Agreed on all accounts, though it is difficult to argue that YouTube is an indispensable service for many goals (education included).
Google and Facebook make most of its money off ads because the reality is that users don't like paying for stuff directly.
And to be fair, I don't regret it, because I have another consideration -- I can easily get some nice Xiaomi phone and root it and install various blockers and alternative YouTube frontends... BUT... my Google account is very valuable, a lot is tied to it and Google has become a bit trigger-happy banning and deleting accounts. So I am not willing to risk it. Hence I paid up.
They might use your viewing history to target ads in other places. And they definitely use aggregate/anonymized viewing patterns to suggest similar videos people might like, but I don't see an issue with that.