These trends combined will mean that eventually it will seem old-fashioned to use a remotely-hosted model for anything other than the most demanding tasks. Just as we don't use mainframes for computation anymore outside of niche tasks like 3D render farms.
The only people using ad-supported AI will be people who can't afford a newer device with local inference. So it will be more or less like the web today, where ads are primarily targeted and viewed by less-affluent and less-technical users.
Of course, I can't see the future, but it would take a lot for those trend lines to not converge. The only thing that could delay the convergence is true AGI, but I'm currently not a believer.