Today, the (for-now) non-profit Mozilla Foundation released its financial statements for 2007 (embedded below). Revenues for the organization behind the open-source Firefox browser were up 12 percent to $75 million, with search-related royalties from Google accounting for 88 percent of the total, or $66 million. (Another $2 million or so came from other search engines). Those revenues come from Mozilla’s portion of the search advertising revenues generated by the default Google search box in the Firefox browser.
Google’s overall percentage of Mozilla’s revenues is even bigger than it was in 2006, when it accounted for 85 percent. And that proportion may continue to grow over the next three years, as Google just extended its contract with Mozilla.
But buried in the financial statements is the fact that the Mozilla Foundation is being audited by the IRS and its non-profit status is in question:
On the audit of the Foundation there has not been any formal notification of issues. There has been inquiry regarding its tax exemption. Management believes that it is conducting its operations in accordance with its original application for exemption and for which it received the advance ruling as a public benefit corporation.
The Foundation has an advance ruling as a public benefit corporation. The ruling period ended December 31, 2007. It submitted its public support test documentation as required by the advance ruling. While the Foundation did not automatically qualify as a public charity with public support at 33% of total support, it believes that it qualifies as a public charity under the facts and circumstances test with public support over 10%.
Mozilla argues that the search dollars should be treated as royalties, and thus not count as revenues under the tax code. There is little precedent for a non-profit generating so much of its “support” from what is, in effect, a commercial agreement. If the IRS rules against it, the Mozilla Foundation would lose its tax-exempt status. It would then be classified as a private foundation and have to pay an estimated $100,000 in excise tax for 2007 alone.
That’s peanuts, and wouldn’t change much at Mozilla—except for the fact that it is pretending to be a non-profit foundation when everyone knows it is a charitable arm of Google. What we still don’t know is how Google accounts for the $66 million it paid to Mozilla last year. Was it a charitable contribution, or lumped in with its regular traffic acquisition costs?
And here’s another conundrum: Why does it take the Mozilla Foundation more than year to issue its financial statements from 2007? After all, it is almost 2009.
mf-2007-audited-financial-statement – Get more Free Tax Forms
I also wondered how the Chrome stuff would impact the Google/Mozilla relationship, but apparently not at all. An interesting, tangled web (two competing products, but revenue from the browser champion so dependent (an understatement) by Google).
Also, at the end you say “After all, it is almost 2008.” Yeah! And that was like 10 months ago (it’s almost 2009). I got the year down, now I’m trying to work on which day of the week it is :p
Jason Alba
CEO – JibberJobber.com Personal Career Management
This article makes it sound like google is doing an exclusive favour to mozilla (charitable arm???). In reality google is just paying mozilla for all the traffic it sends. It has a similar argument with opera also. Of course google doesnt dominate opera’s spreadsheet as opera has multiple sources of income – unlike mozilla.
I meant agreement,
Of course GOOG pays MozCorp for traffic in regular traffic acquisition costs. The fact that Moz continues to try to receive NP status is a farce.
Mozilla also receives monies from Yahoo!. Until recently, Yahoo! advertised Mozilla Firefox on its home page.
I don’t understand why you are saying that receiving Google money makes Mozilla Foundation a farce as a non-profit organization. Please clarify.
Mozilla is not a farce, the fact that it’s treated as a non-profit is a farce.
TechCrunch has crashed on me in the last few days? Am i the only one?
I have the same problem.
?? – Never had any problem…
“After all, it is almost 2008.”
Almost 2009, you mean.
duh, thanks. Fixed.
And with a 2008 market share that’s roughly 23% higher than 2007, I can only assume they’ll run into more problems. I have a major issue with why FireFox, the “open” browser doesn’t include Live Search as an option. Seems like the non-profit, “open” browser is more concerned with revenue,… but maybe it’s just me.
Not sure exactly what you are arguing here, in the future please at least post the assumptions you are basing your premises on.
Mozilla is open and you can search with whatever you want.
There’s a limit to the number of search engine you can include by default without confusing the user. If someone wants to search with Live Search, one can open the search engine manager, click the “Get More Search Engines”, and pick Live.com from the list.
Google is paying Mozilla for the referrals. I don’t suppose Microsoft would pay them, being their competitor.
It’s all part of Mozilla’s plan. They can’t become a for-profit without the geek mob raising a sh*t storm, so they maneuver so as to force the “evil” government to force them away from non-profit status. F’ing brilliant!
/conspiracy theory
So who actually gets all this money that they make? Does it just sit in a trust or are the execs highly paid?
The execs are highly paid.
I think the money is actually payed to Mozilla Corporation, the wholly owned for-profit company they established some years ago, and some of it is “donated” to the Foundation. Or something like that.
$75m and they still consider themselves a non-profit?
Non-profit is a tax status and has nothing to do with aount of money coming into it.
Mozilla is not a non-profit, is not this commercial?
and actually they should get sued, as MS got sued for putting MSN search as default on IE or something like that.
Thanks to its competitors not being able to do anything, Google is getting very huge monopoly and we-users are going to suffer from this.
boo to the sockpuppets!
u sick?
But in that case, M$ owned both products in question. And they’re a commercial company.
Also, if Yahoo! wanted to, they *could* offer a better deal.
impressive! and what about the 12 other % ?
Look behind the numbers…U should be questioning the % of search revenue that Mozilla receives from Google …A Floating percentage?????!!! hmmmm Way to massage the revenue for BOTH companies.
http://www.twitter.com/A_F
I work for a non-profit, and many (if not most) file this late in the year. The IRA grants automatic extensions until October 15th, so most take them up on it. So, Mozilla’s “late” filing is actually the non-profit norm.
Isn’t the firefox deal part of the mozilla corporation, the for-profit wholly owned subsidiary of the mozilla foundation? I thought this news was dealt with when the 2006 numbers were released, hence the incorporporation (which didnt exist prior). If so, the foundation just has to deal with this as any NP with earned income, notably no more than 10% of the revenues go tax-free to the parent from the subsidiary.
That may be the case. Mozilla is trying to argue that the 10 percent rule should apply. But it may or may not fly.
To be clear, the statements above are for the Mozilla Foundation, which derives 88 percent of its revenues from Google.
Given that I’m following along on my phone I haven’t looked closely at the forms… But it says Mozilla Foundation and Subsidiary, so are those revenues inclusive of Mozilla Corp, or is there a separate filing somewhere? Since the financials are consolidated maybe it’s not entirely correct to say that the foundation itself gets 88% of revenues from Google. I really don’t know for sure though. I’m only 22 and taxes are still a bit of a novelty
I really hope they can work this out
Doesn’t look good though. Thanks for the report.
I think you’re confused – non-profits are allowed to earn revenue. It’s a common myth that they’re not allowed to do that.
The issue here is the source of that revenue, not the fact that it is earning revenue.
Visit us for interesting interviews with leading figures on their respected field
Eh
Nice stat. I was looking for that stats. Google as default on tool bar maybe just a beginning? 3.1.0 is more chrome like.
This is some complicated legal stuff. Not really sure what will end up happening.
Surely among the most incisive and informative comments I have ever read on this web site. I salute you, Wisdom, you and your razor sharp commentary. Someone at TC give this guy a job
thanks for letting us know you’re clueless and confused, “wisdom”
It looks like IRS determined that MoCo and Mo.org are really one entity, and can no longer enjoy tax exempt status. This is the same situation where a rich person can set up a non-profit foundation to hold assets, etc. Except with Mo.org, they didn’t give away any money to satisfy the status. May be they should have gave some money to the volunteers.. Heck, if they let this slide, I too can setup the same structure and enjoy non-profit status on all of my earnings. I just call them runtime ‘royalties’.
That’s not entirely true – as Mitchell Baker’s blog post (first link in the article) says, they gave over $1m in grants supporting volunteers and various projects, triple what they gave in the previous year, and it’s still increasing.
The trouble is the scale of the Google revenue compared to that. Even taking out all the Corporation expenses on staff and equipment and stuff, they still ended up with more than they spent.
The headline and bits of the article talk about threats to non-profit status, which is a bit wrong. It is the tax-exempt status that is the question – even if that was lost, they’d still be a non-profit foundation doing the same stuff – but would be paying tax. All you have to do to be non-profit is to not have some shareholders or owners taking profits – you can be full-out commercial and still do that.
Can they give it away to EFF, Creative Commons, Wikipedia, SourceForge, Savannah, Apache and so on?
So the statistic has anything to do with us?
The NP status is being challenged as part of our efforts to take from Mozilla and give to General Motors and Ford.
Live and Let Live !
Leave Mozilla alone……let them make their money. I ain’t angry but maybe they should share it among the thousands or so software developers that contribute to the Mozilla work free of charge !
Non profit? Yeah, OK whatever.
jess
http://www.privacy.de.tc
There is no technical difference in governance between for-profit, not-for-profit and 501 c3 organizations. It is the taxation classes. Also, I hope you realize that corporations have till Oct of the next year to file their taxes (not any different from personal income taxes).
This is more like amateur reporting. Stick with technical reporting…not business and taxation.
Mozilla filed it’s 2006 Taxes on 15 Nov 2007. Thus, it wouldn’t be surprising if they filed for 2007 on 15 Nov 2008 and thus are releasing their financial data promptly after filing. In past years, Mozilla has received two extensions to file. The first extension of three months is automatic and the second is non-automatic. So, nothing interesting here. Move along…
bob wyman
Re: 2007 taxes now, many companies file “late,” meaning in October. So Google may have just filed its 07 taxes. Its 08 taxes will then be filed by Oct 15, 2008.
Mozilla should seriously evaluate its revenue model since relying on a single major source of revenue is not sustainable. Google is doing so many things and at the end of the 3-yr contract, who knows what happens.
Google should also thank Mozilla for sending search traffic, which is much higher quality than AdSense, advertisers are paying more, and Google takes the lion share in this arrangement.
Shouldn’t the Church of Scientology lose its non-profit status, too? That hasn’t happened yet, so I don’t expect it to happen to the Mozilla Foundation any time soon.
At least the Mozilla Foundation is legit…
Mozilla the “charitable arm of Google”? Do you have any proof whatsoever about that? Because until then it’s just spouting bullshit. People like you don’t deserve the name of “journalist”.
It strikes me as incredibly odd that almost everything I’ve read on this subject, both the editorials and the associated comments, fail to recognize that if it wasn’t google who was paying for the search referrals it would be someone else.
The false observation is made again and again that since google makes up the majority of the search referral revenue they have some kind of hold on mozilla. This makes no sense because the default search provider could just as easily be yahoo, or ask jeeves, or live, or anyone else. There could conceivably be fluctuations on the amount paid, total and per referral, but the simple fact is Firefox sports a very valuable piece of real estate that could be monetized in any number of ways. Fundamentally this real estate has NOTHING TO DO WITH GOOGLE.
The value is in Firefox and it’s search bar. This value exists independently of Google. The fact that google is the primary renter of this piece of real estate does not mean they own it and it doesn’t mean Mozilla couldn’t find another suitor if it so choose to look for one.
Google doesn’t own Mozilla people. Look a couple steps past the obvious. If that money wasn’t coming from them it would be coming from someone else or a group of someone elses.
I don’t understand why Google came up with Chrome??? If Mozilla is their charitable/non-profit arm…then why waste money on a new junk browser.
I think Mozilla should be Google.org
http://www.livbit.com
This sounds outstanding! To make this much money, yet be
freeware. Rumor that Microsoft may offer Windows 7 as freeware.
Mozilla kicks!
thanks from tony
Please read this:
Mike Beltzner wrote to me saying that the article is full of inaccuracies.
The Mozilla Corporation is not registered as a non-profit entity, pays taxes, receives revenues, etc. The Mozilla Foundation is a non-profit organization, and its status is not under question. Google does not provide funds to Mozilla as “charity”; it’s a negotiated revenue deal, and they make more money off of the traffic generated than they pay to Mozilla. It’s easy to forget that, but this is not a charity issue; it’s an “affinity” revenue sharing deal.
http://gemal.dk...profit_no_more/
Firefox 3 sucks. I never complained because I thought Mozilla Foundation is a bunch of geeks doing this for free – a small, passionate, open-source group. But now I see that they are a bunch of capitalists making big bucks out of this and I don’t see why I should be so tolerant anymore. I demand quality … and I have the right because I introduced a bunch a people to Firefox who no doubt contributed to their millions. Fire the managers who were in charge of developing the new version. They did an extremely poor job. In the light of these revenue figures, “Firefox download day” is starting to look like a cheap marketing farce. I am ready to move on to other open-source browsers.
One more thing. I don’t trust Google. Now that I know Firefox is dependent on Google for its very survival, I am not sure if I should trust Firefox. Maybe one of these days I will start digging into the code … who knows what personal information Firefox is silently collecting … the credibility is gone as far as I am concerned. And to think that I actually bought a Firefox t-shirt to stop feeling guilty! Damn! $75 effing million! I might as well buy an IE t-shirt!
buy a opera ,safari ,maxthelon shirts too and wear a bra of microsoft
how many open source browser you know ? and r u sure u wont suck them this time
i think firefox sud be treated as more like a open source project like Linux and is meant for them
therse is nothing wrong if it comes to the commercial world of windows and makes some perks
It’s hard to see how Mozilla is violating any rules that wouldn’t apply to say, the Red Cross, which also has large revenues, highly paid executives, and accepts user fees for blood to offset operating costs/tests.
If Mozilla is making that much money on a free product in a crappy economy and no one even noticed they were doing it until they filed their annual statements, their executives are doing a pretty good job of serving the public.
If people are seriously concerned, then change Firefox to force the user to choose a default search engine. And notify the users of how much revenue is generated based on the search engines they choose. People who are happy with the free software from Mozilla can choose a search engine that pays Mozilla well; those who feel it is sullying the purity of the movement or an insult to the developers who volunteer their time can choose a search engine that doesn’t pay for traffic.
Mozilla sure spent a lot on “software developement” and “investments”.
What are you smoking?
Twinkies and irrelevant topic – I think we all know what he’s smoking.
cockroaches
and used toilet paper
This should heat up their base a little..