Thanks for detailing. I also witnessed what happened, but I tend to blame corporate surveillance capitalism instead demonizing the very concept of ads.
Firstly, ads are information of value exchange, which itself has value. Even anarchists need to exchange goods and services.
Also, enthusiasm-based services die, because volunteers get tired, retire or find new exciting projects. They need money or other value to keep working in the long term. And we want them to.
Now, can there be a different system of ads, which would not enshittify it all? I think there can be, maybe it isnt yet created.
From the user perspective, I can imagine an option in server settings, letting me switch on some ads to support its upkeep. It would let me tick some boxes, e.g. only handmade fishing gear and personal IT assistance (whoever the sponsors are). It could be served passively like rss, with no tracking - but the server owners could be paid by estimates, like tv does. Or maybe even some ethical cryptography is possible in the open source system.
Maybe not exactly like that, but you get my line of thinking. Because there is also another type of enshitification: open source projects get abandoned, broken and die just like commercial ones.
Yes, there are donations, but most of us can afford to make only so much of them.
Therefore I prefer to think about reinventing and reclaiming system of honourable advertising, instead of extracting unpaid labor from all those volunteers until they quit.