Earlier quoted context omitted.
What really killed them was the GIF explosion. Average image size remains largely static and bandwidth and storage costs steadily decline so if you get your timing exactly right, you can hit that sweet spot where your CPM declines slower than your hosting costs and provide an increasingly profitable business. However, GIFs completely upended that calculation by increasing the average file size by an order of magnitud…
Why would Google buy when they can just create one overnight if they wanted? Probably much more stable than Imgur too. Imgur is just a commodity. Youtube is not.
They did make their own version of youtube at one point, apparently it wasn't enough and they wanted the userbase too.