So everyone may already know this stuff, but for anyone who doesn't, here's some info:
If my AdWords ad appears on your adsense site, Google tells me so. If I dislike anything about your site (volume, conversion rate, CPA, CPC, etc) I just hit a checkbox and exclude you. I can also move to you "managed placements", which means I can control my bids for your site specifically... otherwise all sites that ad appears on have the same bid. Meaning if you're awesome, and I make you a "managed placement", I can bid higher to get more traffic and thus pay you more. If you suck, I can delete you or make you a "managed placement" and bid you down.
All of those things that might make me want to bid your placement up or down are related to your position/ranking. Your numbers become my numbers, and Google's/AdWords'/Advertisers' opinions of your site are what define the marketplace where your traffic is bought and sold. It's not just some arbitrary algorithm behind the scenes. Competitors for the ad space/real estate matter, seasonality matters, conditions within advertisers' verticals matter, buzz matters, available ad formats and sizes matter, on-site conversion rates matter... I only go into this because if you're building a site that survives on ad revenue, then you have to build something advertisers want and not just worry about some phantom algorithm that every "SEO" on DigitalPunt is arguing about. Make content while they make threads. Falling revenue isn't always Google's fault.
Regarding expansion, yeah Google is expanding into new products and verticals. The in-ad forms they've been testing for the last few years are one of many steps they're taking to muscle lead generation/aggregation companies out of the space. They killed off arbitrage affiliates because if there's money to be made in intermediary arbitrage then obviously they're not charging enough for traffic. And the examples of this just go on and on, including their expansion into my vertical.
FWIW, I'm a 7-fig adwords advertiser so I'm not just talking out my @$$.