1. It consumes nearly unlimited bandwidth.
2. It consumes nearly unlimited CPU for transcoding and serving media at different bitrates.
3. It consumes massive resources to police, from user moderation to appeasing content owners by building systems and databases like ContentID, etc.
4. It generates endless PR and legal headaches, which also costs a lot of money.
5. A huge amount of work has gone into getting users hooked through algorithms that seek to maximize watch time.
6. A huge amount of work has gone into building a network of advertisers who want to pay to put their ads on the platform.
7. And importantly, a huge amount of work has gone into building up an ecosystem of video producers who make their entire living off of YouTube and spend countless hours producing content for them at no cost to YouTube. Obviously YouTube isn't giving out Golden Play Button plaques out of the kindness of their heart. That's marketing.
And despite all this, Youtube almost always works perfectly for almost all users. People click on their phones and the videos just play - all around the world, even while traveling on transit, etc.
There are very few companies who have the resources to attempt to compete with that. Vimeo has obviously given up targeting the same mass market audience. Other competitors without unlimited deep pockets can't seem to make a dent.
It's a lot like asking why doesn't someone just make "a better Google." Unless you have unlimited resources and an unlimited budget, it probably isn't possible. It's smarter to make something else tangental in video that can outcompete Google instead of facing them head on. See: Twitch, TikTok, etc.