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That sounds like an enormous pain in the arse just to piss off a vocal minority of users.

A vocal minority who are not bringing in any revenue for the site.

Saying that though the day they finally succeed in making ads unskippable will be the time for a competitor to move in.

When it's possible to skip baked in ads (SponsorBlock[1]) -- the whack-a-mole will continue no matter what. Even if it means you can't watch videos in realtime but have to wait for them to fully download to rip the ad out, someone will figure it out.

At that time everyone starts talking about it and I gotta imagine a bunch of new people become adblocking users.

[1] https://news.ycombinator.com/item?id=26886275

SponsorBlock only works because the sponsored segments are at the same location for every viewer. If Youtube spliced in their own ads they could easily do it at variable intervals preventing any crowd sourced database of ad segment timestamps. To be honest, nothing really stops Youtube from just turning on Widevine encryption for all videos (not just purchased/rented TV & movies) besides breaking compatibility with old devices. Sure widevine can be circumvented but most of the best/working cracks are not public.

Which only works long enough for someone to make some sort of video diffing system and removes anything others didn't get at that timestamp or something

Yeah, if YT wanted to insert unskippable ads on the backend, they would have years ago. The tech is not the hard part. They know it'd be a PR disaster for them.

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