They did make their own version of youtube at one point, apparently it wasn't enough and they wanted the userbase too.
"The acquisition of the privately held YouTube will enable Google to thrive in one area of the Internet where it has so far failed to gain footing. According to Hitwise, which monitors Web traffic, [YouTube] has the lion's share of online video traffic (...) a 46 percent share, MySpace has 23 percent and Google Video has 10 percent."
Meanwhile, this 2006 article from the Economist  stated:
"the deal is 'an aggressive, mature move for Google, one that shows that senior management is not too proud or stubborn to see that they can't build everything themselves,' says Henry Blodget, an analyst at Cherry Hill Research. Indeed, Google's Mr Schmidt freely conceded that YouTube is the 'clear winner', especially in creating social networks around its site."
Google had very much the power of building a YouTube-like community themselves, but buying out a competitor is a short-cut since it has the positive side-effect of removing that competition in our business. After buying YouTube, Google didn't have to waste time in building a community around a new product or "converting" the YouTube masses to theirs.
This short-cut way of acquisition is nowadays preferred by large companies rather than risk everything by doing innovation and "real" competition.
Summary: userbase/community was what drove the network effect, which made it impossible for Google to catch up, and that's why Google made the decision to purchase Youtube.