contrast, there are several companies that are, according to some legal theories that may yet prove persuasive in court, in debt this much or more to governments by dint of their offshore accounting practices.

At which company do you prefer to be a shareholder? One which owes Mozilla a billion, or one which very well might owe an armed, hotheaded, unpredictable entity several billion?

Ultimately, if I'm a shareholder (and I'm not), I can forgive a billion dollars to mozilla more easily than the other Yahoo mis-steps.

What companies are you talking about?

No specific companies in particular; I was thinking of it more like a spectrum, from Enron / Worldcom to, say Dreamworks (implicated in Panama Papers but probably within the letter of the law).

I'm just saying: being indebted to a (reasonably awesome) outfit like Mozilla is less upsetting to me than being in hot (or even warm) water with the IRS.

Microsoft offered $44.6B for Yahoo, was turned down and dodged a bullet.

Maybe with all that money they can buy DuckDuckGo and make it the default search engine? It's a risky move though. If DuckDuckGo doesn't workout, they lose the option of switching to another search partner.

I hope Yahoo won't abandon search. We need more competition.

Yahoo search is a thin layer on top of Bing these days. Yahoo only ran it's own search (crawling etc) about 2003-2009, all other years it was outsourced (to Inktomi, Overture, Google, Bing) http://news.softpedia.com/news/Yahoo-Sells-Search-Business-t... (2009)

So was Marissa Mayer trying to return Yahoo to do real search again?

I'd say after the Microsoft deal there was no turning back. Too many people, machines, IP moved. Overture bought Inktomi, Altavista, alltheweb search engines. Yahoo bought overture for 4 billion. That was 100s of engineers. Starting again would be an (in my opinion) impossible hiring task, 10miles away from the Google Campus who tend to make excellent counter offers. And at web-scale you cannot be great unless you index, well, almost all the web.

I could understand a break clause based on change of ownership, but the fact that Yahoo would still be obligated to pay is nuts.

Would Mozilla ever want to exercise this clause? I don't know - I wonder how they would react if Verizon/AOL ends up buying them, given that Netscape was bought by them early on.

Wow! If they received that chunk of change all at once, it could completely change the company. Imagine an endowment of that size, with the investment income being used for Mozilla's maintenance and initiatives.

They apparently already receive 1/3rd of that each year, though, so my guess is it'd just be more of the same, as it were, though at a greater pace.

Where's this money go? I thought many developers were doing it for free. Yet they can't support thunderbird or persona

I thought yahoo japan was a completely separate entity from yahoo global, why does the article mention softbank at all?

Is there a reason why Mozilla shouldn't decline and take the money 100% of the time?

It is very easy for the user to change the default Search Engine for the browser (to say Google or DuckDuckGo). I would think most FireFox users do this... So, $375M/year seems like a very high price for Yahoo to be paying. Is this just a price war between the few search giants trying to keep competitors priced out of the market?

>I would think most FireFox users do this

My inclination is that outside of the hackernews community and those like it, most FireFox users have no idea what you're even describing.

Exactly. I've seen people young and old have Yahoo as their default search on their PC or phone, and they usually don't even realize it's not "Google" results.

My in-laws were still using browser toolbars. They thought that toolbars were how you used the web and only used websites that had them.

The idea of changing the search defaults is beyond a large segment of internet users.

I think the assumption is that you have to be at least technically literate enough to know that you want Firefox and purposefully download it. And if you're that kind of person, you probably also know the difference between Yahoo and Google and probably actually care.

Firefox is the "default" browser folks install in many countries.

That's right. Especially in Germany, that is notoriously suspicious of Google, Firefox is the default browser.

The Yahoo deal is US only though...

That's a good point.

I guess a lot of people care about their browser being Firefox more than they care about the search engine? I once used Yahoo for a few months (also Bing and DDT). It's pretty good IMO. Not everyone would switch to Google immediately.

Well, for good reason.

Every time someone started tracking people and do bulk data collection in the past century, it ended up with people being gassed, put into siberian camps, etc.

Thanks, but no thanks.

How does that even happen? I would guess for most non-technical users the default would be IE before they switch to Chrome.

That's why I put "default" in quotes. I meant the browser you choose to download when you get a new laptop. Not everyone thinks Chrome is the best browser out there.

I don't know how common my particular situation is but at the college I teach at the computers in the classroom and labs reset every time you restart or log in. That means every time i'm in class and want to do a quick search on something I end up searching on yahoo because it has reset to that.

Then I grumble at how terrible yahoo search results are and go to google and search for it again...

Unfortunately also the case for me. Whenever I use somebody else's computer or setup a new one, it's search for something then 'what the heck, what is this?" switch back to google, and think "I wonder if this will alienate some FF users" (since the default search results are less useful). So possibly long term loss by FF...

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