Step 1: Provide a free service that people like, funded by the occasional ad
Step 3: Increase the amount of ads and start moderating content because now you have to worry about lawsuits
Do you have any idea how expensive bandwidth costs are? That's the reason there are very few video sites. How exactly is step 1 feasible without some sort of revenue in step 3? You don't just have to cover costs, you also have to make a profit.
Next time you want a free service, ask yourself if you would sign up for a 9-to-5 job with a $0 paycheck?