Google does make money from ads, but that is not their primary business. Yes they have AdWords and they bought DoubleClick around 2007. They also have YouTube that took them forever to figure out how to monetize. They bought Urchin (Google Analytics) specifically to monetize AdWords. Google’s primary business is search. They monetize search in a couple different ways. The primary revenue model for search is micro auc…
Google monetizes search with ads. The micro auctions are for those ads. They even say "Ad" on each of them.
If you have evidence that they're doing paid placement in the actual search results, I'd love to see it.
FWIW, I do wish Google's ads were more obviously visually distinct from search results (and fewer in number).