"downside to targeted advertising"
Mode shifting. When I'm in "work mode" I don't want to see ads for my daughter's birthday gift shopping research, and vice versa, its kind of jarring and probably the near opposite of the "smooth personalized engagement" the advertisers were promised. Heck, if I'm not at work, and work is stressful, I don't wanna see anything about work when I'm not at work. Or if I'm going on vacation I don't need the distraction of vacation ads while I'm theoretically working.
Another jarring impact is related to the current sorta-anonymous way the internet presently works where what I looked for on ebay has very little to do with what I looked for on amazon so ads based solely on one or the other are going to be an epic fail. If you google for the term "uncanny valley" what I'm claiming is 2013 era state of the art targeted advertising is very near a local minima or whatever of the uncanny valley. Less personal and it wouldn't be so creepy, and more personal and it would actually be in at least some danger of occasionally being useful...
"things I might actually want" - things I might actually want At This Moment.
One fundamental problem is "targeted ads" usually mean target to one identity. If they were ever implemented as one identity AND simultaneous activity, well OK.
This is before we hit process issues. Don't spam me with car ads after I've signed the papers and driven away in something else. Yes I researched heavily online so you think I'd be a great advertising victim, but you're too late, the project is done. Why can't I see ads relevant to what I'm interested in Now as opposed to what I was interested in the past?
I buy a new video card every 2-3 years. Advertising would be almost useful for a couple weeks every hundred or so weeks. Most of the ads will be after I make a purchase, probably viewed at work where I'm theoretically not supposed to be doing home computing projects.