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It's only "too big to fix" because Youtube insists on fixing it centrally. They could fix it by delegating responsibility to creators, and implementing some sort of "user-rank" to avoid moderating every single bit of content via paid employees.

If Google were serious enough about the issue, there's an opportunity here. If they created an effective enough, and flexible enough, distributed 'content moderation' back-end, they could probably offer it as a service to other businesses, too.

This strikes me as somewhat unrealistic. Distributed ranking systems like PageRank are susceptible to being gamed; and it is a constant arms race with SEO experts.
If it's difficult, as opposed to unrealistic, then it's a good opportunity for a third party (or a google spin-off) to wholly dedicate itself to solving. Also, PageRank is easier to game because Google must stick to existing rules (eg: if it's on the web, Google is supposed to index it). When it comes to a service tied to a user account, the site operator has more agency to impose its own rules.