Sure but unless this new service is along the lines of "I generate my own key pair _and then only ever give Google my public key_" there's no way they're getting me to trust them. And I seriously doubt that's something they are going to try to do, it's to much of a niche market for Google IMO.
Are people no longer clicking on ads? I'm pretty sure Google is still raking the millions and billions it's getting from ad revenue. The environment isn't actually changing.
Hmm this thread is full of people talking about pulling their data off google, so I guess we are talking about longer term viability of free google apps.