Google advertises their products using their own ad network. And yes, they does cost them in opportunity cost because instead of making money selling that ad spot, they are claiming that space themselves depriving themselves of the revenue.

There shouldn't be a problem. If I offer two services and I advertise service 2 on the website for service 1 I'm just doing what makes sense.

What you are saying isn't normally a problem, the problem is the fact that google is by far the largest digital advertiser, where their core product is information retrieval. If you are able to manipulate information retrieval in your favor that's an unfair advantage.

I agree, it’s like Domino’s advertising their cinnamon sticks (or whatever) on their pizza boxes. They don’t have to advertise Papa John’s cinnamon sticks. Why should they?