I think it's understated just how much advertising revenue Google/Youtube is making off of these deranged videos.

Youtube's Autoplay feature combined with millions of parents willing to sit their children in front of a screen indefinitely means easy money, as most people don't block ads and young children won't skip them. It means millions of ads being watched to completion, which is exactly what advertisers want to hear in regards to their ads, making ad space that much more valuable.

Since the content of these videos is often not illegal, regardless of how disturbing or inappropriate they are, Youtube cannot be forced by a third party to kill these cash cows. Parents tend to assume nothing like is allowed on Youtube, or that Youtube Kids will reliably filter out anything objectionable, so relatively few of them will know their children are watching things like this. I'm sure some parents hardly even care what their kids watch, so long as their child is distracted long enough for them to get some work done.

There's no way Youtube is ignorant about this phenomenon. They're making so much money off of it that it would be impossible to play dumb. They're just not going to do anything about it, unless there's a real, consistent outrage that costs them more money than they're gaining. I'm not quite sure that's possible, but if it is, it's only going to happen if more people know about this. Not just conspiracy-minded redditors. Everyday people, parents, Youtube power-users. Large amounts of people have to be actively disgusted and vocal about it.