The Story of a Webtacular Idea: YouTube


I really like featuring internet success stories on this blog because I totally dig people who take an idea and make it into something truly innovative, useful and empowering. They follow their passions, create a killer business and become millionaires to boot! So to follow my web based video post from yesterday – here is the story of YouTube:

The company was started by three PayPal employees – Chad Hurley, Steve Chen and Jawed Karim who got frustrated over the difficulty of sharing a video shot at a dinner party. They were all in their 20’s when they founded the company in 2005 (Chad 28, Steve 27 and Jawed 26). The domain name was registered on February 15, 2005 and the site launched in May. YouTube received an $11.5 million investment from Sequiua Capital to help finance the business. They were instantly popular and the sites viral elements (embeds, tell-a-friend, e-mail, etc.) were a huge component to spreading its popularity via WOM (word of mouth). Voting also added another huge dimension to video sharing and creating a community.

Google acquired the company in 2006 for $1.65 billion in Google’s stock. Wowzaa!

Of course the company like Napster has had huge issues with copyright infringement but overall they have come out in a pretty decent shape by offering profit sharing, etc. with various content providers.

The future:
“In November 2008, YouTube reached an agreement with MGM, Lions Gate Entertainment and CBS which will allow the companies to post full-length films and television shows on the site, accompanied by advertisements. The move is intended to create competition with websites such as Hulu, which features material from NBC, Fox, and Disney” –> I wonder how companies such as Netflix will respond to this type of model.

Not a bad outcome for three dudes in their 20s who were just trying to share a video! This is what makes the internet such a powerful opportunity for entrepreneurs – it presents so many business options. And YouTube is the classic case of a service designed by the “necessity which is the mother of invention” principal.

• Fun Fact:
Top watched video on YouTube: (121,027,858 views)

In regards to advertising:
“Over the summer and fall of 2007 major announcements were made about advertising models for YouTube. In August, YouTube introduced “YouTube InVideo Ads”, a set of flash overlays displayed on the lower portion of videos. Advertisers are charged per impression, and the resulting revenue will be shared with the clip creator. In October, Google announced the inclusion of YouTube videos in its AdSense product. Site owners using AdSense can select videos from certain content providers, and ads will be served contextually as they relate to either the site or the video. Resulting revenue will be split between content providers, site owners, as well as Google.”

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