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The problem is the site is so popular that practically no one is clicking ads, everyone remembers YouTube without ads so when Google started placing ads in various places they're so obvious and people just ignore them. So many people (don't forget the summer, kids out of school) just sit on YouTube all day watching videos and running up bandwidth. If they hit it heavily with ads before/after videos and everything, I could picture a large portion of the people moving away from them and hosting elsewhere, which might sound bad if you're trying to get as much traffic as you can (who doesn't) but in the case of YouTube, turning people away couldn't be a bad thing.
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