This is totally unresearched first draft post, so it might contain some gross misunderstandings. I am going to look into the history of that quote and my layman economics and update my notes below at some point.My highly unoriginal observation on the pithy one-liner:
"If you are not paying for the service, then you are the product being sold"Is that it follows that it is in the best interests  of you to be a good quality product.
My reasoning follows thusly:
i. When choosing between 2 fixed quality products, the customer prefers the item of lowest price . When choosing between 2 fixed price products, a customer will prefer the item of greater quality. (either the customer comes to market with a fixed budget and buys the best quality available, or the customer requires a fixed quality and buys the cheapest available)
(See note 3 on the subjective customer-value placed on quality.)
ii. (a) If the cost of supplying quality i.e. value of attracting the quality product (You) remains the same, the profitability of the exchange for the supplier increases with quality.
The assumption is that all else is held fixed, hence ignoring elastic affects.
ii. (b) The customer is participating in the exchange hence the perceived-value of the good to the customer is higher.
iii. When the "product" is user data or user eyeballs. Then Quality to the advertising customer is targeting accuracy, specificity, presentation, conversion rates and other things that float marketing types boats.
Due to (ii.(a)), increased profits make capital available for further investment into the service that is in essence "the bait".
Hence providing location data, more specific ad-block+ lists, and contributing to the ecosystems around the free-to-end-user projects can potentially increase the quality of the service.
It's possible to be selective about which relationships you, as a product, take part it in such a way as you affect the profitability to the supplier or value to the customer. (e.g. you can choose to ad-block a particular supplier from making revenue, e.g. adverts on the Daily Mail web site, or block content derived from some particular advertiser to be displayed to you on other web real estate, e.g. adverts for the Daily Mail on facebook)
So... In summary
It took a long while for us to get to grips with our power as consumers.
I think we now have to come up with strategies to leverage our power as products. or some bullshit line similar to that, but you know what I mean.
I am thinking of maybe tools and browser plug-ins to enable selectivity in participating in the campaigns. I know all this stuff exists, but I am thinking that putting it on an explicit footing helps me think it through..
1) when I say best interests, I mean in the limited context of the relationship of the product (you), the service (google, facebook etc) and the customer (the advertisers) and ignore externalities such as "the greater good of mankind" and being treated like a dumb-shit etc
2) except for giffen goods and similar exceptions. see freakonomics for examples.
3) obviously "quality" is subjective, some conscientious consumer might place a value premium on ethical production, however the participating supplier might well find that it is cheaper to pay for marketing to "spin" the description of their product as ethical.