"relevant ads" has to be one of the greatest PR/marketing/scam terms ever created. It's a lie to collect data and get small business to spend at least some advertising money even though they never get seen over the big companies competing for the same ad space. There was never an incentive to get actual relevant ads working, development would just be a waste of money.
But if the data isn't even used for the ads... Why do they collect them at all? I thought this was the only reason for businesses to collect data in the first place
It's not used for mass market ads, it's being used for analytics and being sold directly, and also for precision targeting (political attack ads shown only to people in a target constituency considered likely to vote for someone, to discourage them from doing so). Companies pay for "tell me what kind of people are looking at my site, in extreme detail". Scammers pay for "people who use/buy a particular item/service" so they can do targeted scams based on that. Political campaigns pay for targeted attack ads. For mass marketing, that kind of targeting is too expensive and the data is too fuzzy, since you basically want to reach everyone and the selection criteria are limited so you get lots of dumb "would you like to buy the thing you just bought".