Yahoo's Firefox search deal includes a clause allowing Mozilla to walk away from a new buyer and still be paid $375M per year through 2019
The contract clause — personally struck by the CEO — is a “hairy” one for bidders. — Under terms of a contract that has been seen by Recode …
Context & Ripple Effects
Yahoo is mid-sale, and this clause surfaces at the worst moment for bidders: the Firefox search contract — personally struck by the CEO — guarantees Mozilla $375M a year through 2019 even if Mozilla walks away from whoever buys Yahoo. That sits alongside the $145M termination fee and 51 possible bidders already disclosed in the sale proxy, adding another liability a buyer inherits sight unseen.
The stakes are real on both sides: the Yahoo deal drove Mozilla's revenue up 28% to $421M in 2015, its first full year under the contract, so search royalties are effectively Mozilla's balance sheet. The clause converts that dependency into an option — Mozilla keeps the money without keeping the partner.
First-order effects
- Bidders must value Yahoo's search business as if the Firefox distribution could vanish at Mozilla's discretion while the $375M annual payment obligation stays — shrinking the traffic base they think they're buying.
Second-order effects
- Mozilla gains negotiating leverage over any acquirer: with guaranteed payments secured, it can shop its default placement elsewhere, which is precisely the position it later used to lock in the Google default deal worth $400M–$450M a year through 2023.
Third-order effects
- Search-distribution contracts are being written as portable annuities with buyer-side exit rights, meaning acquirers must diligence contract clauses — not just traffic share — before pricing a search business.
The trend: Browser default-search deals are shifting from captive supply agreements to structured instruments where the distributor holds the exit option and the guaranteed payout.