News

POV: Yahoo and Firefox

Mindshare Point of View: Mozilla’s popular Internet browser Firefox announced that it is transitioning to Yahoo as its default search engine over incumbent Google. The move marks yet another deal by Firefox with alternatives to Google, including new search engine partnerships with Yandex in Russia and Baidu in China. While Firefox’s share of browsers is smaller than Internet Explorer and Google’s Chrome (16%, 18% and 41% respectively), the deal will enable Yahoo to claw back some much-needed share of the search market from long-dominant Google. Exactly how much is unclear.

Details and Implications

The new deal means that Yahoo will become the new default search engine for all Firefox browser searches on PCs and mobile starting in December and lasting throughout the new five year deal. When you type a query into your Firefox browser’s embedded search box you will be directed to a Yahoo search results page, which has been designed by Yahoo, but is powered by Microsoft’s Bing. In other words, Microsoft provides the data and Yahoo provides the interface. That relationship is part of the on-going ten-year search partnership between Microsoft and Yahoo that started in 2010, which has so far survived sustained industry speculation over both partner’s happiness and/or dissatisfaction with the results.

It remains to be seen how much incremental share Yahoo will gain from the deal. According to ComScore, Yahoo’s current share of US PC searches is hovering around 10%, compared to Microsoft’s 20% and Google’s 67%. These data points differ significantly beyond the US market, e.g., in the UK Google has nearly 90% of the market compared to Yahoo’s 3%.

Regardless of geographic differences, the key factor that may determine the success of the deal is its effectiveness beyond the desktop as the real search battleground is mobile. According to eMarketer, US desktop paid search is set to decline by $1.4 billion as users shift to mobile devices. Unfortunately for Yahoo, Firefox’s share of global mobile browsers is 0.75% compared to Chrome at 22% and Safari at 45%; the latter two search engines clearly having an advantage with the dominant installed mobile operating systems. In short, while this deal will hopefully add some much needed competition into the search business, it doesn’t significantly help Yahoo when it comes to mobile search, the key future growth area in both consumer usage and ad billings.

Summary

For Yahoo, the Firefox deal is another smart tactical move by CEO Marissa Mayer to continue bolstering its ad revenue sources through acquisitions and partnerships. In general the industry should applaud any greater competition introduced into the search business, where Google has played a near monopolistic role, much to the increasing frustration of regulatory bodies, particularly in the European Union. However, it’s unclear exactly how impactful the Firefox deal will be given the browser’s limited penetration in the increasingly important mobile search space. Nonetheless, Yahoo may have another and substantially larger opportunity to gain search share on mobile. Google’s partnership as Apple’s default search engine is set to expire early next year, and both Yahoo and Microsoft are now heavily courting the newly invigorated Apple. Such a partnership would give either search engine a significant boost, unless of course Apple develops its own search engine, which has been strongly rumored for some time.

2015 may finally be the year when the industry sees some significant competition in the search engine business, long dominated by Google in most parts of the world, but now being shaken-up by the move to mobile, new alliances and acquisitions, and perhaps even some regulation.