i highly doubt it. I would think they're probably doing some UDP packet voodoo bullshit.

Though it likely appears as transcoded.

The sheer cost of them being transcoded into videos is immense, even if they're live encoding every video.

What happens when you get an ad you need to takedown and remove? You're on disk transcode is suddenly useless now, and you need to make a new one, easy enough, you can just do that in the background, but this also means your ads are baked into each video, which is less than ideal, unless you're constantly updating them.

And if you're doing live transcodes, that means that you have to do this for every view on every video, and i'm not sure that's sustainable.

I suppose you could probably do a cached live transcode system to bring down the overhead, but i can't imagine it's easier than just pulling some voodoo networking bullshit to literally inject an advertisement.