The industry would definitely adapt, but I don't think it would be more favorable to society. Here's what I would expect to happen if we stopped letting third party ad networks detect ad fraud:
* Facebook, Youtube, Reddit, etc and other huge sites are already big enough to run their own ad serving, and keep doing that. They are still in a position to detect fraud as a first party, and they're big enough that advertisers trust them.
* Current ad networks build first-party integrations, where to the browser everything comes from the publisher's site. This could be designed as a newspaper licensing an ad serving system. This would provide high levels of trust, but not as high as the current system because you lose the protection of cross-origin iframes.
* Ad networks don't find it worth it to integrate with long-tail sites, the sites make less money, we have fewer of them.
If we went far enough to functionally remove ads from the internet, either by banning them or by ads losing the adblocker-blocker-blocker-blocker arms race, then I'd expect a different pattern:
* Everyone moves to subscriptions of various kinds, probably with slightly porous paywalls.
* Right now ads are effectively a progressive tax: the publisher makes more money from you in proportion to how valuable it is to advertise to you, which is roughly in proportion to how much money you have. To raise the same amount of money from subscriptions you need to charge more than what people can afford to pay at the low end, so some people get cut off.
* There's a massive drive to consolidation: people don't want to have a lot of subscriptions to manage, so we get things where one subscription covers many people. The economics of how small sites get included in this are complicated, and I suspect this also hoses the long tail.
* Free sites are popular, making money through some combination of product placement, charitable funding, and funding to push worldviews. The latter worries me a lot.
This is already happening in the advertisement world of today, where certain topics—some political but some not—are not "friendly to advertising", and so get demonetized on various platforms. How is that different from the scenario you worry so much about?
I think they're pretty different. If you look at the AdSense prohibited content policy  or the ones for other general-interest networks they don't allow their ads on sites about porn, drugs, gambling, etc. If you run a standard newspaper, for example, covering the full breadth of what a newspaper typically covers, you should be able to put ads on ~every story.
In a world without ads, the newspaper would probably be a subscription site, and would be competing with non-subscription sites that are funded by people who want to push a perspective. The current dynamic effectively prioritizes perspectives in terms of how much people want to read them (because that's where the advertising money is) while in this new dynamic there would be more prioritization based on how much money the people with that perspective have (because that's where the funding is). I think that's probably worse for the world?
Imo subscriptions aren't viable at all. For me to subscribe to something I need strong evidence that I will use it enough.
Automatic micropayments with a daily allowance seem like a much superior solution. They remove the friction of making the subscribe decision and keep the content creators in check by only paying for interesting content. Subscriptions can be easily forgotten or aren't annoying enough to bother to cancel them even if the provided content isn't worth it anymore.
I like the idea, and I do use their service. They have plenty of room to improve- the articles they pick tend to almost always have a certain political slant, and I find more puff than meat more often than I think a curated service should offer.
But. It's a real attempt at a new model, and they're trying. I do get enough value out of it to keep using them to the few-dollars-a-month level, and I hope they improve their system over time.
Which is precisely why companies prefer the subscription model. See gyms, cable TV, and insurance companies.
How do you ensure some content quality that goes beyond a headline and a catchy teaser paragraph?
Kindle Unlimited had this problem when they started distributing payouts based on pages read, which led to a proliferation of books with catchy first page, instructions to skip to the last page and a bunch of junk in between.
How about a simple button that makes a view/visit not count?
> instructions to skip to the last page
That happened because it didn't count pages read or time spent.
I’ve managed to find value from Kindle Unlimited, but pretty much nobody but self published authors (which I have no problem with, but there’s effectively zero bar to entry meaning quality is over the place) is available on the service because of the KDP Select issue. It doesn’t seem to be evenly enforced either, since the Harry Potter books are available via Kindle Unlimited yet are available for sale on other eBook stores, for example.