If Google's Sergey, Larry, or Schmidt were as ruthless as Zuckerberg, I have no doubt that Youtube would have been left to die.
Things just aren't that simple.
Viacom is simply not interested in running a money losing venture, otherwise they would have bought Joost instead of partnering with them. Disney didn't need the Youtube brand when they already invested heavily in go.com back in 1998. Look what happened to Hotmail dominance after Microsoft bought it. And what is Apple's experience with web apps?
So yes, things just aren't that simple.
I said that Google had the option of letting Youtube weaken, and buy them at a discount...or fully letting them die out and have Google Video dominate. Each decision with a different risk/reward ratio. They chose the lowest risk/reward since $1.6 billion is probably a relative drop in the bucket for them.
And I could have bought McAfee, I just lacked $7.7 billion.