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The Firefox browser maker had more trouble creating revenue-generating products in 2019 than it expected, leading to the job cuts. Mozilla has set aside $43 million to pay for building new products.

Feeling revenue squeeze, Mozilla lays off 70

By

Senior Reporter,

Computerworld |

Mozilla, maker of Firefox, last week laid off 70 employees, about 7% of its paid workforce, according to a report by TechCrunch.

“You may recall that we expected to be earning revenue in 2019 and 2020 from new subscription products as well as higher revenue from sources outside of search,” wrote Mozilla Foundation chairman Mitchell Baker, in an internal memo acquired by TechCrunch. “This did not happen.”

Baker noted that the final lay-off tally “may be slightly larger” because of ongoing discussions in the U.K. and France. Mozilla employs more than 1,000 people, the organization said two months ago.

“Our 2019 plan underestimated how long it would take to build and ship new, revenue-generating products,” Baker explained in the memo. “Given that, and all we learned in 2019 about the pace of innovation, we decided to take a more conservative approach to projecting our revenue for 2020.”

Later the same day, Baker issued a public statement that acknowledged the layoffs. “We’ve had to make some difficult choices which led to the elimination of roles at Mozilla which we announced internally today,” she said there.

Mozilla has long been on a mission to develop new sources of revenue – historically it has generated the bulk of its income from deals that place specific search engines as the default in Firefox – but stepped up those efforts starting in 2018 and continued them last year. It experimented with a paid VPN (virtual private network), built the Lockwise password manager and tied it to the Monitor notification service, and created the Send file-sharing service. All, and probably more, would be packaged as a premier service for Firefox users, who would be pitched to pay an annual subscription fee.

However, an expected subscription failed to materialize in 2019.

Creating new products – whether those already previewed or ones yet unknown to the public – was so important to Mozilla that when it came to deciding whether to continue funding those efforts or reduce employee head count, Mozilla chose the latter. “Mozilla’s future depends on us excelling at our current work and developing new offerings to expand our impact,” Baker wrote in the internal memo.

Under current plans, Mozilla has set aside $43 million in a so-called “innovation fund” to pay for building new products that can generate new revenue.

Mozilla had hinted at tough times ahead when late last year it issued its 2018 financial statement, the latest data made public. In that income-and-revenue report, Mozilla said 2018 revenue had declined by nearly 20% compared to the year prior: the $451 million in overall revenue for 2018 was $111 million less than in 2017. And for the first time, Mozilla’s 2018 expenses outweighed income during the year.

About 87% of Mozilla’s 2018 revenue came from its search deals; just 1% was generated by subscriptions and advertising, according to the organization.

Baker’s comments – notably that contrary to expectations, non-search revenue had not increased – suggested that 2019’s financial numbers weren’t any rosier, and that expenses may have again exceeded income. (Mozilla won’t publicly report its 2019 financials until late this year.) “We also agreed to a principle of living within our means, of not spending more than we earn for the foreseeable future,” Baker told Mozilla employees in her memo.

Looming over all of the talk of revenue, new products and living within one’s means, of course, is the nearly uninterrupted decline of Firefox’s user share. During 2019, Firefox shed share – as measured by analytics vendor Net Applications – that represented a decline of about 13%. Among the five major browsers, only Opera lost a larger portion of its user share last year.

At the end of 2019, Firefox accounted for only 8.4% of global browser activity by Net Applications’ measurements.

But that 8%-and-change share still represented millions. According to Mozilla’s public data report, Firefox had 253 million users in December (its MAU, or Monthly Average Users metric, was 253,216,440 on Dec. 19, 2019). If Mozilla convinced just 2% of that number (approximately 5 million users) to subscribe to a $5 per month service (or $60 annually), the organization would generate $303.8 million each year (as gross, not net). No wonder Mozilla has staked out services for a revenue boost.

“Mozilla has a strong line of sight on future revenue generation from our core business,” contended Baker in her public statement. She used that same line in her internal memo to the troops but added this: “We are taking a more conservative approach to our finances. This will enable us to pivot as needed to respond to market threats to Internet health, and champion user privacy and agency.”

This story, “Feeling revenue squeeze, Mozilla lays off 70” was originally published by

Computerworld.

Senior Reporter Gregg Keizer covers Windows, Office, Apple/enterprise, web browsers and web apps for Computerworld.

Copyright © 2020 IDG Communications, Inc.

This Article was first published on itnews.com

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