Microsoft Fought Google Hard for the Default Search Spot in Firefox

The Google Mozilla search deal saga is finally behind us. The two companies announced a renewed deal this week for the next three years. Later, the financial details were leaked and they were quite interesting.

Google will be paying $300 million, €230 million per year, minimum, for the honor of retaining the default search spot.

Google paid about $100 million, €77 million in 2010 and probably paid a bit more in 2011, but not significantly more. This begs the question, why the three-fold increase in guaranteed revenue in the new deal.

Especially since Google is in a completely different position than it was three years ago. Google Chrome had just come onto the scene and Firefox was the only important player, besides Internet Explorer of course.

But in those three years, Firefox hasn't managed to gain any more market share, yet Chrome has shot up and even surpassed Firefox by some reports.

Clearly, while Firefox's market share and users are important and valuable, Google didn't need Firefox like it did before.

Well, the reason behind the price hike is simple, competition. A basic principle of a free market, a fixed supply, i.e. Firefox users coupled with increased demand equals a price increase.

It seems that Microsoft, sensing an opportunity and desperate to drive up its search market share, made Mozilla quite a generous offer, or more, to switch to Bing as the default option.

There's no love loss between Microsoft and Mozilla, they were arch enemies at one point, but business is business. The hundreds of millions of Firefox users were too tempting for Microsoft to pass away.

Google didn't need those users as much as Microsoft. Chrome is doing great and Google is the dominant search engine globally. But it couldn't let Microsoft have them, so it came with a counter offer, or more, and in the end won the deal.

In fact, these intense negotiations are most likely the reason why the initial deal expired in November without a new one being announced for several more weeks.

Even more interestingly, even Yahoo got in on the action initially, but it couldn't afford to type of money Microsoft and Google were throwing around.