Being a (Near) Monopoly is Expensive
The more I think about it the more I realize why Google doesn't like the various flavors of paid links. It has nothing to do with organic search relevancy. The problem is that Google wants to broker all ad deals, and many forms of paid links are more efficient than AdWords is. If that news gets out, AdWords and Google crumble.
DoubleClick was the wrong model until Google bought them. But smart marketers are not trying to waste millions of dollars on overpriced brand ads.
Google Doesn't Sell Social Ads
If you are buying ads on Google you are trying to reach everyone searching for a keyword. If you buy contextual ads you are trusting relevancy matching algorithms. Those used to be the standard, but now there are far more efficient ways to reach early adopters. Social influence is far more important than most people give it credit for.
Content as Ads & Cheap Social Ads
People game Digg, draft stories for specific trusted editors, suggest stories to popular blogs, buy reviews on blogs, create products or ideas with marketing baked in, link nepotistically, etc. There are a lot of cheap and affordable ways to reach early adopters.
Editorial and social relationships have far more value than Google realize, and Matt Cutts's recent outbursts are just a hint at how Google is losing their dominant control over the web. And they deserve to, because...
The Web Doesn't Want to be Controlled
Sure Google likes link baiting today, but that is the next paid link. Google is backing themselves into a corner, destroying each signal of quality they once trusted, until one day the web is a piece of junk or Google is no longer relevant.