On the website I run, the readers which would be most likely to upgrade and pay for a 'happy reader' version of the website would actually be the same group of readers that advertisers would actually want interacting with advertisements.

I've tried to not bombard readers with a terrible experience and they appreciate it. Advertisers stick around and renew regularly, signaling that the real estate is still valuable enough to pay for. So in my experience, you don't have to sacrifice user experience to collect dollars from advertisers.

Definitely true, but could those visitors generate more value for you as direct subscribers than as eyeballs? If they're even moderately likely to subscribe, I'd expect the answer to be "yes".

Of course, there's no one size fits all solution for monetising a site - depending on your skill with ad sales (sounds like you're selling direct?), your demographic, and so on, different solutions will work better.

Agreed. I wonder how they'll handle Pocket, which I love, but is also designed to get rid of both ads and pagination for free.

It probably doesn't even make a blip on their radar. I wonder if even browser-based adblockers are really an issue for them, and they most likely have couple orders of magnitude more users.

It is technically possible to block the IP ranges of reading/caching web apps, as well as refusing to show content to readers blocking ads, but few providers bother. Neither usage scenario is practiced widely enough to significantly impact ad income, except on sites that serve a very tech-proficient userbase.