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If they didn't have search, they'd be in trouble. Looks like the competition is heating up for space on publishers' sites.

Google Sites Revenues - Google-owned sites generated revenues of $1.98 billion, or 62% of total revenues, in the fourth quarter of 2006. This represents an 80% increase over fourth quarter 2005 revenues of $1.10 billion and a 22% increase over third quarter 2006 revenues of $1.63 billion.

Google Network Revenues - Google's partner sites generated revenues, through AdSense programs, of $1.20 billion, or 37% of total revenues, in the fourth quarter of 2006. This is a 50% increase over network revenues of $799 million generated in the fourth quarter of 2005 and a 16% increase over third quarter 2006 revenues of $1.04 billion.

Amazing how their revenue keeps increasing. You would think they would have hit a plateau in ad revenue by now.
Why would there be a plateau? The number of advertisers and their budget is not fixed.
Long tail of Advertising. Basically there is an infinite amount of advertisers