How so? TV and media have been doing it since forever - not as efficient but still. It's a valid model if you want open, pluralistic services.
Why do e.g. FB not offer a level of service that is viable without personally identifiable information being used for targeting?
There seems to be a BIG difference in the effectiveness and mechanisms of statistical target groups vs. individual targeting. If you've followed the Cambridge Analytica scandal, you know to what degree this information can be abused.
And lets not kid ourselves, very few people would pay $100+ for facebook, even though it would be interesting to see them offer that option.
If I need to lure users into using my platform by pretending to be "free" so I can get a monopoly going, then that just underlines my point of a non-viable business model.
You just described every startup in SV, but in any case facebook did not have ads platform in its growth phase.