That would undermine their revenue model. Youtube isn't intended to be a walled garden for children, it's intended to be a viral social platform that targets consumers with advertising (or offers to upgrade to the paid tier) through the lure of content discovery.

I find it difficult to believe Google never knew these videos existed, since they appear to be an entire industry based on copyright infringement and gaming their algorithms, one would expect Google to want to kill them with fire. That they are allowed to proliferate can only mean they serve Google's interest for the site - they drive clicks and views.

Whatever other motives there may be for them (personally, I think they're nothing more sinister than monetizing clickbait) I think it's important to remember that Youtube is a business driven by clickbait, and the design of the site reinforces this everywhere it can.