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Payment definitely is needed, unless you're offering to host it for them.

I hate ads just as much as everyone else, but if that's how they are planning to pay for hosting/time, it is absolutely needed.

You can have ads without the tracking, just like @andrepd mentioned.

You can, with downsides. Uninformed ads have less value. You can also make people pay, and have no ads.

You can do lots of things.