How did you reach this conclusion? The main problem is that it works way better than traditional marketing medium.
It's the reason Google and Facebook are so massive, why would publishers choose to pay them if it doesn't work?
Because they believe it works and it's impossible to prove otherwise?
Like on the frontend side with Facebook which thinks if I'm interested into cycling I will also be interested in cars (both are on the street, right?) or if I'm interested in some more dirty humor I also want to see more "naughty" stuff.
And also on the backend used by magazines and they mostly don't use the user profiles because it's too targeted and doesn't have enough audience. And if you make the targeting broad enough you'll have again people interested in chocolate so you target them with wine and whiskey.
Or even better on Amazon where you can buy a new TV and when you have done so it will suggest you even more TVs for the next months.
However what you're saying isn't completely wrong. I've also seen user targeting become a self-fulfilling prophecy. What happens is that it's championed by a high level executive as the panacea for improving revenue, implemented, and seen to not work. Now, as we all now, the C*O is Always Correct, so everything else around it is modified until the user-level targeting A/B test shows positive results. Usually this ends up in the product being tortured into an unusable mess.