I sort of get how it happens but I can't quite understand how the level of stupidity required by management is achieved in practice to actually do it.
It's a common commercial lifecycle for all sorts of things. You make a new thing. You find a way to make money from the thing. You expand your market for the thing by filling a need and treating your customers well. At some point you want to cash out, and start burning your userbase to make extra money. Eventually this destroys the whole thing.
It works the same way it did in 1999, so my grandma can still sell stuff on it. That's it. Done. It's probably made way more money by not changing anything than by increasing CPMs 5% by playing a fullscreen ad every 6 seconds.