How is the incentive a blunder? Google employees can voluntarily devote a large portion of their paid time to any project of their choosing. By announcing this incentive, Larry is actually focusing the efforts of whole company into the market he thinks they need to grab.
I say the move is genious. There might be a little fewer tomato gardens on the campus at the end of the year, but he'll be leveraging the ideas and strength of the whole workforce into that single market. Zuck might very well have something to worry about now.