Yahoo's Insanely Bad Deal to Pay Mozilla $375 Million a Year for Nothing Is Headed to Court
In its 23 years of existence,
Earlier this year, Verizon bought Yahoo and
it with AOL into a new company called
But that's exactly what happened in
. Mozilla launched its new
browser and changed the default search engine to Google. We don't know how much Google is paying Mozilla for pride of place in its browser, but in 2014, Google shelled out
to do so. And based on the
filed by Oath on December 1st, it appears Mozilla intends to collect the rest of that $750 million from Yahoo over the next two years. Oath's suit claims Mozilla improperly terminated its agreement with Yahoo. Mozilla quickly filed its own
against Oath, claiming a breach of contract. And the war of words has begun.
Well, technically, the most important words in the documents for each filing are redacted. We've reached out to both companies for comment and will update this post when we receive a reply. Oath has yet to make a public statement-read into that what you will. Mozilla did publish a lengthy comment on its blog with "as much information as we can in the spirit of our values of openness and transparency." The statement reads in part:
We recently exercised our contractual right to terminate our agreement with Yahoo based on a number of factors including doing what's best for our brand, our effort to provide quality web search, and the broader content experience for our users.
Immediately following Yahoo's acquisition, we undertook a lengthy, multi-month process to seek assurances from Yahoo and its acquirers with respect to those factors. When it became clear that continuing to use Yahoo as our default search provider would have a negative impact on all of the above, we exercised our contractual right to terminate the agreement and entered into an agreement with another provider.
The terms of our contract are clear and our post-termination rights under our contract with Yahoo should continue to be enforced.
An important detail in that statement is the part about "doing what's best for our brand." It's unclear what the exact language was that supposedly allows Mozilla to walk away while still collecting payments, but the Firefox maker asserted that it has carried out a review process that included several factors.
Damage to its brand could be a key defense. Mozilla's status as a non-profit good guy that does what's best for users was tainted when it switched to Yahoo. Even though a user can change the search engine settings, many people just leave the default. And virtually no one believes Yahoo is superior to Google. Throw in the bad optics of being associated with an evil telecom giant like Verizon, and it would seem Mozilla has a pretty good case for claiming its reputation would be harmed by continuing the deal.
Even for a huge company like Verizon, $750 million is a lot of money. It's unsurprising that Oath would fight this tooth-and-nail. But for Mozilla, that kind of money on top of its standard revenue could be a game changer. If the terms of the contract are as cleanly in Mozilla's favor as they appear to be, Oath is probably hoping to come to some sort of settlement. If Mozilla wants to restore its reputation as the little guy that takes on powerful corporations, it should wring every last dime out of Oath that it can.