Mozilla did lose their way. It happened because they abandoned their core users: you. People who loved Firefox so much they practically forced it on everyone around them.

Google released Chrome with a massive advertising campaign, reaching even to television. They put ads for Chrome on the world's biggest web properties. It was packaged in installers. Not to say it wasn't a good browser - but it wasn't obviously better than Firefox. This marketing campaign bought them a ton of marketshare.

Mozilla's response, instead of sticking by Mozilla evangelists, nearly all of whom were power users, was to decide that the browser was too complicated for its users. It needed to be more like Chrome. It needed to be the browser for the proverbial grandma. So they axed features (like Panorama), configurability, and extensibility, alienating everyone who really cared. Only they didn't have the marketing heft of Google, so they didn't get Grandma, either.

Ever since then they've been panicking and grasping at straws and shoving in shovelware like Pocket in obviously vain attempts to regain what they had. And they never will, until they make people like you and me LOVE Firefox again.