I wonder at what point will Google start splicing ads directly into the video feed? Surely there's a way to do it without transcoding the entire file again.
Twitch already does this on the fly and it's a pain to bypass, I think the question is why Youtube hasn't started doing it yet given how effective it is.
I can't imagine that google hasn't thought about it. The sheer scale of the processing cost to do it is probably too high with as much video they serve.