I think there is a fundamental problem with an ad-subsidized service. Even ignoring the privacy issues inherent to the way modern advertising works in practice (which you probably shouldn’t ignore), the mere presence of an advertiser as a third party whose interests the service provider must consider creates malign incentives.

I also think providing a service for free is fundamentally anti-competitive. It’s like the ultimate form of dumping. And there are many studies showing that people are irrational about zero-cost goods, so it’s even harder to compete against than might be expected.

Arguably, the advertiser is not merely a third party whose interests the service provider must consider, but rather the actual paying customer (and much more of the second party) whose interests the service provider must satisfy to make revenue. That to me puts into perspective the absurdity of this business model: the user is not the customer, the product or service itself is not the product but only a means to keep offering the actual product to the paying customer.