But they would still prefer ad-free viewers to watch YouTube and add to the network effect than to spend their time elsewhere.

This claim is opposite to their actual current behavior. This isn't a case where they made their ad-blocking slightly more effective, they added it to the terms of service. They changed their stance legally. To use ad-blocking on yt, is now legally the same as using cheats in competitive games. Which game publishers have sued over.

Blocking ad-blocking is not "trivial" from the software side, the arms race has made the work of both sides incredibly complex in some cases. It's "trivial" to block the video if the ad isn't served just as it is "trivial" to have the ad-blocker pretend to watch it if that's the requirement.

It's fairly clear to me, that YT has decided that whatever losses this incurs, outweighs the benefits. And I tend to agree. YT's business model never made sense, not after they began allowing basically infinite uploads.

YT doesn't charge for all the things that actually cost it money, no-one pays them to store the content no-one watches from ten years ago, or even six months ago. The rate at which their expenses grow is not coupled to the rate at which they charge. In fact, their income is constant, while their expenses have the potential to be exponential.

Compare that to Netflix, which has a fixed catalogue that they curate, and doesn't grow out of the blue as users throw more at their servers to ingest. And they are in a downturn, with subscribing users!

Even targeted ads stop working once an individual gets used to them, ad-based revenue only works for a while, per customer. It only works long-term on a subset of people, which isn't lucrative, nor ethical. That modern platforms are disproportionately subsidized by their most gullible users is a disgusting reality.

That makes data-mining and targeted advertising a huge business, but insufficient for running something like YT. Because it, is an even bigger business, one that has included all the people you can't advertise to. Streaming doesn't do "economies of scale" the way physical products do, servers and bandwidth don't magically become cheaper the more you buy. In fact in recent years the opposite has often been true.

YT will never make enough with ads. The math simply doesn't work out. I am very skeptical that it makes sense for YT to "allow" ad-blocking to "spread the message" of their product. If anything, to become solvent, YT needs to deliberately downsize their audience.

To grow and form a network, can be left to the communities that form around channels.