The problem with Google is their filter also removes the most of the really high end people. I expect there are far fewer people at standard keeping a 4.0 and doing interesting work in their own time than there are people keeping a 3.5 at the same school and building cool things. Add in a insanely long interview process and poor salary's and many people they accept already have other jobs that they like.
You can also see this in what they develop. They are good at incrementally improving something like web mail, or online maps, but you don't see them pushing into new areas.
Google can afford a lot of false negatives, but it can't afford false positives. And from what I've seen, the interview process does a fairly good job of screening them out. Maybe it's just my team, but I don't see a whole lot of deadwood around.
FWIW, they hired me and I have nowhere near a 4.0 (it actually was a 3.0 + interesting projects).
And most successful products are just incremental improvements on what's out there. You really don't want to be a true innovator: who uses an Altair, or WWW (the browser, not the web), or AltaVista, or CP/M, or Visicalc, or Betamax, or a Xerox Alto, or Xanadu? But if you put enough innovations together, you get something really kickass like GMail. Going after established markets is just prudent business sense, it doesn't mean they aren't innovating.
(And there are some pretty crazy off-the-wall experiments that go on inside Google to, it's just that nobody can talk to you about the ones that haven't launched, and it's a good bet that 99.99% of the crazy stuff never will launch because it's basically useless.)
Depends on whether you're arguing that they don't push into new areas, or that they only do it by purchasing other companies, but I do see them pushing into new areas:
Google is pushing/has pushed out from their original search into ad sales, online video, webmail, domain hosting, online document and spreadsheet programs, desktop searching programs, browser development, health information, web analytics, a mobile phone operating system, iPhone software, location and tracking systems, a code repository, voice recognition, statistical language translation, price comparisons, online payment systems, photo editing and hosting, sketchup, feed reading, mapping, satellite imagine, astronomical imaging, local free wifi, Google Earth, chat and video chat, blog engine, app engine, book ripping... that's not all, either: http://en.wikipedia.org/wiki/List_of_Google_products
I don't expect them to come out with a new kind of paint or an electric car, but they do a lot with information.
You can also see this in what they develop. They are good at incrementally improving something like web mail, or online maps, but you don't see them pushing into new areas.