history-of-youtube

History of Youtube

YouTube was launched in February 2005 by former PayPal employees Chad Hurley, Jawed Karim, and Steve Chen. A mere 18 months after the first video was uploaded, the platform was acquired by Google in a well-publicized deal worth $1.65 billion.

YouTube is now the second most trafficked website on the internet with around 720,000 hours of content uploaded to the platform each day.

But how many users stop and think about the history of YouTube and how it came to be? Some of the platform’s early days and key turning points are explained in the article below.

The seed is sown

The seed for YouTube was sown at a dinner party in 2004. At the time, Karim in particular noted that despite the proliferation of devices that could shoot video, there were relatively few websites where users could share their creations.

Karim also declared in a later interview that the impetus for starting YouTube came after he couldn’t find a video of Janet Jackson’s wardrobe malfunction at the Super Bowl and footage of the 2004 Boxing Day tsunami.

Video-dating platform

Nevertheless, in late 2004, Hurley, Karim, and Chen started work on a website where users could upload video-based dating profiles. The three men worked out of Hurley’s garage in Menlo Park, a city within the San Francisco Bay area. 

After CEO Hurley registered the logo, trademark, and domain, the YouTube dating site was released to a small number of beta users to coincide with Valentine’s Day 2005.

However, the platform attracted little interest from daters, and the founders were forced to pay random women $100 to create a profile on the site. 

It was eventually decided that YouTube had no future as a dating site, but the platform on which the site was based was nevertheless an effective way to share videos.

This was proven by several users who uploaded videos that were not at all related to their dating aspirations.

Public launch, first video, and investment 

YouTube was released to the public in May 2005, with the very first video uploaded by Karim himself the previous month.

The 19-second clip, which has now been viewed more than 243 million times, features Karim at the San Diego Zoo talking about elephants.

In September 2005, a Nike advertisement went viral and became the first to reach 1 million views.

The video featured Brazilian soccer star Ronaldinho receiving his first pair of Golden Boots and was the first major instance of a company using YouTube as a promotional tool.

Two months later, VC firm Sequoia Capital invested $3.5 million in the platform which would be used to “accelerate the company’s growth, enhance product development and expand sales and marketing efforts.

Sequoia first learned of YouTube after partner and fellow former PayPal employee Roelof Botha used the platform to upload wedding and honeymoon videos.

Official launch and interest from Google

YouTube officially launched in December 2005. With around 8 million views per day at this point, funds from the Sequoia investment were used to improve YouTube’s servers and increase its bandwidth.

Various features are added over the following months such as playlists, full-screen video, subscriptions, and the company’s content verification system.

In April 2006, Google acquisitions lead Susan Wojcicki watched a video of two Chinese boys lip-synching to the Backstreet Boys.

Wojcicki, who is now CEO of YouTube, credits the video with convincing her that a site heavy on user-generated content would be a worthwhile purchase for the search giant.

Google’s acquisition!

In a video dated October 10, 2006, Steve Chen and Chad Hurley officialized the news of the acquisition of YouTube, from Google, for $1.65 billion.

The third co-founder, Jawed Karim was already out.

And yet the three co-founders all became multi-millionaires, making probably $300 million each for Chen and Hurley and around $66 million for Karim.

At the time, Google was trying to launch its video service called Google Video.

Yet, Google, while already a tech giant back then, could not figure out how to make Google Video as successful as YouTube.

YouTube, indeed was a rocketship, and what concerned them most the Google’s founders, Brin and Page, was the fact that YouTube was also used as a search engine for video.

With video becoming a dominant format for the Internet by 2006, Google was quite concerned about being unable to keep up with YouTube’s growth quickly.

YouTube, on his side, was executing extremely well, and it was backed by some of the major Silicon Valley VCs. Indeed, Sequoia backed YouTube through Roelof Botha.

Botha was CFO at PayPal before he joined Sequoia. He was a PayPal Mafia member.

The YouTube co-founders, looking for money to finance the operations that, since that point, had been running on Chen’s credit cards, turned to Botha, which they knew from PayPal.

Indeed, YouTube’s co-founders were former PayPal team members.

After eBay had acquired PayPal, Chen, Hurley, and Karim left to start their own company, which would later become YouTube.

By November 2005, Google, through Larry Page, had already started to seriously look into acquiring YouTube:

Source: House Judiciary Antitrust Subcommittee (2020) – Formatted by Internal Tech Emails on Twitter

Thus, by February 7, 2006, the acquisition of YouTube by Google gets on the CEO’s desk as a priority.

Source: House Judiciary Antitrust Subcommittee (2020) – Formatted by Internal Tech Emails on Twitter

In an initial consideration, Google considers an offer for YouTube of $50 million.

We were in February 2006, YouTube was burning cash, it wasn’t generating revenues, and yet Google would eventually offer much more to secure it.

However, by February 2006, Google kept looking into ways to partner up, without buying YouTube.

In fact, when Google first proposed the deal to YouTube, things didn’t move forward, as YouTube’s founding team was looking for “the myspace deal.”

In fact, at the time, back in July 2005, News Corp. the company – at the time – owned by the business shark, Rupert Murdoch, had acquired MySpace for $580 million in cash, setting an incredible precedent.

For Google’s executive team, that was way too expensive.

In fact, at the time, Google thought it could still figure out videos with its Google Video.

Yet, as months went by, Google Video didn’t gain as much traction as the executive’s team thought.

And as Yahoo showed up, things got way more interesting.

Google’s executive team, driven by its co-founders Page and Brin, was an incredible deal-maker.

They knew when the timing was right to close a deal before a competitor like Yahoo stole it.

Eventually, the deal was closed at $1.65 billion, and YouTube became part of Google.

youtube-ad-revenue
YouTube, by 2021, generated over $28 billion in advertising revenues. In the first nine months of 2022, YouTube generated over $21 billion in advertising revenues.

Key takeaways:

  • The seed for YouTube was sown at a dinner party in 2004 attended by co-founders Chad Hurley, Jawed Karim, and Steve Chen. The trio recognized that while there were many devices capable of shooting video, there were relatively few places where videos could be shared.
  • YouTube was launched as a dating website where users were asked to upload a video of themselves as part of their profile. For whatever reason, the idea didn’t catch on, but many continued to use the platform to upload random, unrelated videos. 
  • Deciding to run with the idea of a general video-sharing website, a beta version of YouTube was released in May 2005 and experienced rapid growth. A video of Chinese boys lip-synching to music convinced Google acquisition manager Susan Wojcicki that user-generated content was the way of the future.

Read Next: YouTube Business Model

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how-does-youtube-make-money
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, generating more than $28B in revenue by 2021. YouTube also makes money with its paid memberships and premium content.

Who owns Google?

The most prominent institutional shareholders are mutual funds BlackRock and The Vanguard Group, with 2.7% and 3.1%, respectively. Larry Page and Sergey Brin together have 51% of the voting power. Other shareholders comprise John Doerr (1.5%), venture capitalist and early investor in Google, and CEO, Sundar Pichai. Former Google CEO Eric Schmidt has 4.2% voting power. 

YouTube Competitors

youtube-competitors
YouTube is the most popular online video platform, a hybrid between a video search engine and a social media platform with a continuous feed prompted by social interactions and engagement. The platform is so popular that YouTube.com is the second most visited website. After being acquired by Google in 2006 for $1.65 billion, the platform now boasts over 2 billion registered users. Collectively, these users upload 500 hours of video every minute. The platform competes with other video engines like Vimeo and Dailymotion and social platforms like IGTV, TikTok, and Twitch.

Digital Advertising Industry

advertising-industry
The digital advertising industry has become a multi-billion industry dominated by a few key tech players. The industry’s advertising dollars are also fragmented across several small players and publishers across the web. Most of it is consolidated within brands like Google, YouTube, Facebook, Instagram, Amazon, Bing, Twitter, TikTok, which is growing very quickly, and Pinterest.

Google Business Model

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, which comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

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