One thing you have to understand about Google is that they're a technology company at their core, unlike Microsoft and Apple which have turned into product comp

One thing you have to understand about Google is that they're a technology company at their core, unlike Microsoft and Apple which have turned into product companies. Google is very much focused on creating the best technology, which they then apply in support of their single source of revenue right now, which is advertising. So although YouTube does not generate revenue, perhaps that was never the goal. Perhaps YouTube provided them the opportunity to strengthen their technology that supports advertising. This can be said about many Google ventures right now including Android, Google Voice, and more. These other projects are unlikely to generate significant revenue in and of themselves, but so long as they draw people to the Google platform and the technology enhances their ability to generate more revenue for their core advertising, I think the company considers them a win.