So for 1 Megabyte photos, they have on the order of 4,000 petabytes in storage now, and are adding 28 petabytes per week. So at Backblaze B2 prices, that would be $20m / month in storage and a mere $140k / month growth. (And Google's internal cost of storage is definitely less than Backblaze B2... the discounts they offer to public Google Cloud customers per petabyte are pretty big).
In comparison, Facebook is getting hit with more than 10PB of photos per month. YouTube surely dwarfs all of that. (Google Photos may be harder to monetize, but traffic is also way way lower).
Surely Google is being exceptionally stingy with this move to charging for Google Photos. Google Cloud itself has many many contracts that are north of $20m per month. This move is likely less of "the gains to ad targeting from private photos fell short even during the pandemic ad surge" and more of "the YouTube price hike went swimmingly, how can we gouge more for services now that the pandemic has shown people will pay?" Also probably with a sprinkle of "we're starting to have high employee turnover, how can we make sure the product doesn't become a zombie risk in 5 years?"