Just a wild-ass-guess, but I bet the order of importance for factors driving Google's search ad revenue goes something like:
- Search terms (AdWords)
- IP geolocation
- Demographics (age, gender, income: derived or otherwise acquired)
- Search/browsing history
The line between the last two blurs a bit, since surely Google will try to fill in your demographic blanks based on your search and browsing patterns. But regardless, the first two they can do completely anonymously, and anyone who wants can likely escape the last two with the right browser settings or privacy extensions. Personally it doesn't bother me that much, since the results relevance I "trade" my privacy for has value for me as well as advertisers.
- Search terms (AdWords)
- IP geolocation
- Demographics (age, gender, income: derived or otherwise acquired)
- Search/browsing history
The line between the last two blurs a bit, since surely Google will try to fill in your demographic blanks based on your search and browsing patterns. But regardless, the first two they can do completely anonymously, and anyone who wants can likely escape the last two with the right browser settings or privacy extensions. Personally it doesn't bother me that much, since the results relevance I "trade" my privacy for has value for me as well as advertisers.