This is almost certainly a non-story. There's been no statement, comment, leak or even rumour from either side regarding this. Pure conjecture... and in any case the extension is used by fewer than 1% of Firefox users - hardly an important market segment. It may even be that those 1% will click on the server-side-supplied Adwords on Google's search results more frequently than most, given their underexposure to advertising elsewhere.

Yes it is conjecture as indicated by the question mark in the headline but it is based on quite sound reasoning and ...

"When we asked Google for an answer, the company stayed quiet, as it did when The Times came calling. And we're still awaiting an email from Mozilla on the matter. But it isn't hard to connect the dots."

If there was no problem wouldn't they have been happy to deny it?

It doesn't matter whether this specific story is 100% accurate. What is important is the power dynamics between Google and Firefox.

Firefox is now much more significant that before. Recent browser stats show Firefox driving 10% to 30% of US website traffic (depending on type of site). They just hit 400 million downloads and are continuing to grow.

If Firefox changed their defaults to Yahoo, it would be a huge hit to Google traffic and ad revenue. Even if Firefox made adblock the default, they would still be attractive because they control a very large market share of users (that just happens to be increasing every month).

Stupid question: who controls Firefox, and what if any obligations do they currently have to default to Google for search?

google actively encourages people to download the firefox browser with their adsense product. they encourage publishers to plug it with buttons and links, and give them commission everytime someone downloads it.

so firefox's increase in market share is partly due to google.

presumably google are expecting firefox to carry on eating into IE's market share, and can see the problems that might entail for them with the adblockers... (IE will never install an adblocker as standard because Microsoft have their own ad product)... so maybe they are trying to get a bit of a hold over them.

if a few years down the line firefox decides to install an adblocker as standard (like they already do for pop-ups) then google will kick up a fuss -- and will firefox want to threaten all the extra exposure that google is giving them?