I think that's absolutely how it works (in part). Ads curated toward your demographic! Maybe it's not inherently purposeful, but it's harmful, nonetheless.

In a subr×ddit about alcohol recovery? "Our algorithm detected that your post history contains the word "alcohol" or "beer" a lot! We will tailor your ads to cater to your interests for maximum profits!" Boom. There you go.

It takes the human aspect out of the community and drives it to become harmful at worst and soulless at best.