> Given that what is shown on the feed is also personalized, the "contextual ads" still allowed bit makes no sense to me.

This is where the line between contextual and behavioural is blurry. In theory, behavioural == who I am, and contextual == where I am/what I am reading.

Shortly after the Cambridge Analytica scandal, we started getting companies selling "ethical" contextual targeting SDKs. The issue was that the "context" was a result of a ML model running on your device and using your location, accelerometer, magnetometer readings (etc...) to define a real-time profile of the user, e.g. "exercising at the <gym name>", "they're having coffee at <restaurant name>".