this post was submitted on 02 Dec 2023
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The resource implications are the problem. The cost - in terms of compute time - to bake those ads eats into the profit earned from advertising as a whole. Since only a fraction of users adblock, they would probably lose more money than they gained.
They'll consider it once the compute cost inserting the ads is low enough that it's worth it. I have no idea if we've reached that point yet, but I'm guessing not, since otherwise they'd already be doing it.
Most of the formats served by YouTube are already chunked, which means they can easily insert different chunks of video (ads, etc) at various points in the stream by changing the manifest. This is trivial, computationally. The complexity lies in building the mechanisms to make it work.
The non-chunked formats are only used by older devices, and are lower quality. Those would require re-encoding to change, but few users see them anyway, and those users probably don't adblock.