Earlier quoted context omitted.
If you were paying google hosting fees, that'd be $700. I'm guessing the cost to them is far lower than that, though. ($0.01 per GiB) That also equates to over 5 million downloads. I'm guessing this app is likely pulling in a lot more than $700 for google. https://cloud.google.com/vpc/network-pricing
FOSS app. No IAPs/subscriptions. Google's taking the hit on this one 10MM+ downloads on the Play Store (Unsure if Google gives us actual figures on the dashboard)
Google takes a hit on some apps to sell and advertise with others. What's hurting Google in this case is the release of an app update that is bad for customers and bad for the business. While it's just one papercut, the "huh, my iPhone version works just fine" razzing will ring just a bit more true for customers who got bit by the update. Do it enough, and they'll get tired of the hassle and jump.
It's a rough balance, building something scalable that also holds high quality, and separate policy decisions can sometimes lead to truly Kafkaesque journeys for developers and users. It's at least instructive for others. Making and evolving APIs and ecosystems is hard. Think very carefully about the holistic impacts of decisions.