Mozilla Corporation is laying off 250 people, about a quarter of its workforce, explaining that the COVID-19 pandemic has significantly lowered revenue. Mozilla previously had about 1,000 employees.

The Firefox maker’s CEO, Mitchell Baker, announced the job cuts yesterday, writing that “economic conditions resulting from the global pandemic have significantly impacted our revenue. As a result, our pre-COVID plan was no longer workable.”

In a memo sent to employees, Baker said the 250 job cuts include “closing our current operations in Taipei, Taiwan.” The layoffs will reduce Mozilla’s workforce in the United States, Canada, Europe, Australia, and New Zealand. Another 60 people will be reassigned to different teams.

This will take a toll on browser development. “In order to refocus the Firefox organization on core browser growth through differentiated user experiences, we are reducing investment in some areas such as developer tools, internal tooling, and platform feature development, and transitioning adjacent security/privacy products to our New Products and Operations team,” Baker wrote.

All laid-off employees will be given severance packages that are “at least equivalent to full base pay through December 31, 2020,” Baker wrote. Mozilla Corporation is a subsidiary of the Mozilla Foundation, a nonprofit.

Revenue problems

Mozilla Corporation gets the vast majority of its revenue (which totaled $435.7 million in 2018) from search engines who pay to be the default search option in Firefox in different parts of the world, including Google, Yandex, and Baidu.

Baker’s announcement and memo didn’t say exactly how the pandemic lowered revenue. Computerworld wrote yesterday that, with Firefox’s search deals, “a shrinking [browser market] share impacts finances. Even if the effects are not immediate and direct, then they’re likely to show up mid-term or when contracts come up for renewal.” A Mozilla financial statement says it has contracts with search engine providers that expire in November 2020.

Those contracts don’t provide guaranteed payouts. When contacted by Ars, a Mozilla spokesperson said that “Firefox’s revenue is subject to the overall trend of the search market and our product performance, versus a guaranteed payment.”

The pandemic may also harm Mozilla’s attempt to diversify revenue by offering subscriptions for products outside of its Firefox flagship. Baker’s memo to employees yesterday said Mozilla will try to turn things around by “ship[ping] new products faster and develop[ing] new revenue streams. Our initial investments will be Pocket, Hubs, VPN, Web Assembly, and security and privacy products. In addition, we are creating a new Design and UX team to support these products and a new applied Machine Learning team that will help our products include ML features.”

Mozilla previously laid off 70 employees in January, and a memo Baker sent at that time may shed light on the company’s latest struggles. In the January memo, published by TechCrunch, Baker explained that “we expected to be earning revenue in 2019 and 2020 from new subscription products as well as higher revenue from sources outside of search. This did not happen.”

“Living within our means”

Mozilla “underestimated how long it would take to build and ship new, revenue-generating products,” she also wrote in the January memo. Mozilla thus “decided to take a more conservative approach to projecting our revenue for 2020” and “agreed to a principle of living within our means, of not spending more than we earn for the foreseeable future.”

But that more conservative 2020 budget plan was disrupted by the pandemic, as evidenced by Baker’s statement yesterday that “our pre-COVID plan was no longer workable.” While the pandemic is a reminder that a company’s revenue-generating ability can change quickly and unexpectedly, Baker wrote that yesterday’s cuts and reorganization are intended to make Mozilla financially sustainable for “the COVID and post-COVID eras.”

“We did not simply ‘trim,'” Baker wrote in the memo. “We did not approach this as a stop-gap or a way to get us through the next few months. We looked at what Mozilla Corporation needs to do to be sustainable and have impact over time. Then we reshaped the organization to meet this, mapping the critical roles and skill sets required to deliver on this outcome.”

https://arstechnica.com/?p=1698421