Mozilla announced that it was dropping Yahoo in favor of Google just as it unveiled the Firefox Quantum, a lightning-fast browser that ironically looks to challenge Google Chrome. Mozilla has now filed a countersuit, claiming breach of contract. Yahoo's new parent Oath filed a complaint against Mozilla in a California court on December 1, alleging a breach of contract.
"Immediately following Yahoo's acquisition, we undertook a lengthy, multi-month process to seek assurances from Yahoo and its acquirers with respect to those factors", the company explained in a blog post yesterday. Mozilla was given a contractual right to terminate the agreement, if Yahoo was found unacceptable for some reason. Under the terms of the contract, which were revealed during Yahoo's sale process a year ago, the party that would acquire Yahoo would have to pay Mozilla $375 million annually through 2019. The Mozilla-Yahoo deal is worth as much as $300 million per year, which is a huge chunk of Mozilla's annual income.
Mayer's tenure at Yahoo was marred by a series of questionable management decisions that included spending $3 billion on acquisitions and famously paying ad man Henrique de Castro $109 million for 15 months of work. When it became clear that continuing to use Yahoo as our default search provider would have a negative impact on all of the above, we exercised our contractual right to terminate the agreement and entered into an agreement with another provider.
Mozilla's response and counterclaim indicate there was a clause that gave the company an out if certain conditions existed or didn't continue to exist. We enter into all of our relationships with a shared goal to deliver a great user experience and further the web as an open platform. However, Mozilla has now lodged a cross-complaint against Oath, claiming that it only seeks to exercise its rights under the 2014 contract. In order to secure the Firefox deal in the first place Marissa Mayer had agreed that in any change-of-control scenario Mozilla had the right to leave the partnership if it did not deem the new partner acceptable. Still, we are proud of how we conducted our business and product work throughout the relationship, how we handled the termination of the agreement, and we are confident in our legal positions.
Mozilla continued these types of discussions with Yahoo in March 2015, reiterating that Mozilla "wants improvement for both parties to grow marketshare", but the "current experience is causing users to move".
Mozilla basically says that Yahoo failed to uphold search quality standards that it promised to maintain at the time of the initial agreement in 2014. Future proceedings should prove interesting.