The Mozilla-Firefox IPO Debate, Part 2: Mozilla Responds
Mozilla COO John Lilly responded to our earlier post and said the Mozilla Foundation does not plan to take Mozilla Corp. public. This is not a surprise: As we noted earlier, Mozilla Foundation head Mitchell Baker has maintained a similar stance for years.
John and Mitchell are obviously entitled to their opinions, and we respect both (the opinions and the people). As officers in the entity that owns 100% of the stock of Mozilla Corp, John and Mitchell also currently control the company's future, so all IPO debate at this point is moot. In the spirit of the debate, however, we feel compelled to note that we find some of John and Mitchell's logic flimsy.
Before we get to that, though, more on the numbers. John's response alerted us to Mozilla's full financial information for 2006. The information (which we hadn't seen) suggests that our earlier estimates and valuation of a publicly traded Mozilla Corp were in the ballpark.
Specifically, Mozilla's revenue grew as follows:
2004: $6 million
2005: $53 million
2006: $67 million
Total expenses in 2006 were $20 million, resulting in a 2006 operating profit of an impressive $47 million.
Assuming revenue and operating profit grew in 2007 (and we can't imagine why they wouldn't have), we would expect Mozilla Corp's 2008 revenue to be near the low end of our previously estimated $100-$200 million range, with operating profit of a mid-range $75-$100 million. We therefore stand by our earlier estimate of a publicly traded value of at least $1.5-$4 billion for Mozilla Corp.
And now on to the anti-IPO arguments:
John Lilly says that it would be "ethically wrong" to take Mozilla public. If the Mozilla Foundation has promised the Mozilla community that it will never pursue an IPO, then, yes, reneging would be ethically wrong. If, however, John is arguing that it would be ethically wrong to broaden the ownership of Mozilla Corp. to include shareholders who may have different priorities than the Mozilla Foundation, this is bogus.
John (and Mitchell, in previous posts) casts the argument in the typical non-profit = good and for-profit = bad terms that are common in these discussions. In many cases, this framework is fair, but in this one it isn't. Why? First, because we're dealing with Internet browsers, not soup kitchens. (Yes, it's nice to have a free, high-quality tool that isn't plastered with ads or hooks into other products, but the idea that this is a "public trust" in the same vein as a National Park or Social Security is silly.) Second, because Mozilla Corp. is already a for-profit corporation--and one that happens to be making a big profit.
Why is Mozilla Corp. making a big profit? Because it is being extremely well managed by its owner, the Mozilla Foundation (well done, John!). For example, Mozilla Corp. has attracted thousands of talented, dedicated, and cheap (free) workers, and it has made smart, restrained business decisions that have put Firefox users and developers first. It has followed the Amazon playbook--ignoring those who demand a quick revenue score and instead investing in user happiness. This is indeed "good" policy for users and (unpaid) employees, but it's good policy because it's good business, not because the Mozilla Foundation is a non-profit.
What to do with those piles of cash?
Make no mistake: Whether or not the Mozilla Foundation (MF) takes Mozilla Corporation (MC) public, the Mozilla Foundation will collect (and own) the cash that piles up as Firefox's awesome browser business mints money. As Firefox grows, that cash pile will become ever more immense--and, as it does, the Mozilla Foundation will have to decide what to do with it. The decisions might include:
John's second argument--that going public would make it harder for the Mozilla Foundation to achieve its goals--is fair. We are still not clear on how the Mozilla Foundation's goals differ from the goals of a superbly run business (one that creates high-quality products that customers love, treats employees well, and makes a fair profit), but it is true that public shareholders tend to be impatient and single-minded.
In any event, as the sole owner of Mozilla Corp., the Mozilla Foundation can do whatever it wants with the business. But our question is this:
Do the thousands of developers who built Firefox really have the same goals as the Mozilla Foundation? Or would some of them prefer to eventually get some financial benefit from the amazing business they've built?
A salary, maybe--just like the salaries Mozilla Corp. employees who benefit from their labors get? (Why should a Mozilla Corp administrator live on the browser income while a developer has to subsist on warm feelings and a day job?) Will the volunteer developers feel the same way in a few years, when Mozilla Corp's cash pile is mountainous?
If not an IPO, would the Mozilla Foundation at least consider paying Mozilla Corp's employees and contributors a dividend?
John and Mitchell are obviously entitled to their opinions, and we respect both (the opinions and the people). As officers in the entity that owns 100% of the stock of Mozilla Corp, John and Mitchell also currently control the company's future, so all IPO debate at this point is moot. In the spirit of the debate, however, we feel compelled to note that we find some of John and Mitchell's logic flimsy.
Before we get to that, though, more on the numbers. John's response alerted us to Mozilla's full financial information for 2006. The information (which we hadn't seen) suggests that our earlier estimates and valuation of a publicly traded Mozilla Corp were in the ballpark.
Specifically, Mozilla's revenue grew as follows:
2004: $6 million
2005: $53 million
2006: $67 million
Total expenses in 2006 were $20 million, resulting in a 2006 operating profit of an impressive $47 million.
Assuming revenue and operating profit grew in 2007 (and we can't imagine why they wouldn't have), we would expect Mozilla Corp's 2008 revenue to be near the low end of our previously estimated $100-$200 million range, with operating profit of a mid-range $75-$100 million. We therefore stand by our earlier estimate of a publicly traded value of at least $1.5-$4 billion for Mozilla Corp.
And now on to the anti-IPO arguments:
John Lilly says that it would be "ethically wrong" to take Mozilla public. If the Mozilla Foundation has promised the Mozilla community that it will never pursue an IPO, then, yes, reneging would be ethically wrong. If, however, John is arguing that it would be ethically wrong to broaden the ownership of Mozilla Corp. to include shareholders who may have different priorities than the Mozilla Foundation, this is bogus.
John (and Mitchell, in previous posts) casts the argument in the typical non-profit = good and for-profit = bad terms that are common in these discussions. In many cases, this framework is fair, but in this one it isn't. Why? First, because we're dealing with Internet browsers, not soup kitchens. (Yes, it's nice to have a free, high-quality tool that isn't plastered with ads or hooks into other products, but the idea that this is a "public trust" in the same vein as a National Park or Social Security is silly.) Second, because Mozilla Corp. is already a for-profit corporation--and one that happens to be making a big profit.
Why is Mozilla Corp. making a big profit? Because it is being extremely well managed by its owner, the Mozilla Foundation (well done, John!). For example, Mozilla Corp. has attracted thousands of talented, dedicated, and cheap (free) workers, and it has made smart, restrained business decisions that have put Firefox users and developers first. It has followed the Amazon playbook--ignoring those who demand a quick revenue score and instead investing in user happiness. This is indeed "good" policy for users and (unpaid) employees, but it's good policy because it's good business, not because the Mozilla Foundation is a non-profit.
What to do with those piles of cash?
Make no mistake: Whether or not the Mozilla Foundation (MF) takes Mozilla Corporation (MC) public, the Mozilla Foundation will collect (and own) the cash that piles up as Firefox's awesome browser business mints money. As Firefox grows, that cash pile will become ever more immense--and, as it does, the Mozilla Foundation will have to decide what to do with it. The decisions might include:
- reinvesting in the business
- investing in other businesses
- earning interest
- paying Mozilla employees more
- paying code contributors
- throwing massive Mozilla community boondoggles
- funding the Coalition for the Homeless
John's second argument--that going public would make it harder for the Mozilla Foundation to achieve its goals--is fair. We are still not clear on how the Mozilla Foundation's goals differ from the goals of a superbly run business (one that creates high-quality products that customers love, treats employees well, and makes a fair profit), but it is true that public shareholders tend to be impatient and single-minded.
In any event, as the sole owner of Mozilla Corp., the Mozilla Foundation can do whatever it wants with the business. But our question is this:
Do the thousands of developers who built Firefox really have the same goals as the Mozilla Foundation? Or would some of them prefer to eventually get some financial benefit from the amazing business they've built?
A salary, maybe--just like the salaries Mozilla Corp. employees who benefit from their labors get? (Why should a Mozilla Corp administrator live on the browser income while a developer has to subsist on warm feelings and a day job?) Will the volunteer developers feel the same way in a few years, when Mozilla Corp's cash pile is mountainous?
If not an IPO, would the Mozilla Foundation at least consider paying Mozilla Corp's employees and contributors a dividend?
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I honour and commend John Lilly and Co. for the stance they are taking and I wish them all the support they require to stick with it.
As the commented above me said, this is an issue of "public trust". Quite literally the "public" has entrusted their time and energy into a project that had certain very clear motives and ethical drivers behind it. Therefore the result (a browser called Firefox) is a product of "public trust". Sure profits are being made. I have no idea where those profits are being directed, and the idealist in me would hope they are being put to good use for the public in some way. Of course Mozilla is under no obligation to do that, and I am happy to simply know there is a great free publicly driven browser on hand.
Regards,
Jonathan
PS. Sorry if this comes through twice. Tried posting it via Thunderbird and it struggled with the javascript. Firefox to the rescue.
Hmm... So now I see why TB didn't like this. I get the error from your site "Text entered was wrong. Try again." Perhaps you could set the commenting system up to have a slightly more specific or insightful message? Is it referring to the captcha? I'll try again.
I honour and commend John Lilly and Co. for the stance they are taking and I wish them all the support they require to stick with it.
As the commented above me said, this is an issue of "public trust". Quite literally the "public" has entrusted their time and energy into a project that had certain very clear motives and ethical drivers behind it. Therefore the result (a browser called Firefox) is a product of "public trust". Sure profits are being made. I have no idea where those profits are being directed, and the idealist in me would hope they are being put to good use for the public in some way. Of course Mozilla is under no obligation to do that, and I am happy to simply know there is a great free publicly driven browser on hand.
Regards,
Jonathan
> same vein as a National Park or Social
> Security is silly.
This is where your misconception lies. The public open-standards-based World Wide Web, from IEEE's Ethernet and IETF's TCP/IP on up to W3C/WHATWG's HTML and Mozilla's Firefox, is absolutely a public trust as worthy as a national park or social security.
I've read both your posts now and John's rebuttal.
The one question that I have (and I alluded to it in a comment in your last article) relates to Mozilla's mission. John has mentioned it in his blog posts. Mitchell has often dug in her heels on this very point.
If the Mozilla mission is to preserve choice and innovation on the Internet, put another way by John "keeping the Internet open and participatory", then wouldn't it be a wrong if the company chose to do anything strategically that didn't align with that mission? From the Mozilla Corporation's point of view, it might be a disservice to the community members, the directors, the users, and the Mozilla Foundation (who is the parent company) to place control in the hands of those who might have other motives (financial gain) aside from those who believe in the mission.
I wrote it before, John has also written it a few times, but I'd like to hear your specific response to this thought:
If Mozilla Corporation went public, offering its stock to the public capital markets in hopes to raise a lot of cash for operations and investment, what would stop that public stock from being acquired by investment banks, hedge funds, or other corporations...who in turn might vote at a shareholder meeting to do something other than what is good for the Web? Perhaps sell the company to third party? Perhaps redirect its mission? A majority position or a shareholder movement could derail the things that Mozilla wants to accomplish.
Also, just another comment, I do disagree with your statement: "the idea that this is a "public trust" in the same vein as a National Park or Social Security is silly."
Why silly? It could be a new way to think about public goods or trusts or entities. I believe more than 50% of Firefox users are outside the U.S. In many cases, these are "newcomers" to the Web. Perhaps having an independent, non-monetarily driven "public trust" is just what people need when accessing information on the Web for the first time or in countries that might not hold on to the same democratic ideals of places like the U.S. Just a thought.
Looking forward to your response! Thanks for the thought provoking articles.
-seth
We are doing many of the things you're suggesting, in terms of investing more in the business and other businesses (like mobile and web services) and supporting more contributors (both employees and non-employees).
But the crux of our position is that we have a statement of values and mission that's an expression of commitment to the broader community, and we feel that being independent without shareholders who might (rightly) focus on profits, would hurt our ability to live up to the mission. I've written a bit about it on my blog:
http://john.jubjubs.net/2008/01/03/more-on-why-mozilla-will-not-ipo/
John Lilly
COO, Mozilla