>(O)r they flat out have no idea how to profile people except expressed interests from outside sources
I think this is the closest to the truth if you meant that the way I'm interpreting it. YouTube seems to base its search algorithm around certain, broadly defined parameters that are chosen purely based on advertiser demand. If I watch one "meme compilation" sent to me by a friend, my entire recommended section will be meme compilations for weeks afterward. These videos grab eyeballs, particularly eyeballs in my demographic category as a general rule. However, if I search for car repair videos surrounding a specific model, I will never see anything relevant in my recommendations except for general "auto enthusiast" videos that target a very broad audience (broad in terms of the demographics of this hobby segment). It seems like YouTube is very focused on serving videos that please their advertisers and that their major advertisers are only interested in very generic target categorization.
I'd say this is best explained by the fact that producing a compelling video advertisement is several orders of magnitude more expensive/difficult/labor intensive than simply choosing a set of keywords for a "click here to buy" ad to show up in google search results. This means microtargeting is effectively impossible as it just doesn't make sense to spend $15k+ filming a professional quality video advertisement (plus cost per impression/click expenses) just to sell a hyper-niche product like a manufacturer-specific diagnostic tool. That said, I am a huge fan of two specific channels which seem to draw a large enough and unique enough audience to get hyper-niche ads for things like capital pipeline maintenance equipment so maybe YouTube just doesn't have the volume of audience analytics to make such ads work on anything but the most obvious signals in the data.