If contextual ads are more effective than personalized ads, then there is an enormous market waiting to have its lunch eaten by a contextual ad provider, which should be able to operate at a far lower cost than a personalized ad provider.

That we don't see that happening at all is pretty strong evidence that personalized ads are more effective than contextual ads. I find it highly unsurprising that ads which are based on the history of a person are more effective than ones based only on their present. If someone was looking for a car last week, odds are that they are still looking for a car.