I don't think it's bandwidth costs that are the big problem here. People want a competitor that offers what YouTube offers: a way to get paid for uploading videos.

I think this service is fundamentally very hard to produce. For all its faults with monetization, it's not clear it can be done better (beyond toy scale). It's clearly not profitable to have humans match videos with advertisers, and computers are inevitably going to screw up, like in this instance. edit: it seems this case is just a basic policy issue, though that policy is a consequence of trying to avoid attempting to solve this problem for the long tail of small time uploaders. I just assumed it was another false positive based on the title.

Keeping advertisers and uploaders happy seems like an almost impossible task. Google may not be doing very well at it, but that doesn't mean it's easy to do better.