Activator.CreateInstance throws ArgumentNullException for parameter 'Type'

Question

I recently encountered a problem with my Profile provider: it wouldn't retrieve profiles correctly (see error below). It worked locally, but when I put the code compiled by a Web Deployment project on a server it would crash.

Value cannot be null. Parameter name: type Description: An unhandled exception occurred during the execution of the current web request. Please review the stack trace for more information about the error and where it originated in the code.

Strack Trace:
[ArgumentNullException: Value cannot be null. Parameter name: type] System.Activator.CreateInstance(Type type, Boolean nonPublic) +2796915 System.Web.Profile.ProfileBase.CreateMyInstance(String username, Boolean isAuthenticated) +76 System.Web.Profile.ProfileBase.Create(String username, Boolean isAuthenticated) +312

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I found the solution, but it's far from being obvious (see my answer below).

Answer 1

The solution to my error was to uncheck this option from the Web Deployment project:

Treat as library component (remove App_Code.Compiled file)