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this post was submitted on 10 Oct 2024
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YouTube serves probably dozens of formats/bitrates, and has spent years tweaking how it ingests, transcodes, and serves videos. Adding in-stream ads might have been a bigger engineering task in that environment. Depending on the percentage of users/viewers avoiding ads, it might not have been worth the return.
You are correct, which goes into the cost category of doing a stream stitched integration. Also, when I left said ad server in 2016, I think I recall HLS streaming primarily supported by Apple devices. Devices like Roku's (don't quote me on that) didn't support it at the time so a lot of companies looked at where the majority of their streaming was occurring and decided it wasn't worth the hit.
As I know they transcode every uploaded video to their preferred format. They could use the same infrastructure for the ads. But maybe it's really too expensive.