SEOPTI - 12:40 am on May 12, 2010 (gmt 0)
Fact is there are no adwords ads for most 4-5 word phrases. I would say more than 90% of those phrases are without a single adwords ad across seven industries I work with.
Since the graph shows more people are using 3-x words to find stuff on the web, this could be disturbing for Google. I think it hurts their earnings and it will even more hurt their adwords earnings as soon as Joe more and more discovers long tail.
My guess is they will adapt the algo for long tails to keep adwords profitable. And the key for them is to get a broad match adwords ad on every long tail phrase query.