It seems like inherently a money pit to me. Was Google even profiting off it before they started cramming in ads and offering YT Premium?

Serving video data to, potentially, billions of users is absolutely expensive.

You can't, "in a weekend" a youtube clone that can stand up to the first viral hit.

That's what BitTorrent is for. The main issue with torrenting is that non-viral content is going to have very low availability.