That's a different issue entirely. I don't see why advertising couldn't work without the tracking it brings (the tracking just makes advertising more profitable). If we have to go ad-funded, that would be the more acceptable way.
However, I don't think that advertising is critical to providing free services. It's only important if you want to build a huge business doing it, or have something extremely fancy. In those cases, I don't see what's wrong (and I see plenty right) with doing in exchange for money.
Also, there were plenty of free services before advertising wormed its way into the web, and there still are ad-free free services now.
The ad world wants you to think that they're an essential online component, of course, but I am far from convinced that's actually true.
All that said, ignoring whether or not online advertising is a positive, the online ad industry itself is an extreme negative. We'd be much better off if it ceased to exist and was replaced by companies that don't treat people in such a contemptible way.