Obviously Google is pivoting on a number of fronts; if this enjoys wide adoption (unlikely as that may seem at the moment), they'll have to basically retreat from email content analytics, right?
But the other cost is searchability, which is a pain for a search-based email system. I don't think many people use labels very much.
However, based on the experience of desktop search, I think pure client side search would probably have reasonable initialization time and space overhead, and would certainly make searches faster, at least compared to my current Gmail experience.
Just install Mozilla Thunderbird and use IMAP. Client side search, all your devices sync via IMAP, no ads, and free software.
Anyway, it's off topic.
Actually it does, sort of: Right click on you@example.com, choose Search Messages, then Save as Search Folder, then "Match all Messages" and, in "Select the folders to search", Inbox and Sent.
They make most of their money on Google search anyway - and with just the queries, no personal context as far as I know. No privacy issues arise here, in fact, it would probably work in incognito mode just as well.
Are there any numbers on how much profit they actually make on Google Mail?
It allows people to make the choice of whether they value privacy more than usability, or, it allows fine-grained control -- end-to-end for messages you care to keep private, but no encryption for the mails you don't care about, but want searchability (mailing lists, notification emails, package tracking, etc)
But these are _exactly_ the things I, the user, want encrypted. I would probably even stop doing business with vendors that did not encrypt their transactional communications with me.
If Google's primary intent is to make sure that users keep their email encrypted completely, smart clients (like browsers and mobile apps) can do what Gmail servers can't.
Look at what the Google-provided Gmail Offline extension does. Now remember that End-to-End is just an extension, like Gmail Offline, except that this one also decrypts email on the client. Once email is decrypted on the client, analysis can be performed (like indexing the email for search), and that analysis can be sent to the Gmail servers or used to perform ad calls directly (I'm not saying that Google is doing this, but technologically all of this is pretty easy given everything else already done).
Things will start to move for the majority when end-to-end encryption can be done directly in the protocol, by default, i.e anything but email.
It's the same strategy google did with the browser and mobile. They don't want to be locked out of this play, because if they don't have influence then they may potentially loose all sorts of profiling data on you. So, with Google controlling the adoption they can ensure mechanisms to provide services around your encrypted data to benefit you (while also serving google by letting them into your encrypted life).