"it seems like an inherent conflict of interest in the overall model."
actually, i think you're wrong. the business model is kinda like the yellow pages: everyone is listed - because that's what makes it useful and why people actually DO use it - but you can buy ads that make you more promient than your competitors.
that said, its my understanding that their patented "page rank" algorithm is a thing of the past: all these guys merely cache and crunch as much of the web as possible and index it. this is gonna be a game of branding and marketing, not technology. (actually, this is exactly what eric brewer recently said - the guy that founded inktomi and prof at uc berkeley: that, ironically, google isn't a tech company; its an ad company.)
i think the real worry comes from e.g. what bill joy (sun founder, who left recently and rejected a job at goole): the place is a zoo, and they hire all these smart phds to work on numerous different projects, none of which is a killer app. this is exactly what msft has been doing since 1995, to find "the next big thing", and everything goes kaput. they need a plan and a vision and some focus in pursuing "what comes next", whatever that be.