Wow, that's cliche (and wrong). Webhosts are not the product in this situation. This is a supplier-distributor relationship, where Google is the supplier (of ads) and you are the distributor (to end consumers).
No, I think OP has it right. The paying customers are the advertisers. Websites supply "inventory" of impressions. (That's certainly what Google calls it in my Doubleclick dashboard.) Google is a distributor, and they sometimes decide to cut off certain suppliers.