Posts Tagged with “accounting”

Sustainability in Uncertain Times

November 19th, 2008

Today we are posting our audited financial statements and tax form for 2007. We have also posted an FAQ. As in past years, I’ll use this event as an opportunity to review both our financial status and our overall effectiveness in moving the mission forward.


The financial highlights are:

  1. 2007 was another healthy year for Mozilla both financially and organizationally.
  2. Mozilla is well positioned to remain vital and effective during the current difficult economic times.

Our revenue remains strong; our expenses focused. Mozilla’s revenues (including both Mozilla Foundation and Mozilla Corporation) for 2007 were $75 million, up approximately 12% from 2006 revenue of $67 million. As in 2006 the vast majority of this revenue is associated with the search functionality in Mozilla Firefox, and the majority of that is from Google. The Firefox userbase and search revenue have both increased from 2006. Search revenue increased at a lesser rate than Firefox usage growth as the rate of payment declines with volume. Other revenue and support sources were product revenues from online affiliate programs and the Mozilla Store, public support, and interest and other income on our invested assets.

The agreement between Google and the Mozilla Corporation that accounts for the bulk of the revenue has been renewed for an additional three years, and now expires at the end of November of 2011.

Mozilla expenses (including both the Mozilla Foundation and Corporation) for 2007 were $33 million, up approximately 68% from 2006 expenses of $20 million. Expenditures remain highly focused in two key areas: people and infrastructure. By the end of 2007, Mozilla was funding approximately 150 people working full or part-time on Mozilla around the world. Expenditures on people accounted for roughly 80% of our total expenses in 2007. The largest concentrations of people funded by Mozilla are in the U.S, Canada, and Europe with smaller groups in China, Japan, New Zealand, and South America.

Our assets as of December 31, 2007 were $99 million, up from $74 million at the end of 2006, an annual increase of 34% to our asset base. Unrestricted net assets (net of liabilities) at the end of 2007 were $82 million compared with $58 million in 2006, a 42% increase over the prior year. In 2005 the Mozilla Foundation established a “tax reserve fund” for a portion of the revenue the Foundation received that year from Google. We did this in case the IRS (the “Internal Revenue Service,” the US national tax agency) decided to review the tax status of these funds. This turns out to have been beneficial, as the IRS has decided to review this issue and the Mozilla Foundation. We are early in the process and do not yet have a good feel for how long this will take or the overall scope of what will be involved.

In 2007, the Mozilla Foundation expanded its grant giving and funding program, providing approximately $700,000 in funds. Mozilla supported projects such as Mozdev Support, the NVDA open source screen reader for Windows, GNOME, and Mozilla-related educational activities at Seneca College. In addition, the Mozilla Corporation contributed $321,326.40 to various individuals and efforts, which supported the open source projects of individual developers, the Bugzilla community, Creative Commons, Oregon State University, and others. This brings total grants, donations, and contributions to over $1 million (roughly tripling 2006 donations).

We believe that Mozilla’s structure and financial management will allow us to continue with relative stability despite the disturbing economic conditions that developed over the summer and fall of 2008. There are no guarantees of course and Mozilla is not immune. We will certainly feel the effects of the economic situation. However, there are a number of reasons why Mozilla is likely to experience less disruption than other organizations.

  • Our financial objective is sustainability, not financial return on investment, and certainly not the increasing financial return on investment that the markets seek. Success in our fundamental goals is not measured by the stock or investment markets.
  • Our basic structure — public benefit, non-profit organization — means that we do not have a share price or valuation set by the market. So the downturn in the stock market does not affect us directly.
  • Mozilla’s participants do want a return on their investment. That return is our effectiveness in creating a part of the Internet that is open, participatory, innovative and promotes decentralized decision-making. Financial resources are one tool in generating this return. But they are not the only tool. The open source software development model is adept at providing multiple tools to achieve our goals. Financial resources are a catalyst, but neither the goal nor the only tool.
  • We’ve been building in the ability to live with greatly reduced revenue for years. We have a significant amount of retained earnings. We don’t currently anticipate dipping into that fund in the immediate future. We believe our revenues for the near term future will be adequate to fund ongoing work. If the economic setting further worsens, we do have retained earnings to carry us through some difficult times.
  • Our financial management style has always been that each person who is paid to work on Mozilla needs to be a resource for many other people. We haven’t tried to hire everyone we need to fulfill our mission — that’s not possible.

Moving the Mission Forward

1. Scope

In 2007 we launched a number of initiatives focused on strengthening the Mozilla mission. In February we published the first version of the Mozilla Manifesto and began the ongoing public discussion of the most over-arching goals of the Mozilla project: openness, participation, decentralization, innovation. A few months later we turned to describing the open web and promoting an open Internet as the most fundamental “platform” for ongoing development. There is much work to be done here, both in defining what we mean clearly and in working with others who share the goal. This is possible only because of our success to date — we are able to shift the focus from Firefox as an end in itself to Firefox as a step in achieving something much greater.

In May the Mozilla Foundation started an Executive Director search process to add additional capabilities. This task required designing a search process appropriate for an open organization like Mozilla. We figured out how to create a search committee with board members and individual contributors, created that committee, did a lot of public outreach and discussion, and combined this with classic search techniques. We were able to include a live, streamed, public discussion and the chance for hundreds of Mozilla participants to meet our final candidate as part of the process. It would have been ideal if we could have done this more quickly, as it took us until August 2008 to officially hire our new Executive Director. But we found a rare and great fit in Mark Surman, and this occurred only because of the determinedly open nature of the search process.

In June we launched a focused, increased effort in China. This includes a range of outreach and community activities, particularly in universities, plus a focus on making Firefox a better experience for Chinese users. To do this effectively we created a subsidiary of the Mozilla Corporation known as Mozilla Online Ltd.

In July we launched a call to action to revitalize Mozilla efforts in email and Internet communications. That led to vigorous discussions for several months, and the decision to create a new organization with a specific focus on mail and communications. In the fall of 2007 we laid much of the groundwork for the creation of Mozilla Messaging, which launched officially in February 2008.

The idea of openness is taking root across the industry and in other areas of life. More organizations and people are realizing that choosing openness, collaboration and enabling participation is good for people, and good for a set of business opportunities as well. In addition, we are seeing the vast amount of civic and social benefit that can be created through open, collaborative, shared work product.

2. Geographic Reach

2007 was also a year of geographic expansion, reflecting the increasingly global nature of the Mozilla project.

One aspect of our global expansion is in our user base. By the end of 2007, nearly fifty percent of Firefox users chose a language other than English. In a fast forward, the first country in which Firefox usage appears to have crossed the 50% mark is Indonesia, surpassing 50% in July 2008. A set of European countries (Sovenia, Poland, and Finland) see Firefox usage above 40%.

Another aspect of geographic expansion is in the contributor and community base. In 2007 Mozilla contributors from the United States made a series of trips to India, resulting in many contacts and one of our 2008 interns. Mozilla contributors from the United States also made the first trips to Brazil to see our contributors there. This also resulted in ongoing activities in Brazil that are continuing, as well as expanding activities in other South American communities. The number of participants in Eastern Europe is growing dramatically. We started work in China and hired Li Gong to lead this effort. This resulted in the creation of Mozilla Online Ltd. in August. Mozilla has new groups of contributors and employees in Auckland, Beijing, Copenhagen, Vancouver and across Europe.

This global reach is driven by our focus on local contributors, local product and local empowerment. Firefox 2 shipped in thirty-six languages. Firefox 3 shipped in forty-six languages in June 2008 and 4 months later, our Firefox 3.1 beta is now localized in over 50 languages. We continue to invest very heavily in what we call “localization” for short but which in its broadest sense means everything that allows global participation in building and accessing the Internet.

At the end of 2007 our Calendar Project had twenty-six active localizations for Sunbird 0.7 and Lightning 0.7, and Thunderbird offered thirty-six active localizations. SeaMonkey 1.1.7, the last stable release of the year, featured twenty languages. The number of releases is made possible by the enormous dedication of the localization communities, plus a focus on building infrastructure to enable those communities.

These efforts to make the web more accessible did not go unnoticed. In May of 2007 Mozilla was awarded the World Information Society Award by the ITU, the United Nations agency for information and communication technologies. Mozilla was singled out for its “outstanding contribution to the development of world-class Internet technologies and applications.”

3. Community

Our community remains healthy and vibrant. The percentage of code contributed to Firefox by people not employed by Mozilla remained steady at about 40% of the product we ship. This is true despite a significant amount of new employees in 2007. Our geographic expansion is powered by active and committed volunteers, from the localizers to Spread Firefox participants to others who introduce Firefox to new people.

In June of 2007 we launched a new quality assurance effort, building ways for people to get involved without needing to plunge exclusively into our bug-management tool. In October we launched a new support effort, building on the work community members have provided via forums. Today our end user support offering includes an online knowledge base, forums for discussion and troubleshooting, and one-to-one live support. We also made event planning and speaking planning a public activity, and have developed programs to assist more Mozilla contributors to become active public speakers about Mozilla.

4. Product

The number of people using Firefox on a daily basis nearly doubled from 27.9 million in 2006 to 48.9 million in 2007. As of October 2008 that number has grown to 67.7 million. In 2007 and 2008 three titans of the Internet and software industry — Microsoft, Apple and Google — all released competitive Web browsers. Our market share continues to rise, our community continues to grow and Firefox continues to provide leadership in innovation, technology, and user experience. Living among giants is not easy, but the Mozilla community continues to demonstrate that our efforts stand the test of competition and continue to lead the way.

Other Mozilla projects remain vital, with committed contributors and users. Worldwide, SeaMonkey has approximately five million users and Thunderbird has five to ten million users. Bugzilla installations are hard to count since many of them are internal to an organization. But we see Bugzilla installations everywhere, and over sixty thousand copies of Bugzilla were downloaded in 2007, with hundreds of companies identifying themselves as Bugzilla users.

The impact of our userbase allows us to help move the Internet industry to a more open and participatory environment — accessible content, standards-based implementations, and bringing participation and distributed decision-making to new aspects of Internet life.

In 2007 we began a new, focused effort to bring the Firefox experience to mobile devices; early steps included forming a team and identifying mobile platforms as a central part of our work going forward. We’ve begun shipping development milestones and early releases in 2008.

We’ve also started new initiatives to promote innovation across the Mozilla world by providing a home and infrastructure for experimental work via Mozilla Labs. Innovation is a notoriously difficult thing to build into an organization; we’ve adopted a flexible approach that we expect to grow and change over time. The Mozilla community is diverse and creative, our challenge here is to build environments that both encourage individual creativity and that allow us to work at scale.

Mozilla is strong. We’re growing. We’re trying new things. 2007 and 2008 to date have been important, successful years for Mozilla.

I hope Mozilla participants feel proud of what we’ve accomplished and excited about what is still to come. The Internet is still young, and still in its formative stage. Mozilla has, and can continue to empower each one of us to build the Internet into a better place.

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