It sucks for Google too. The very last thing they want is the commoditization of search. Resisting brand advertising is likely a result of wanting to limit the perception of being a commodity. They'd MUCH rather have the perception that they don't need to compete on brand, that they're technically much better than everyone else.

The fact that they're doing lifestyle branding is actually a pretty bad sign. It means they feel Bing represents a real threat.

Lucky for Google, Microsoft sucks at advertising. Imagine if they had to compete with someone who was as good at lifestyle branding as Coca-Cola.