I personally think Google held itself back from OTT monetization strategies all these years as it waited for (a) its individual products to become undisputed market leaders, and (b) a unified privacy/social glue across all its products.
Now that the majority of users are locked in to Google - to specific products and across their entire suite of products - they are lifting their self-imposed restraints on privacy/aesthetics/advertising.
That's the only explanation to the whole set of stupid decisions they've been taking lately (reader, yt UI, gmail compose, ...): they make more cash by doing so.
I'm usually flamed or attacked for suggesting it in most forums, so it's very nice to see people experiencing the same thing with Google
Hangouts is the perfect example. Instead of an easily sortable, easily curatable list of contacts with an easy way to see if they're available or not... now the whole product is shiny, with flashy animations, very little user control of any part of the software, and a whole bunch of Google's "we know best" design ideas like a "special mix" of "recent*" contacts that you cannot alter in any way without actually removing a contact from Google entirely.
Well you can - you just can't offer the service for free.
Those concerns are completely unrelated to their algorithm. I doubt they want to maintain many Youtube UIs.
That is the reason why AdWords location targeting is kinda broken currently (at least on non-mobile devices it relies on IP geolocation). If one day AdWords start serving geographically correct ads for everyone, that's the day when the ad people got access to account data.
Google AD CLICKS increased by 22% and PPC went down 4%-8% so Googe made it up on volume. If showing more ads and/or making ads better than organic search is "optimizing for the 99% use case" then you aright.
But as shown on a few comments below Google in many cases shows only ads on the first browser screen. Terrible for users and terrible for Google long term. They should enjoy the steroid boost while it lasts.