The internet is unbearable with ads. If a browser doesn't filter ads well it's unsuitable for use in 2023. If Chrome can't block YouTube ads anymore, then it's just not even a contender. The normies tend to lag a little with these things, but it won't be long before "Firefox is the one that works on YouTube" is common tech trivia.
Exactly, this is what killed internet explorer as well. Back in the day when popups and pop unders were still a thing, internet explorer provided an utterly miserable browsing experience that was the default. And then people started installing Firefox and Chrome to get a better experience. And then internet explorer market share started on a long, unstoppable slide down to becoming utterly irrelevant. MS tried to fix it later but it amounted to too little and too late.
Now Google is repeating Microsoft's mistakes here. The more miserable the ad experience, the stronger the incentive to do something about that. And when the solution is "Install Firefox, add uBlock Origin, Tada!", there are just going to be a lot of people that will figure out how to never see ads again. Firefox works on mobile as well and runs Youtube without ads just fine there. Think about that next time you are forced to watch an ad in the Youtube app on your phone.
The irony with Youtube is that ads are just a part of the revenue stream. They also get a revenue share on sponsoring deals and a few other things. Which for most youtubers is actually their main income stream. Ads are just the cherry on the cake. Which is why Google can't just kill off browser support or move everything to premium/paid accounts. They'd lose a lot of their viewers and revenue. And as a consequence, potentially some of their content creators even. Google is completely dependent on external content providers and viewers keeping the revenue going. No content, no views, no revenue. That's why they have to keep the platform such that it maximizes exposure for good videos.
I wish you were right but I doubt you are. Yes, the internet is absolutely unbearable with ads -- to you and me. But so many people suffer in silence and consider ads to be a minor annoyance that's simply inevitable.
Same with Android TV: most people accept the default launcher that serves ads and pushes content constantly. It takes some work to change the default launcher, but people won't even try. They accept it.
I pray every day that Manifest V3 will be the beginning of the end for Chrome, because it cripples ad blocking in an unacceptable way. But I very much doubt it will happen.
Google isn't one thing. It's an organization made up of individuals, with salaries and bonuses, and stock grants, and other incentive structures. It's entirely possible that those individuals, narrowly in the pursuit of those things, could squander something like browser market share, in exchange for dollars per view on youtube, or some other metric defined in an OKR.
The internet is unbearable with ads. If a browser doesn't filter ads well it's unsuitable for use in 2023. If Chrome can't block YouTube ads anymore, then it's just not even a contender. The normies tend to lag a little with these things, but it won't be long before "Firefox is the one that works on YouTube" is common tech trivia.