Earlier quoted context omitted.
You're missing the point. Google feels a need to respond to Bing, which it hasn't before. However stupid you may think the ads are, Google is responding as if Bing is a (potentially) legitimate threat.
Of course it is a legitimate threat - if Bing started doing searches in any consistently better way than Google I'd use that. I have about as much loyalty to Google as a service as I did to Altavista: i.e. practically none. I suspect others think this way and Google knows it.
I have no doubt that Google will improve and adjust to any threats Bing might one day bring. The cost of me moving all of my data and changing habits to another place would be high. That and there is no way in hell I'd trust Microsoft with my data.