UK search engine marketers VARN recently repeated an earlier experiment which found that 50% of 1,010 people tested couldn't distinguish AdWords links from organic links in Google SERPs.
In the new test, 54.7% couldn't identify the paid links.
Younger people were better at spotting the ads: e.g., 48.8% of users aged 18-24 said they could identify the paid ads, vs. only 30.0% of those aged 65+.
Of the 45.3% overall who say they can identify the paid links, 36.9% said "I know which they are but don't click them" and 8.4% said "I know which they are and do click them".
Which means that .369/.453= 81.5% of those who can recognize the ads avoid clicking on them.
That being the case, VARN researchers believe that Google's switch from yellow to green (same color as the URLs) "AD" labels may have been done to make the ads harder to spot, since most of the clicks on ads are coming from people who don't know the ads are ads.