I'm interested in what the end game is here because I find it hard to believe that server side re-encoding videos on demand to inject an ad in a way that has no insertion point that can be filtered for could even be profitable. Millions of views per day, each with a customized ad baked into the video on demand, at that point you've basically gotta be costing them more money than just watching the video normally with adblock, don't you? The compute time for thousands upon thousands of videos being opened every second, all having to go through re-encoding (then again transcoding into all the different quality options) has to be fucking enormous.
Like, any way other than that has something that can be filtered. Even then, if you can't avoid the ad being injected into the video then surely you can filter whatever's forcing you to watch it and not just skip it. Whatever method used, someone's gonna find a way, at some point there's something forcing you to sit there and watch that ad and that's something that can be manipulated. So it's all a big, expensive "fuck you" to anyone who uses an adblocker for a little while, just because they can. It really does feel personal to someone at Google because there's no way all this could even be worth it.