I guess we have very different concepts about innovation. First and foremost the term “service” as posed here seems too broad: in the years Google decided to change and extend what the given service is.
Exploiting your existing user base, in order to get traction for your next service, that in your opinion gives an added value, is not what I’d call innovation. If your new product or service is really innovative, then you don’t need this kind of tricks to get traction, users will come to you (because of the added value your new service gives to them).
The early Google was innovative, and won over the other search engines because of that.
If you are not able to get traction without this, then what you call innovation is not innovative, and you’re overestimating your product. For me (and apparently for the eu commission too), the rest is simple propaganda. Some find comfortable to believe it, probably because it’s profitable for them.
I don’t know what is the climate inside Google, but if this is able to significantly chill their “innovation”, then I think that they’re simply waiting for the next big thing in tech.