It also only works when the advertisers know information about you, and the more they know, the better it works. This presents a perverse incentive to get as much information as possible, even if it's not in the individual's best interest.
To lay it out clearly, it is in an individual's best interest to have relevant ads shown if any ads are going to be shown. It is not in an individual's best interest to have personal, private or even possibly harmful information warehoused at different advertising entities. The tension between these two things is what we're discussing, and I think the harm (or possible harm) from having that personal information aggregated far outweighs the benefits to the individual for targeted advertising. That targeted advertising it also helps the company is of little consequence in this specific equation (that is, should I as an individual want this, but of course matters quite a bit in explaining the status quo).