Do they, really? Would that not result in less revenue as people move to your less-annoying competition?

The less-annoying competition pays less, and end users don't have a choice of ad "vendors"; only app authors have that choice. App authors will choose whatever maximizes revenue; if more annoying ads drive off a few users but bring it more revenue from the remainder, the app will use more annoying ads.

If it did everyone would use chrome/firefox with adblock. A huge portion of the population seems to put up with all the ads thrown at them.

I didn't say it would push things to infinitely annoying. But the needle gets stuck leaning that way.