The beauty is that Googles business works just fine with FLOC and their competitors don't.
When third party trackers "abuse" the ids one "obvious" solution could be to only allow "trusted" advertisers to receive it.
If, in a great stroke of fortune, the requirements to become trusted are basically "be Google" I wouldn't be surprised.
Google's Widevine (streaming media DRM) is a great correlate to this. If you wanted to try and create a great, novel 4th web engine/browser; good luck. Many of the major streaming sites use Widevine. You can't build a browser to stream that content without asking for access to Widevine encryption. Google will not give it to you; they may, eventually, if you build up enough of a userbase, but what browser would be able to build up that userbase without access to streaming media?
Its less about building a bulwark around Google's technology, a clear monopoly, and moreso a bulwark around the Boys Club of Established Big Tech. Then Google can go to Congress and say "we have competition, look, Facebook serves ads".
Yes, you just don't understand what working is. Everyone realizes you can do screen recording, HDMI recording, or just invite a friend over to watch on your screen. What it does do is make the content owners comfortable enough that there is a reasonable level of protection as to allow their content to be streamed online.
Because these users are still anonymous to companies using Google services. Uniquely identifying users, and the liability for doing so, falls to intermediary services. I expect it will be the domain of data brokers like LiveRamp, Epsilon, and others.
"Use Google and be compliant" is a good sales tool and good value for companies that use Google services. Companies that don't want to sell data to brokers will stick with Google.