@dhh, David Heinemeier Hanson, the creator of Ruby on Rails and partner at 37 Signals, tweets daily about the startup bubble and criticizes most startups that depend or will depend on advertising revenue instead of selling software. Of course, this is in his self-interest because his company sells software, such as Basecamp and Campfire.
The best way to compete with Google is to compete on design and community. This will give you the time to develop enough data-mining strength to make a competitive advertising revenue stream. I don’t think paid services for consumer and even business-to-business products is the answer.