Open-source has created more clones than any single company, and it keeps on cloning. And yet software companies that actually provide value aren't going out of business any time soon.
If Google really starts cloning everything, the way Microsoft is trying, they'll start losing the focus on their core values. As a result, their products will be inferior ... their resources are limited after-all.
Don't believe me? They have a social network for quite some time ... see http://www.orkut.com ... do you see it competing against Facebook? They also have a Wikipedia competitor ... knol.google.com ... do you see it overtaking Wikipedia?
But I do remember what my online-life was like before Google Search / GMail / Google Maps ... I used AltaVista and the first page of results was always full of junk. I used Yahoo Mail that had a slow interface, and only something like ~ 50 MB of storage ... I still have that account (using it for YIM) and it's practically unusable (their spam filters are crap ... in contrast with 2 GMail accounts + 2 Google Apps accounts that are doing just fine).
Google Apps is also really valuable ... I can have my email setup for my domain in a couple of hours, for free, having all the goodies of GMail.
I'm also using Google Translate ... which is really kick-ass sometimes (I'm not a native English speaker, and my native language isn't really popular, but Google Translate knows about it ;))
I'm also using Google Docs and Google Calendar ... Docs because it's there (came with Google Apps) and Calendar because it is intuitive and it is sending me SMS messages for free, plus my wife can see my schedule without me having to give her my password :)
Android and Chrome are 2 products launched to increase competition. I'm a Firefox user, but Chrome is so fast and so stable that it leaves Firefox in the dust ... I'd use it, but some Firefox-specific features are missing. And Android is the open-source mobile-OS we needed ... polished, backed by a strong brand, with a good SDK, and online-store.
I don't really think it's debatable whether Google provides value or not ... they clearly do. And what's "innovation" anyway?
Of course you're not going to see revolutionary ideas. That's why patents are so absurd.
But if you're fear-mongering about freebies, it means you're not providing enough value to justify your sales.