Exactly. It was more practical for Google to buy YouTube than try to take it on ... and yes, they tried with Google Video, but it just didn't get traction with the masses like YouTube did.
Plus, buying YouTube eliminated potential competition later from them, or whoever else was thinking of acquiring it...
And substantially raises the barrier of entry to others considering starting a similar service. YouTube's technology is easy to duplicate (there's zillions of clones out there), but not YouTube's mass appeal.
Getting back to your initial question, one potentially effective way to protect a truly innovative publicly viewable website is utilizing patent law for its presentation, functionality, etc.
To digress a bit, if one has a unique idea that has not been publicly released, but only pitched privately to others, the person could potentially protect their idea utilizing contracts, such as a non-disclosure agreement.
Ron