There's not really that much to it. Pre-acquisition Youtube was burning through cash at a rapid and increasing rate. There was clearly no way they were going to find a revenue source which would even come close to covering their operating expenses. Google was one of only a few companies who were willing and able to keep Youtube going as a loss leader.
bandwidth and computation was more expensive back then so cost per stream was much higher than it is now. Even so, google also has craptons of its own fiber and its own CDN so can operate much cheaper than anyone else can at smaller scale.
