No, it's a question about why we're tracking what people are reading, and whether that's a good thing. It's why librarians were the only significant contemporary dissenters to the Patriot Act. They've created ethical standards around what they do, unlike tech professionals (outside of the FSF.).
I hate ads and am a privacy advocate. However, I'm not going to stretch the facts. Yes it's technically possible to hand back the searched words to ad providers. But as of writing, you have no proof that OP did that. Using adsense doesn't mean you're plugging in that data back into Google. What reason does the app developer have to do that, unless they were paid or something to do so?
"Why would a dictionary need ads" well, because someone made the app. And maintains it. And provides it for free in exchange for a tracking cookie. Since the datasets are most likely free, they not possess the ability to even sell it. Who knows, you certainly don't unless you're the author or did the research.
Privacy and security are not absolute. It's a model. It's a series of tradeoffs. To parrot "but m'privacy!" is only doing harm and isn't solving privacy related problems.
> Why would every website's business model be based on ads and tracking?
Certainly there are for-pay services as well, but the absolute vast majority of people prefer to pay with their privacy than with their cash, to the point where starting a for-pay service of that type today without a known brand name behind it is not going to pay your hosting bills let alone put food on your table.