The obvious idea behind this move is Google's interest in capturing those advertising revenues generated by Mozilla's 25 percent browser market share and users who are using the box for Google searches. Some rumors suggest that the price for Firefox went up as Microsoft was bidding for the space as well and Google certainly has no interest to handing those search revenues to Bing.
The problem, of course, is Firefox is a rival for Chrome is this respect as it is cheaper for Google to harvest search revenues through Chrome than pay Mozilla. As long as Mozilla has substantial market share that makes economic sense for Google, there is no reason to believe why Google would be dropping Mozilla. However, Chrome developer Peter Kasting does not quite agree and complained that people do not understand why Google is developing Chrome and why Google is supporting Firefox. According to Kasting, Chrome is much more Google's donation to the world, a welfare project if you will, than a tool that generates revenues.
Kasting argues that "the primary goal of Chrome is to make the web advance as much and as quickly as possible. That's it. It's completely irrelevant to this goal whether Chrome actually gains tons of users or whether instead the web advances because the other browser vendors step up their game and produce far better browsers. Either way the web gets better. Job done. The end."
To continue that thought, Mozilla also aims to make the web better. And since Chrome "cannot be all things to all people", Google needs to fund Mozilla as Firefox "is an important product because it can be a different product with different design decisions and serve different users well." Kasting concludes his thoughts with the notion that "Google succeeds (and makes money) when the web succeeds and people use it more to do everything they need to do." One may wonder where all the advertising business fits into this argument, as Chrome is actually tied directly to advertising via its instant-search engine supported via the location bar.
For some perspective, there is a balancing post from Firefox product manager Asa Dotzler, who has not been especially kind to Google's intention to build walls around its interests in the web in the past. According to Dotzler, the deal between Mozilla and Google has, of course, to do with selling ads: "This is Google's business," he writes. "They sell ads alongside 'free' content, and they buy additional traffic to make those ads more valuable." Contrary to Kasting's web welfare claims to make the web better, Dotzler says that "Google is not a philanthropist 'donating' money to Mozilla or any other traffic acquisition partner."
In the greater view, the deal makes sense for both parties and Mozilla has clearly come out on top, but the Firefox guys have a rough year ahead to make the money work. Despite Kasting's thoughts that Mozilla is simply an extension of Google's intent to make the web better, there may be more interest for Google to keep Mozilla alive and well down the road. The company is already under fire for unfair monopolization of web apps and advertising and the last thing Google needs is an antitrust suit that it killed Firefox in the browser race. Funding it with $1 billion may help avoid such a suit.