You can Google "Adpocalypse" for more info on this. Here are a couple of articles on it:

https://www.nytimes.com/2017/04/17/arts/youtube-broadcasters...

http://www.tubefilter.com/2017/05/04/how-youtube-adpocalypse...

It started when some big advertisers made waves about their ads being placed on "extremist" videos on YouTube. Some quit Google's network at the time, too. To beg them back, Google essentially started removing anything that might upset those big advertisers. Like anything at all.

The "demonetization" actually came a bit later when there was backlash against those removals from users, so it was Google's way to "compromise". It wouldn't remove the more "sensitive" (but not extremist) videos, but it would demonetize them without much thought.