Are linux containers really not securable? That's how Google runs all their stuff in production.
The meaning of "Linux containers are not secure" is that untrusted code should not be given root privileges within a container. Google is generally not doing that. They have e.g. trusted Gmail code running on the same machine as trusted YouTube code, handling untrusted emails and untrusted videos. But the Gmail team is not worried about the YouTube team hacking them, or vice versa. The security mechanisms just need to keep honest people honest.
And when they do have untrusted, third-party code to run, for Google Cloud Platform, they use VMs or actual sandboxes: see section 6.1 of the paper you linked.
http://csl.stanford.edu/~christos/publications/2015.heracles...
Basically, if someone breaks into Gmail, you're already in deep trouble. You're not significantly better off because they didn't break into Hangouts. Same in the other direction. So you can run those on the same hardware.
If you think YouTube is less sensitive than Gmail (I don't know if Google actually does), you can separate those, sure. But there are enough applications that are no worse to break into than YouTube, like Photos. You can run those on the same hardware.
At Google's scale it's not too hard to say, this is the stuff we're ridiculously paranoid about and this is everything else, and get 80% CPU utilization on both infrastructures.