Yep, the video is split up in many tiny chunks, for example so the client can seamlessly change quality during playback in "auto"-mode. So they'd just have to

Yep, the video is split up in many tiny chunks, for example so the client can seamlessly change quality during playback in "auto"-mode. So they'd just have to find a good spot between those chunks and start injecting different chunks (i.e. the ad) there before continuing with the actual video. This doesn't require any re-encode or other shenanigans on the server side.