Oh man, it's absolutely true for FOSS, unless you develop FOSS purely because of idealogical reasons, Richard Stallman-style. FOSS development can be turned into reputation and popularity, which can be turned into cash. It's much easier to get your startup off the ground (or find a good job or decent clients as a contractor, etc.) if you have 10,000 Twitter followers, because you write popular FOSS.
Which is exactly how FOSS is supposed to work. You give away something free of charge and available to everyone and you're getting something back from your users.
That doesn't make the software's user "the product" though. In your case the developer is making himself the product he tries to sell, not the users. This is really not comparable to advertisement and data collection.
But the user is not really 'the product' in any meaningful way. The developer's reputation from having +1 user does not have a negative impact on the user like advertising does.
Telling people not to trust anything they don't have to pay for seems a really obvious footgun for FOSS.
