It could be the case that having Google as the default in Firefox will pay for itself through advertising.
Of course it will, easily
(Seriously - people should understand that Google's business is search (and advertising), and they want to commoditize its complements - browsers and phones with browsers on them).
Google does roughly 1 billion searches a day[1], and makes conservatively $0.08 per search[2]. Firefox has roughly 25% market share.
$0.08 * 1,000,000,000 * 0.25 = $20,000,000 per day.
Yearly revenue = $7,300,000,000 = $7.3 billion
Reasonableness check: Google's yearly revenue = $29.3 billion. $29/4 (ie, Firefox at 25%) = $7.25 billion, which seems roughly right.
First, I think it's only fair to attribute ~1/2 of their revenue to search. You've got to give a lot to web ads, gmail ads, etc.
Second, I'm not sure it's quite fair to give FF 25% of their total search. It may be 25% of their desktop search, but mobile search is getting bigger and bigger. I'd say 25% is at best an upper bound.
Third, I think a large number of FF users would use Google search even if that required changing the default. I'd guess that it's on the order of 50%. The value of the deal is only the value of the searches they gain.
That said, even if you divide by 10, spending $300M to making $700M and get goodwill with developers is a great deal.
The trick is figuring out how many users would use the Firefox search box vs would just enter google.com into the URL the old fashioned way (or would change the search box back to Google). I have no doubt Google is measuring that number and used it to guide their bidding.
My hunch is that Google is only breaking close to even with this deal (i.e. making $300M for paying $300M) and bid high just to keep too many people from trying Bing.
Plus, Google tends to act at least a little altruistic when it comes to the web [1] and may mind less being generous to Firefox.
Hunches aren't very useful without hard data. More practically, defensible logic is good practice on HN, because people try and build real businesses based on what they read here.
A month ago many people thought that Mozilla was going to be in financial trouble because "they couldn't re-sign the Google deal". That seemed to be based on little more than a hunch, which data showed that was clearly wrong (which I pointed out at the time).
Note that a donation to Wikipedia is very different (for tax purposes) to a business arrangement with Mozilla.
(I do agree that Google is good to the web though)
Well, it may well be 50% off, or even 80% off, but it does give you an order of magnitude. 100% correct numbers aren't really material: this is a really good deal for Google.
You are right that not all their revenue comes from search, and I should have thought of that. 66% of their revenue is from Google websites[1]. They don't break that down, but I'd suspect 90% is search (Youtube is probably a reasonable contributor but search ads are very expensive, and Google gets pretty good fill rates on them).
Mobile search is growing quickly, but they still "only" made $2.5 billion over the last 12 months from it (and also I presume this deal covers the Firefox mobile browser, which might not be popular now but Mozilla has been working hard on).
But yes, 25% market share is probably an upper bound.
I think a large number of FF users would use Google search even if that required changing the default.
It is possible that Mozilla could do a deal to change the search engine used on existing installs. I would hope they wouldn't do that, but it is something another search engine would probably have wanted to explore.
Also, about:home is the default home page on Firefox, and currently defaults to a Mozilla branded Google search page. That could be changed on existing browsers for sure.
All up, I agree that the $7.2 billion number is probably high, but it seems likely it would be more than $1-2 billion.
If this was such a great money making deal for Google why did Microsoft not bid higher? They have similar monetization strategy for Bing and would have similar ROI for gaining searches. Plus, MS is flush with cash and have a great desire to compete with Google.
Microsoft would love to, but they can't afford it. Bing is already losing huge amounts of money, and doing yet another deal for market share isn't going to be popular within MS unless it is profitable.
While MS could make money on a Firefox deal, they can't nearly make as much as Google can simply because Microsoft can't monetize the users as well as Google can.
You can see this on the demand side - many people try out new keyword advertising campaigns on Bing because they are so much cheaper than on Google.
Once they are confident they have a good set of keywords, they switch straight to Google (and at best keep the Bing campaign going). They'll pay more at Google, but get so much more traffic it is worth it.
Do you think Bing could be monetized at a similar rate to Google if their market shares were similar? Or are there other things Google are doing (e.g. better add targeting) that is making them more money per search?
Hard to know. Google does have better targeting at the moment.
Back when Yahoo was a player they built a platform that was supposed to match Google (Yahoo Panama[1]) that was their big hope of matching Google. It didn't succeed.
Also, Firefox users are far more likely to be using AdBlock than Chrome or Internet Explorer users. (yes, Chrome too. Ever since Google featured it on their homepage for a while, average Joes have become fairly likely to be using it)
> I think a large number of FF users would use Google search even if that required changing the default. I'd guess that it's on the order of 50%.
I think you're overestimating the degree to which the average user is willing to make any changes to any default functionality. Remember, these are the people who google "google".
Of course it will, easily
(Seriously - people should understand that Google's business is search (and advertising), and they want to commoditize its complements - browsers and phones with browsers on them).
Google does roughly 1 billion searches a day[1], and makes conservatively $0.08 per search[2]. Firefox has roughly 25% market share.
$0.08 * 1,000,000,000 * 0.25 = $20,000,000 per day.
Yearly revenue = $7,300,000,000 = $7.3 billion
Reasonableness check: Google's yearly revenue = $29.3 billion. $29/4 (ie, Firefox at 25%) = $7.25 billion, which seems roughly right.
[1] http://www.jeffbullas.com/2011/05/16/50-amazing-facts-and-fi...
[2] http://www.quora.com/How-much-revenue-does-Google-make-per-q...