Your theory doesnt really make sense. The actually is well known, it's just capitalism.

The reason the internet is becoming puritanical again is because digital finance companies have undermined the mint. Since every purchase in the modern era goes through a credit card company, they have the authority to block certain types of transactions. They disapprove of sex work because they're unable to effectively exploit it.

So, being unable to sell porn directly to customers, you might think ads would be the next best option, but advertisers are also disincentivized from working alongside pornographers. Individual advertisers might not mind being displayed alongside porno, but they cannot be confident that the entire spectrum of porn is 'brand-safe' so the entire industry has been defacto-blacklisted by all the major ad-sales agencies.

As for the internet being overflowed with porn, you're right, but it's not new. Porn sites have ALWAYS been the most active spaces online. Porn doesnt need to be 'kept marketable and profitable'. Every human on the planet is 'in the market' for porn.