[0:00]YouTube, YouTube, YouTube. How did YouTube go from a failed dating site on the edge of bankruptcy to the second most viewed website in the world? With hundreds of billions of dollars. YouTube's rise is a wild underdog success story. But this video is also a journey through the different eras of YouTube. From the rise of the creator economy, to the Adpocalypse, to all kinds of scandals and drama. And trust me, this story gets crazy. Welcome to the insane history of YouTube.
[0:52]The story of YouTube begins in a surprising place: the headquarters of PayPal. It's 1999 and three early PayPal employees are Steve Chen, Chad Hurley, and Jawed Karim. These three guys found they made a great team together. But, they also had something else in common too. Often, the three of them would meet for lunch at a coffee shop outside of PayPal's headquarters and talk about all the interesting ways the internet was evolving. And all the different business ideas this gave them. Their dream was to start their own internet company and get rich. However, their dreams quickly fell apart. In 2002, PayPal was acquired by eBay, its CEO was replaced, and the company focus changed. The new workload became unbearable and boring. So Chad left PayPal to become a design consultant, Jawed went back to finish his degree, and Steve eventually left for Facebook. But the trio kept in touch. And by 2005, they were paying closer attention to a popular website called Hotornot, which allowed anyone to upload a photo of themselves for other people to rate. The guys wondered, what if instead of pictures, they built a site where users could upload videos of themselves? People could get rated and also reach out to each other to connect. And they even had a name for it: YouTube. You, because users were showing themselves and Tube, in reference to old analog TV sets. And thus, YouTube's first slogan was Tune In, Hook Up. So YouTube was intended to be a video dating site. Coincidentally, they registered the domain for YouTube on Valentine's Day 2005. After months of tireless work, on April 23rd, 2005, YouTube entered a public beta, and Jawed uploaded the first ever YouTube video, which was just him at the zoo. All right, so here we are, one of the elephants. And the cool thing about these guys is that they have really, really, really long, um, trunks. And that's, that's cool. At the top of the site, you could enter if you were searching for videos of men or women, and at what age range. However, the problem was, YouTube's dating scene was a ghost town. At one point, the founders tried to pay women on Craigslist $20 to upload videos of themselves. But still, nobody was using it, and the founders felt like months of work had gone to waste. At that moment, it was hard to imagine they were about to change the internet forever.
[3:53]YouTube's dating angle wasn't working. But the guys had accidentally created something entirely different. Every day, new videos were uploaded to YouTube, but instead of dating profiles, they were snowboarding fails, cat videos, backflips, and all kinds of other homemade clips. People were using YouTube to store videos they had lying around on their SD cards or computers. And so, a month after launch, around 30,000 people were visiting the site every day. This hadn't been their plan, but the founders figured they should run with it. Basically, turn YouTube into a database for people to store their videos. When YouTube was a dating site, we received zero video uploads for a week, right? And then we're just make it into a generic video site where you can upload anything, and that's when we really started seeing the videos. Steve, Chad, and Jawed worked tirelessly to upgrade YouTube with new features, like a five-star rating system, a 'Top Videos' page, and the ability to embed videos onto other websites. However, a video-sharing website was not exactly an original idea.
[5:03]The first one launched in 1997, and many others tried breaking into the market ever since. But the technological barriers these websites faced were simply too high. For starters, hosting and sending large video files was really expensive. So websites either limited people's uploads and downloads, or they made them pay for extra bandwidth. And even then, every camera recorded dozens of unique video formats. And different websites and devices only supported certain ones. Not to mention that internet speeds back then meant even small videos would take ages to download. So, even though online video-sharing was clearly a good idea, none of the early companies succeeded. But YouTube had one key advantage over everyone else: timing. When building the first version of YouTube, the founders made a smart decision to use a free browser plugin called Flash Player. Flash converted any kind of video to a single format, and when coupled with their simple and effective user interface, this made YouTube way more accessible than other sites. Flash also compressed files and came with a video playback system that streamed the video in small chunks. This meant that on YouTube, videos loaded fast, completely for free, and you didn't need to download them. To share videos, you just sent a link, and this changed everything. What's interesting though, is that at this point, the founders still saw YouTube just as a way for people to store videos that were relevant to them and share them with friends and family. But then something curious started happening. Someone would upload a video with a universally funny quality.
[6:47]And it was only a matter of time until someone else found the video and shared it with their friends. At this point, in 2005, MySpace was the biggest social network site. And so, if someone found a funny video on YouTube, they'd post it on MySpace, and it'd get re-shared over and over. With the combined power of MySpace and YouTube, early viral videos like "David after Dentist," "The Evolution of Dance," and "Charlie Bit My Finger" spread across the internet like wildfire, getting millions of views. And for YouTube, viral videos meant more visitors, which meant more uploads, which then led to even more viral videos. It was a snowball effect. However, whilst this situation looked great from the outside, inside the company, they were in a state of panic.
[7:50]Any website that hosts videos needs somewhere to store them. But until now, this hadn't been a problem for YouTube. When starting out, Steve hired a data hosting company called ServerBeach, who were offering unlimited bandwidth for $129 a month. This was a good bargain initially. But when the number of videos uploaded to YouTube suddenly skyrocketed, ServerBeach quickly realized their unlimited plan was not going to work. So they said YouTube would have to start paying them proportionally for the amount of bandwidth they used. And the YouTube guys had no choice but to accept. This was a major issue. And suddenly, ServerBeach started charging thousands of dollars to Steve's credit card every month. And the even bigger problem was YouTube still wasn't a functioning business. They didn't even have a plan for how they were going to make money. So, all of the initial excitement of seeing their user number grow was replaced by a panic. Every one of those users was costing them money. Around June 2005, Steve, Chad, and Jawed felt like the walls were closing in. And they quickly started looking for investors. Unfortunately, though, it seemed like nobody wanted to invest. People thought YouTube's concept was great, but most investors didn't see it as a viable business. They felt even if YouTube could be monetized, the returns would be mediocre at best, as video hosting was just too expensive. And so, after months of unsuccessfully pitching investors, things were looking bleak for the three founders. Every day, close to a million people were now visiting YouTube, but every month, ServerBeach was charging Steve many thousands of dollars to host YouTube's videos. This was unsustainable. If they didn't find an investor soon, Steve would probably go bankrupt, and that would be the end of YouTube. However, one day, Jawed was at a barbecue with one of his old coworkers from PayPal. He'd just got married and said he couldn't find a way to share the honeymoon videos with his friends and family. Obviously, Jawed jumped at this opportunity and helped him upload his videos to YouTube. But that guy just happened to now be working for Sequoia Capital. One of Silicon Valley's biggest venture capital firms. And he was so impressed with YouTube, that he connected the YouTube guys with his partners at Sequoia, who agreed to invest. And thus, in November 2005, YouTube got the influx of cash they so desperately needed: $3.5 million. The founders breathed a sigh of relief. And they used this money to hire more employees. And then crammed them into a tiny office above a pizza restaurant. Sure, it wasn't perfect. In fact, their new office was literally infested with rats. But the main thing was that YouTube seemed like it had a future. Unfortunately, this optimism didn't last long, because just a few weeks later, YouTube's single biggest traffic source declared war on them.
[11:14]For most users, YouTube was a way to store videos for personal use or to embed them on their websites. But a handful of people were taking a different approach. They were actually making videos for YouTube consistently. This was new, and it was interesting. So to help these people out, Steve, Chad, and Jawed updated YouTube with a new feature: the Subscribe button. It seems simple, but this button would actually save the company in a few months and end up changing millions of lives. For now, though, the Subscribe button had one immediate effect: more people started uploading on a regular basis. By November 2005, more than 2 million people were visiting the site every day. By mid-December, that was closer to 8 million. YouTube's growth numbers were doubling every week, and it hadn't even left beta. YouTube launched officially on December 15th, 2005. But whilst they were busy celebrating, others were conspiring against it. You see, YouTube's viral hits were largely because of MySpace, but MySpace wasn't exactly happy about this. Every time someone clicked a YouTube link, they spent less time on MySpace. So MySpace had no mercy. They started removing posts with YouTube links, censoring any mention of it. And they even started their own video-sharing project called MySpace Videos. So the week after YouTube's official launch, their main source of traffic was gone. The biggest social network was now their competitor, and they weren't the only ones. Google, Yahoo, and Facebook all wanted the video-sharing market for themselves. But even though YouTube had far less resources, it did have something the rest of these companies could only dream of. Two months after introducing the Subscribe button, YouTube was no longer a simple video repository. Thousands of people were now uploading videos to YouTube for YouTube's sake, and millions of people were watching them every day. It didn't matter if you were a musician, a filmmaker, friends making comedy skits, or whatever else it was you wanted to share with the world. Now, anyone, anywhere, could build a community with people who shared their interests. And so, when MySpace shadow-banned YouTube, it didn't actually matter. By January 2006, YouTube's daily viewership had more than tripled to 25 million. By March, there were 25 million total videos, and every day, about 20,000 more were uploaded. And with such staggering growth, YouTube became the breeding ground for a new kind of celebrity: a YouTuber.
[14:09]Early popular YouTubers emerged, like Smosh, Brookers, I Justine, Fred, and Lonelygirl15. What's interesting, is back then, there was a team at YouTube dubbed the Coolhunters, who would manually find interesting videos to put on the YouTube homepage, rather than using algorithms. However, it would soon become hard for the YouTube team to manage the huge influx of videos they were getting. Initially, moderation was all done by a small team, who would manually watch every reported video, and they were exposed to all kinds of horrific uploads. In fact, many of the team started having nightmares. And as the uploads just kept coming faster and faster, YouTube would soon have an even bigger problem.
[15:07]Since anyone could upload pretty much anything for free, people were using YouTube to upload copyrighted music, movies, and TV shows. And this pirated content was getting lots of views. Newsweek called YouTube the 'video version of Napster' and questioned if it would get sued into oblivion. Even a random video with a song as background music counts as copyright infringement, so all three major record labels filed a barrage of lawsuits against YouTube. Not just that, but videos of an SNL skit were uploaded to YouTube and watched millions of times. So Viacom, one of the biggest media companies in the world, threatened YouTube with another massive lawsuit if they didn't somehow remove all of them. YouTube simply did not have the tools to deal with all of this. And to make things even worse, each day, around 65,000 new videos were now added on top of the 25 million YouTube was already hosting.
[16:11]And they still hadn't figured out a good way to make money. They had started running a small amount of banner adverts, or occasional ads on very select channels. But at this point, they didn't have a good ad system, and they didn't know if either advertisers or viewers would accept ads on these short home-made videos. Not to mention that they were concerned about running ads on content when they had no idea if the material was copyrighted or not, as that could invite even more lawsuits. So basically, YouTube was in a very strange position. On the one hand, it was one of the fastest growing websites in internet history. On the other hand, they had no meaningful revenue, were a magnet for piracy, and were getting sued by the biggest media companies on the planet. In its current state, in the summer of 2006, it seemed like YouTube simply couldn't succeed. And so, many prominent business people thought YouTube was practically worthless. But then, to everyone's shock, the YouTube founders uploaded a video to YouTube's official channel to say they'd been acquired. Hey, YouTube. This is Chad and Steve. We're the co-founders of the site, and we just want to say thank you. Today we have some exciting news for you. We've been acquired by Google. Two kings have gotten together. Yeah. The king, the king of search, the king of videos have gotten together. Just 18 months after its launch, Google bought YouTube for $1.65 billion. But why had Google suddenly decided to buy YouTube? Well, Google had attempted their own service called Google Video, but it only had around 10% market share. Whereas YouTube had over half of the video market. Google figured, if you can't beat them, buy them. However, Google buying YouTube actually meant more copyright holders piled on even harder. Viacom announced they were suing YouTube for a billion dollars. So how on Earth would Google turn this mess around?
[33:31]Every year, YouTube released a Rewind video, basically looking back over the past year. And to someone not familiar with the platform, YouTube Rewind 2018 would have seemed like any other. But instead, the video became the most disliked video in YouTube history. There were many reasons for this. Firstly, the video emphasized old media stars like Will Smith, John Oliver, and Trevor Noah. Seemingly focusing more on celebrities than native YouTubers. It also featured many creators who didn't produce videos in English, meaning many viewers had no idea who half the people in the video even were. The video also glossed over big moments from the year, like beauty guru feuds, or the breakout of YouTube boxing. And instead, it felt more ad-friendly and corporate. And so the YouTube community picked this moment to unleash their dissatisfaction with YouTube overall.
