1 – Correct
If Google had not struck a corporate link with another company, Microsoft would have benefitted. Instead, Google was benefitted so this could be a reason for ‘Google making the pace’.
2 – Correct
If Google is making large profits, then a possible reason could be that it is gaining a large share of the advertising market.
3 – Wrong
This statement is not related to the conclusion given in paragraph 3.
Statements 1 and 2 are correct. So C is correct.