The bigger question is does anyone really believe a business does something for free? Or do they pass the costs around?
Show me one business for profit or non profit that works for free. You can't as they don't stick around very long.
Google, as an individual it's never cost me a dime and with the free programs like Google Earth, and showing me how to root my Motorola Xoom tablet and such, I have no problem with them collecting my searches.
Google has done so well that everybody is into data collection as AT&T shows. And why facebook isn't a place to visit, they collect everything, and Mark Zuckerberg has proved time and time again he can't be trusted.
You do have a valid point; it's just Google is unique in the way they make their fortune, one is by sharing it with it's users, youtube for one. I have a 4 second video that has seen over 400K hits, the demographics are overwhelming with that many views and I can zero in on my target audience if I were into that.