Arguably, the advertiser is not merely a third party whose interests the service provider must consider, but rather the actual paying customer (and much more of the second party) whose interests the service provider must satisfy to make revenue. That to me puts into perspective the absurdity of this business model: the user is not the customer, the product or service itself is not the product but only a means to keep offering the actual product to the paying customer.

Yes, I mean from the consumer perspective. You're right that the user of an entirely ad-funded service isn't the real customer. They're still at least somewhat the customer when they're still providing some of the revenue though.