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> Again, I'm willing to be told differently

I guess my point is that you're not going to be told differently, because that information is proprietary. It is not YouTube's habit to go around letting all the curious people know the details of its financials or the inner workings of its decision-making apparatus. You would not expect to be told all the factors that weigh into the feature's development, nor how it's turning out. So the fact that nobody has informed you or publicly announced that demonetization's goals are being achieved is the expected outcome, whether or it is performing as desired.

The only solid evidence you or I have access to is that they are still doing it. That at least strongly suggests that it has some significant benefits from YouTube's perspective, considering all the downsides you so rightly point out.