I think it's one of the great lost opportunities in human history.
I don't know what the "correct" course of action would have been, instead of making everything ad-supported and mostly terrible. Some kind of very very seamless micropayments? Maybe there was no "correct choice." Maybe "free, but awful" always would have won no matter the alternative.
But man, this outcome sucks. The internet turned out to be just one more way to squirt advertisements into our eyeballs.