I think he's saying search itself runs as a loss-leader to get people into their hugely profitable AdWords product. In other words, they spend money in search in order to make money via ads. But yeah. The two go hand in hand, so I'm not sure I'd say search is a loss-leader.

Apologies for taking so long to reply. I've seemingly been banned from replying.

I'll just say that's a convoluted definition of a loss-leader. If a revenue line requires an expense, that expense is not a loss-leader, it's just a cost. That's like saying that having a website is a loss-leader for Amazon, since they really make their money on selling products.

That would make any media company a loss-leader for advertising, basically.

You're misreading what he wrote. It's the ads that bring revenue, and not search. Search is what helps to get people to see relevant ads. Google is not that much in the business of charging people money to provide search services.

I believe their argument is "if you ignore the sources of revenue, it runs at a loss", for what that's worth (which is little).

The search engine runs ads, and is enormously profitable.