This is why as an app developer I am deeply sceptical about Google's model. Okay, so the consumer saves a buck, but then you chip away at their goodwill every time you show an ad. And note, when you're showing an ad, to make it effective you have to make it intrusive, you either have to lock them out of the free functionality for a while or you need to make it eye-catching.
I don't know anyone that said "I'm so glad Google bought Youtube and plastered ads all over the videos".
People hate advertising so much they will go out of their way to avoid it.
In economic terms, as an app developer the way I see it is that free+ads is really just burning up my user's good will to enrich Google. The more I annoy my customers like this, the less likely they are to recommend my app. To the extent that it is less than a zero-sum game... it's not just an even 50:50 trade-off between for pay and ad-supported.