They did pass on a lot of value to consumers. They used their profits to grow, build Gmail, buy and grow YouTube, build Android.

Just running Google as-is without ads would have produced less value in the long run. Plus the SEO tide (which relied on DoubleClick ads that weren't yet owned by Google) began to rise and would've drowned Google Search much earlier if they hadn't grown.

Where I think Google took the bad (for consumers) turn was when they purchased DoubleClick and began to consolidate the entire ad business. Instead of losing money to SEO spammers, they began to make money. This put Google into a conflict of interest against their own users. Ever since then they've been piling onto that conflict of interest, draining more and more value from their products.