Preston Gralla

How much does Google fear Microsoft's Bing? Almost $1 billion worth, as counted by the Firefox deal

December 22, 2011 3:56 PM EST

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Why has Google agreed to pay Mozilla nearly $1 billion over three years to be Firefox's default search engine? There's a three-word answer: Fear of Bing.

AllThingsD reports that Google will pay Firefox just under $300 million per year to be the default search engine. That's far more than it has paid in the past, the site reports, claiming that "In 2010, Google contributed 84 percent of Mozilla's $123 million in revenue." That would put the previous deal at a little over $100 million, only about one-third of the current deal.

Google was bidding against both Microsoft and Yahoo, and was willing to outbid either. As AllThingsD says:

Google's main rival in the bid, sources said, was Microsoft's Bing search service, which was aggressively trying to hipcheck it from the main search spot on the browser.

That's because the software giant has been spending a lot of money in efforts to grow Bing's market share in the search market.

Given Google's dominance, why should it worry about Bing? Because even though Microsoft has faltered in search, Bing is a solid search engine, quietly gaining market share. And Microsoft has a history of eventually squashing competitors after a long slog.

The most recent numbers show Bing with a 15% search market share, and Yahoo with a 15% search market share. Given that Bing powers Yahoo search, that gives Bing a 30% market share. Sure, Google still dominates with more than 65% of the market. But if Bing had become Firefox's search engine, Microsoft could chip away at the Google lead, especially given that Bing is the default search engine for the most popular browser of all, Internet Explorer.

So the world may believe that the battle of the search engines is over. But Google's willingness to pony up nearly $1 billion to Mozilla shows that the fight is still not through.