If ads had never been allowed, would search be more like AOl's keywords? Would we still be limited to 10MB in email storage? Think what you will, but Google has developed a ton of impressive technology and open sourced quite a bit of it; they have been much more open stewards than I would expect if AOL and IBM and Microsoft built out the internet.
(They have also given everyone a ton of value without asking for money from users -- it's important to not underestimate how far we've come on the backs of the ad dollar).
It might be a faustian bargain, or it might not be.