There is no reason we have to make the false choice you present. That is simply Google holding a gun to our heads to encourage us to choose something that is in Google's best interests rather than our own.
The choice should be between X targeted ads or X non-targeted ads. They can still target ads based on the content of the page, no different from how television and print ads worked prior to all of this data collection.
Because in OP's hypothetical, it is the equivalent of a gangster saying "I can shoot you in the face or punch you in the face, which do you prefer?"
They present a false choice where Google is saying "We can do this the easy way or the hard way" and we are forced to choose between bad and worse. There is no reason we should not have a less bad choice: the same amount of ads but non-targeted. We, as customers, should not be held hostage by the massive corporations.
The choice should be between X targeted ads or X non-targeted ads. They can still target ads based on the content of the page, no different from how television and print ads worked prior to all of this data collection.