Google did have a competitor called Google Video which was failing horrendously.
One of the huge downsides of Google Video from a consumer side was that videos took 3 - 5 days to upload as they were proactively being checked for copyright infringement. Google probably never could have gotten away with the laissez faire attitude towards copyright infringement that a young startup like Youtube which is why it made sense for them to buy it, regardless of the price.
It's hard to remember that period well and put things into context, but if you were there, honestly, Google Video was pretty good. In the very early days Google Video vs YouTube could have been a toss-up. There was nothing particularly compelling about the UX on YouTube (it got much better later). Google Video wasn't amazing UX, but technically it was fine. And had the advantage of getting prime real estate in search results.
YouTube's early success I suspect had a lot more to do with them paying fast and loose with enforcing IP rules. It wasn't until a bit after the Google acquisition that they started getting more serious about it.
I remember Google Videos being better than YouTube at the time, but IIRC it didn't have the amount of pirate content that initially made YouTube popular.
Google Video actually beat YouTube to market by about 3 months.
The problem was that Google Video was missing some critical features beyond the video player. It was harder to upload videos. It didn't get embedding until after YouTube, and then its embedded player had a clunkier, less-branded interface than YouTube's. It lacked the "related videos" sidebar that was the crucial feature that made YouTube take off. Google also couldn't put up the copyrighted content that YouTube often turned a blind eye too.
YouTube's actually a really good example of the better product winning. They understood their market and aggressively put out features that their early adopters wanted. It wasn't all that apparent to outsiders that the product was better, because the details don't register for them. (Personally, I didn't see what the big deal with YouTube was until 2007 or so.) But for the key early adopters, it was pretty clear which one was more fun to use.
Google acquired YouTube, they didn't make it, just like Android. At the time Google had Google Video which was terrible in comparison, and although Google was already the most used general purpose search engine, YouTube was so much better that it had already become the standard for publishing and/or searching videos.
I recall Google Video being the better platform when it was first released. Had a clear interface, integrated with google search, and better performance. I have no idea how Google failed to gain the lead.
Google Video was an actual product, competing with Youtube. When they decided to acquire the much more successful Youtube, its brand already had a lot of value and recognition, so it survived.
I remember this, it was very short lived but it indeed existed; I think it wasn't pre-YouTube though, I remember it as a direct YouTube competitor prior to the take over by Google.
YouTube was also _significantly_ smaller when Google purchased it. Perhaps they weren't able to create a properly competing platform, but they've certainly been wildly successful in growing it.
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