It doesn’t need to. The OS could download ads and show them in—app and report back impressions through the OS. And, Apple doesn’t make much money from iOS ads.
Apple doesn't have any ad frameworks that are open to third-party developers, so they would have to build one to support this. And that didn't work out so well last time they tried.
I don't understand why iOS doesn't allow blocking internet access for apps. You can only disallow mobile data access, but not WiFi access.
The frustrating part is that in China they have the functionality [0], so it's there, but we are not allowed to use it for our privacy.
[0] https://old.reddit.com/r/apple/comments/69k1j8/the_chinese_i...