You seem to have misunderstood what Google Labs was. It was not an organization doing basic research. It was (crappy) infrastructure for making neat little experiments available to the public without making them production quality.
It's also interesting how Google employees, at least the ones who post on HN, seem to be isolated from what is going on elsewhere in the company. Is there cross-pollination between functional groups within Google? Great research organisations often have this quality. (Prepare for waxing poetic from young Google employees who think they are changing the world...)