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Hey Nick. Hope you had a great holiday. My take is that Google already has far more than user check-boxed demographic info and they heavily leverage it when serving up search results. With few exceptions, advertisers want a consumer to buy their product and they really don't care if the buyer is between ages x and y (unless it's booze of course). Every time we search we give Google better information on which to serve us more relivent ads, thus they are able to serve less ads (as they have been in recent quarters) but get greater conversion and thus higher revenue.
I think the question we should ask ourselves is: Will user reported demographic information combined with "group" association be a net positive ROI means for advertisers to target consumers? If they answer is yes, then we must ask: Will it be more or less effective than results served through targeted search results?
It's very important to understand that Google search is a living and learning organism. Every time we search and then click the system gets better at iterating the next searchers true intentions. And the system has been learning for almost 10 years.