The deal, which was announced Wednesday, means U.S.-based Firefox users will see Yahoo! as their default search engine starting in December for both mobile and desktop. But given Yahoo! CEO Marissa Mayer's penchant for focusing on mobile, signing a deal with a company with 0.75% market share, as measured by NetMarketShare, doesn't exactly move the needle. Firefox has a little bigger piece of the pie on desktop, owning 13.91% of the market, but it's still way behind Google's Chrome, which owns 21.25% of the market and Microsoft's (MSFT) Internet Explorer, which owns 58.49%.
Wall Street isn't concerned that Google (GOOG) might see any material impact from the loss of Firefox. Analysts expect Google to continue to plug along and dominate the U.S. search market.
Credit Suisse analyst Stephen Ju, who rates Google "outperform" with a $722 price target, noted that the deal wasn't even worth tweaking his estimates to reflect the loss of the partnership.
"If we are to bracket a range of 60%-80% revenue share to Mozilla in TAC payments, this implies about $375mm-$500mm in Gross Network Revenue, correspondingly about $75mm-$200mm in Net revenue, and likely $60-$160mm in Adjusted EBITDA if we assume 80% margin on this stream of revenue," Ju wrote in a note. "Against our current 2015 estimates, this is about 2.5%-3.3% of Network Gross Revenue, 1.4%-3.6% of Network Net Revenue, and 0.2%-0.5% of Adjusted EBITDA. And this is all baking in a scenario in which 100% of Mozilla users elect NOT to toggle the default search engine back to Google. We therefore see little case to update our estimates on this event as it is unlikely to generate a material impact."
According to comScore's August report, Google held 67.3% of the U.S. search marketplace, Microsoft 19.4% and Yahoo! 10%.
The deal does include a revenue-sharing agreement with certain "guarantees," according to Reuters, but for Mayer to really move the needle for search Yahoo! will have to convince other browsers, most notably Apple's (AAPL) Safari (which has 45.04% market share in the U.S.) to generate meaningful revenue and really scare Google. Mayer can make the all the claims she wants about believing "deeply in search," noting "it's an area of investment, opportunity and growth," as she said in a press release, but money talks.
Yahoo!'s search revenue in the third quarter was $450 million, up 6% year over year, with the price-per-click increasing 17% year over year, though paid clicks remained flat from a year earlier. By contrast, Google's revenue in the third quarter was $16.5 billion excluding traffic acquisition costs.
-- Written by Chris Ciaccia in New York
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