I had typed up something similar already but abandoned the post.
But that's pretty much exactly it. Google managed to build something early on that is difficult to compete with, and now they are resting on it. The company revenues are split up into 3 parts: search/ads, backbone internet, and "other". Where "other" is a tiny fraction of the whole that is almost inconsequential to their profit margin.
It's a "problem" that a lot of companies have where they are in a position where revenue is actually too easy. That may seem like a blessing but it has many downsides and typically chokes growth potential. The consequences for failure at a functional company are usually pretty significant. If SpaceX builds a rocket that doesn't work or if Toyota builds a car that absolutely nobody wants that hurts the bottom line. And it drives the company to do better. But at google what are the consequences? If someone at google makes an unprofitable product, well, that's the norm. It just gets tossed in the "other" bin with everything else and everyone laughs and goes back to their free lunches and complementary massages.
It's a romper room filled with nerf toys. And many folks at google are seemingly content to luxuriate in that environment. Why would anyone at google willingly push themselves out into the cold, unforgiving, and desolate world of real-world business where actions have serious consequences when they can just futz around in the "other" play room, slap ads on their "products" and call it a day?
Google has no drive to make youtube the best it can be. And the same goes for gdocs, gmail, app engine, or any other thing they make.