> Has anyone else noticed this?

Nope, quite the opposite.

> WebM was already a second class citizen on YouTube (and the web in general), > but the situation seems to worsen as time goes on.

We must be looking at different webs.

> Is Google giving up?

Hardly.
http://hardware.slashdot.org/story/14/01/03/2349203/youtube-goes-4k-and-vp9-at-ces

"These hardware vendors include major names like ARM, Broadcom, Intel, LG, Marvell, MediaTek, Nvidia, Panasonic, Philips, Qualcomm, RealTek, Samsung, Sigma, Sharp, Sony and Toshiba."

And then there's the upcoming Daala, targeting a generation beyond HEVC and VP9: http://people.xiph.org/~xiphmont/demo/daala/demo1.shtml

So things are looking pretty good in the free codec world.

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