This piece is part of Mashable Spotlight, which presents in-depth looks at the people, concepts and issues shaping our digital world.
A decade ago, Netflix meant DVDs by mail, video referred to TV and the Internet meant simple text and pictures.
All that changed in about 20 months. That was the period in which three former PayPal employees created YouTube on Feb. 14, 2005 and sold it to Google for $1.6 billion on Oct. 9, 2006.
The journey began with a possibly fictitious dinner party in San Francisco and ended with a breakfast at Denny’s in Redwood City, California. In between, there were maxed out credit cards, arguments over copyrights, humungous rats, a cameo by MC Hammer and the exit of a third, mysterious founder. When it was all over, digital media would be completely transformed.
Before YouTube’s 10th anniversary, Mashable talked with some of the people involved in YouTube’s formation. The picture that emerges is of a smart startup that came along at the right time but also had the right connections, philosophy of design and, above all, the superb execution that allowed it to come from nowhere and dominate the online video market.
The business they built was worth $1.6 billion for Google at the time, which let Google own the world’s second largest social network and the primary purveyor of online video. Since 2006, YouTube has been as synonymous with online video as Google is to search.
We’ll never know how YouTube might have looked if it had decided to go solo — perhaps it could have been as big as Facebook or Google, or maybe it would have been smothered by copyright lawsuits and huge bandwidth bills.
In January 2005, two former PayPal employees — Chad Hurley and Steve Chen — attended a get-together at Chen’s new house in San Francisco. After shooting some video, the two realized they had no way to share it. The video files were too big to email and loading them to the web took hours. Hurley and Chen were flush with cash from eBay’s $1.54 billion purchase of PayPal in 2002, so they decided to solve the problem themselves.
The reality was a lot messier than that neat little narrative. As Chen later admitted, the event “was probably very strengthened by marketing ideas around creating a story that was very digestible.”
The artistically minded Hurley and the tech-savvy Chen made for good copy for reporters looking for a Steve Jobs-Steve Wozniak dynamic. However, a third YouTube creator, Jawed Karim, was around for YouTube’s early days and didn’t re-emerge until Google bought the company. Karim, who was also a PayPal engineer, enrolled in Stanford University after YouTube was founded and was omitted from most early news accounts.
Though each of the three founders showed promise in his early years, none stood out as being unusually talented or destined for greatness. What they had in common was a love of technology.
Chen and Karim, who were from Chicago and St. Paul, Minn., respectively, were hard-core coders who both went to the University of Illinois, Champaign-Urbana, the same school Marc Andreessen attended when he helped build Mosaic, the first commercially successful web browser, in 1993. Hurley, who is from Birdsboro, Penn., a Philadelphia suburb, took a more offbeat path, attending the Indiana University of Pennsylvania where he received a fine arts degree.
While Chen and Karim were recruited to join PayPal, Hurley pushed his way in. After reading an article about PayPal in Wired, Hurley arranged a phone interview for a job. Part of his test in the interview was to design a logo for PayPal. Hurley did and the company used the logo for more than a decade. He sent PayPal a resume on a Wednesday and was hired by that Sunday. When he arrived in California, Hurley was broke, so he slept on a friend’s floor and scrounged money for pizza until he got his first paycheck.
There wouldn’t be a YouTube without PayPal. YouTube was created by three former PayPal employees, staffed by other veterans of the company and bankrolled by people who used to work at PayPal. Originally known as Confinity, PayPal was launched in 1998. The early team included many would-be tech luminaries, including Max Levchin, LinkedIn’s Reid Hoffman, Elon Musk and Peter Thiel. Originally, Confinity’s mission was to create cryptography for handheld devices, but the company wound up pivoting about five times before settling on online payments.
As Karim later recalled, what he learned at PayPal could be summed up in two words: “Stay flexible.” That mantra would help guide YouTube.
PayPal’s culture encouraged entrepreneurship. “At PayPal, we first and foremost, hired people always looking for those that could [form companies], and many did,” Levchin told Mashable. “A key interview question was ‘are you thinking of starting your own company after this?’ Most said ‘yes.’”
Roelof Botha, who rose through the ranks at PayPal, eventually becoming its CFO, worked with Karim the most and remembers him best of the three. Karim was a “very independent thinker, fiercely independent,” Botha told Mashable. Chen, meanwhile, used to take frequent smoke breaks. Hurley, he recollects, was quiet and often the odd man out because he was one of the few people at the company who was married at the time. (Hurley met Kathy Clark, daughter of Netscape cofounder Jim Clark, in 2000, and married her in the early 2000s.)
Chen and Hurley worked closely together from 1999 until eBay’s acquisition of PayPal in 2002. After the eBay deal, Hurley left to become a freelance design consultant and worked on the film Thank You For Smoking, which came out in 2005 and gave Hurley a “special thanks.”
Chen, meanwhile, stayed on at PayPal to help the company launch in China. Karim left sometime in between. All had received a decent payout from the eBay acquisition.
The idea for YouTube came at exactly the right time. Previously, a handful of factors limited online video’s adoption, and there wasn’t a standard for video playback. Most people didn’t have broadband, which made viewing videos very clunky. Finally, people didn’t have an easy way to share videos online.
For Karim, two disparate incidents crystallized this problem: the Dec. 26, 2004 tsunami in Indonesia and Janet Jackson’s “wardrobe malfunction” during Super Bowl XXXVIII in January 2004. In the latter, Karim found that although everyone was talking about the incident, you couldn’t find a clip of it anywhere online. With the tsunami, Karim said he believed there were probably lots of videos of the disaster, but no way to access them.
At the time, many people in the industry were thinking about online video and looking for a better way to upload and deliver clips. For this reason, the exact origin of YouTube may forever be shrouded in a Rashomon-like haze since the three founders have different versions.
“Chad and I are pretty modest, and Jawed has tried to seize every opportunity to take credit,” Chen told Time in 2006.
None of the three founders could be reached for comment for this story.
One thing they do agree on is the date: On Feb. 14, 2005, the three officially started work on YouTube.
“That’s one of those things about being a computer science major,” Karim later deadpanned. “Valentine’s Day is just another day.”
In fact, while the three registered the domain name on Feb. 14, the real work actually started before that. At some point earlier, the three had run through a whiteboard of possible names before settling on YouTube. Chen said he initially wasn’t keen on the name, but when he saw Hurley’s logo, it clicked. It also helped that the domain name was free, though Universal Tube & Rollform Equipment later sued YouTube when its utube.com domain got overloaded with bad spellers looking for YouTube.
Beyond hosting a site for videos, the three only had a vague notion of what YouTube would be. As Karim recalled, he was partially inspired by HotOrNot, a dating site that ranked people on a 1-to-10 scale in terms of attractiveness.
“I was incredibly impressed with HotorNot, because it was the first time that someone had designed a website where anyone could upload content that everyone else could view,” Karim told Time in 2006. “That was a new concept because up until that point, it was always the people who owned the website who would provide the content.” (In 2003, Mark Zuckerberg was similarly gobsmacked by HotOrNot and created Facemash, a version for Harvard students that was a predecessor for Facebook. HotOrNot may be the most influential website of all time.)
“In the beginning, we found that very few people came to our website,” Karim recalled. “The product was so primitive that you couldn’t even choose which videos you wanted to watch. Instead, the website picked the videos for you, randomly. And because there were so few videos, they were the same ones, over and over again.”
One of those early videos has become among the most famous of all time, the 18-second “Me at the Zoo,” in which Karim revealed the cool thing about elephants is that they have long trunks.
Yakov Lapitsky, a high school friend of Karim’s, shot the video. “We met up to go to the San Diego Zoo and hung out when I was there for a conference,” Lapitsky, now a University of Toledo professor of chemistry and engineering, told Mashable. Lapitsky said he was only slightly cognizant what the video would be used for. “He didn’t really talk about his project at the time.”
It was hard to get a handle on what YouTube was, exactly. The founders didn’t know how to describe the project, so they called it a dating site. But since there weren’t many videos on the site, Karim populated it with videos of 747s taking off and landing. Desperate to get people on the site, YouTube ran ads on Craigslist in Los Angeles and Las Vegas, offering women $20 for every video they uploaded. Not a single woman replied.
Another vision for YouTube was a sort of video messaging service. “We thought it was going to be more of a closer circle relationship,” Chen said in a 2007 interview. “It was going to be me uploading a video and sharing it with eight people and I knew exactly who was going to be watching these videos — sharing with my family and my friends.”
What actually happened was a “completely different use case” in which people uploaded videos and shared them with the world.
The big break
The founders’ luck changed on July 4, 2005, when Karim attended a barbecue at PayPal alum Mike Greenfield’s house. Keith Rabois, a former PayPal exec who is at currently part of Silicon Valley investment firm Khosla Ventures, was there and asked Karim what he was up to.
Karim replied that he was working on a new video-sharing site called YouTube.
Rabois then asked him three questions: Does it use Flash? Does it host professional or long-tail content? Can you distribute the content on the web?
Karim replied that it was based on Flash, the site hosted long-tail content and, yes, you could distribute it on the web.
Since in 2005 you couldn’t watch video on your phones, Karim and Rabois went to Greenfield’s bedroom, got on his PC and watched all the content YouTube at the time, a process that took about a half-hour.
Impulsively, Rabois said he wanted to invest. “There were only two times I’ve done that,” Rabois told Mashable, referring to his instant decision to sink money into the venture. “The other was with Airbnb.”
For Rabois, the Flash component was an important factor. A year or so earlier, Levchin had declared that Flash was the future. “So literally from February 2003, I’d been looking for something that used Flash,” Rabois said.
Around the time of the barbecue, Karim got accepted to a Ph.D. program at Stanford University. The decision isn’t as crazy as it now seems. YouTube then was still an interesting venture with an uncertain future.
But Rabois said going to Stanford was a difficult decision for Karim. “In many ways, I think Jawed was the most active founder,” he said. “He uploaded most of the early videos.” He said going to Stanford was a difficult decision for Karim. “Against my advice, he decided to leave the company.” When asked if Karim regretted the decision, Rabois said, “Obviously, in hindsight, he still got to be part of one of the most influential cultural phenomenons of all time…. I think he underestimated how culturally significant YouTube would become, though few companies ever [reach that level].”
In the summer of 2005, Karim’s impending departure was just one of YouTube’s headaches. As Chen later recalled, there was a staff of about eight or 10 people at YouTube who were unpaid. The startup’s primary expense was bandwidth. As usage increased, the bandwidth bills got larger. Chen put that expense on an ever-expanding array of credit cards.
Rabois eventually provided an answer to YouTube’s money woes. Shortly after the barbecue, he emailed Botha about YouTube. “Within 24 hours I had signed up,” Botha said. The site was so small then that the site was still scanning the names of users, and the YouTube creators recognized Botha’s name. Botha got married in 2003 and had videos on his hard drive that he hadn’t been able to share. With YouTube, Botha saw the utility immediately.
By the end of the summer, Botha, who was then at Sequoia Capital, helped arrange Sequoia’s initial $500,000 investment in YouTube.
Karim’s departure complicated the elevator pitch to the press and investors. The company stopped mentioning his name and instead focused on Hurley and Chen. “It was awkward to talk about. ‘There are three founders, but one’s gone off to college,'” Botha said. “And at that point, Jawed did disengage.”
The twist is Karim would never complete his Ph.D.
Hurley and Chen pressed on. The numbers steadily increased. After he invested, Rabois checked Alexa daily to see YouTube’s progress. When it cracked the top 35,000 sites, that was a big deal.
YouTube’s team consisted of about half a dozen people by then, including Chen and Hurley. All had been working out of their homes.
Most of the early YouTube hires were from PayPal, said Hunter Walk, who was Google’s director of product management during the time of YouTube’s formation. “As YouTube grew, that team reassembled,” he told Mashable. “This was a real advantage versus someone who would have had to recruit from an unknown pool of talent.”
In the summer, after a small angel-round investment by Sequoia, the team began working at Sequoia’s headquarters on Sand Hill Road in Menlo Park. They’d stay there until November, when they moved to a new space in San Mateo above a pizza joint. As Christina Brodbeck, a designer at YouTube recalls, the place was infested with rats. “Giant rats — like the size of cats!” she told Mashable. “I remember sleeping in the office one night on this old slip-covered sofa, and you could hear the rats crawling around in the wood rafters.”
The video below documents the move to the San Mateo office, including the mention of a dead rat.
The founders also used curtains in the office because they couldn’t afford walls, as they explain to MC Hammer in this video:
Julie Supan worked at Inktomi during the first dot-com crash, then moved to Minnesota to work at Best Buy. Mark Dempster, who was then at Sequoia, knew Supan. When she returned to Silicon Valley in 2005, he called her and suggested she run marketing at YouTube.
Supan joined in September 2005 and for many weeks, she and the two founders brainstormed with Botha in endless whiteboard sessions about what YouTube stood for. Eventually, they positioned YouTube as a broadcast medium for average people. A Nov. 7 press release from YouTube described it as “a consumer media company for people to watch and share original videos through a Web experience.”
A steady hand in marketing was important for YouTube since it had lots of competition. Supan remembers a report from the time stating there were around 280 other video-sharing sites, many of which had been around before YouTube. She told Mashable, “We were basically last to market. Really no service launched as far as I could remember after YouTube.”
Botha said that much of YouTube’s success came because the site was so easy to use. Chen’s team had made sure you could load a video in any format to the site. “You could load it and they took care of transposing it back in Flash,” Botha said. YouTube also made it easy to cut and past a URL by making that feature prominent on the site. YouTube also had a public view count. As Twitter would later discover, public metrics can help grow your brand by appealing to users’ vanity. Finally, YouTube also made it easy to embed videos, which many users opted to do on MySpace, the hot social network at the time.
“I often liken building consumer products to playing music or art,” Botha said. “You can get 98% of the notes correct and it will still be off.”
Gideon Yu, who left Yahoo to become YouTube’s first CFO in September 2006, told Mashable that Flickr was also brand new at the time and the concept of online sharing wasn’t proven. “A lot of people asked ‘You make a website and people add their content and consume it and you make all the money?’ In 2005, 2006 these were the questions. Now it’s a given that people will contribute content. At the time, it wasn’t obvious.”
Supan has a slightly different view. She said the key to YouTube’s success was that the video player always worked. Period. “People don’t mind if products aren’t perfect, as long as they work,” she said. “You have to do one thing well.”
As Hurley recalled in a later interview, the inspiration for YouTube’s sharing functionality was once again PayPal, in particular a payment button bloggers and publishers could use on their own sites. “That button took them back to the PayPal experience,” Hurley said “We tried to do the same thing with a video solution.”
By providing easy sharing mechanisms, YouTube accelerated the growth of online video. Initially, the only issue hindering the spread of online video was the lack of viral content. That would soon change.
In the meantime, YouTube had to vie with, among others, Google. On Jan. 25, 2005, Google published a blog post entitled “We’re tuning in to TV.” In the post, John Piscitello, a product manager at the time, recalled how he had visited Wisconsin for a wedding and was looking for some travel information about the state. “I turned on the TV in my hotel room, started flipping channels, and was idly watching some travel show when a thought hit me: Surely someone, somewhere must have produced a travel show episode about Wisconsin…, but of course there was no way to find it.”
Google’s solution was Google Video, which let you search an index of transcripts from recent TV shows. In other words, Google viewed video as an adjunct to its mission of digitizing the world’s information. Video, in its view was just another source of data to be strip-mined for searches. Piscitello, who is no longer at Google and currently makes scores for films, declined comment for this article.
Over time, Google would evolve Video, focusing on improving its quality. In Google’s view, YouTube’s clips were low-quality and junky, sort of like the chaff it tried to cull from its searches. Supan said that missed the point. “Their biggest argument against YouTube was it was low-quality and grainy, and who wants to see that? Well, the world did.”
Botha recalls that after Google bought YouTube, he overheard a Google engineer complaining, “I don’t know how they won. Our video quality was so much higher.”
“With Google Video, you needed to know what codec your video and what was the dimension of the video frame,” Yu recalled. “With YouTube it was all in Flash and when you wanted to upload a video to YouTube, the only thing you needed to do was push a button that said ‘upload.'”
In November 2005, YouTube closed a $3 million Series A round from Sequoia. Around the same time, a video appeared on the site featuring soccer star Ronaldo that was actually a Nike ad. “It was shocking,” Supan said. “That was one of the moments at YouTube where the consumer surprised us.” Botha was so impressed that he flew Hurley and Chen up to Nike’s headquarters in Beaverton, Ore., to talk about YouTube. “There was a moment of connectedness,” Supan said. “We married brand-building and entertainment.”
Later on, marketers would get even slicker. In mid-2006, Lonelygirl15, a purported video blog of a teen girl, became a huge hit and made the cover of Wired magazine. By September 2006, the whole thing was revealed to be an elaborate, scripted show designed for YouTube and backed by the Hollywood firm Creative Artists Agency.
A bigger shock came the next month. Sometime after Dec. 17, when it ran on NBC’s Saturday Night Life, someone uploaded a video featuring Andy Samberg and Chris Parnell of SNL mocking their own nerdniess with a rap music parody called “Lazy Sunday.” Finally this was the viral content that would demonstrate YouTube’s potential. Coincidentally, Micah Schaffer, the brother of Akiva Schaffer, a member of Lonely Island, Samberg’s comedy troupe, joined YouTube about two weeks after the video hit.
By Dec. 27, the video had logged 1.2 million views on YouTube — a mediocre number these days, but a milestone back then. Though for some “Lazy Sunday” was their first exposure to YouTube, Botha says the common belief that the video was an inflection point for YouTube is misguided.
“If you read the press, you’d think our traffic jumped 50% after ‘Lazy Sunday,'” said Botha. “But there was steady growth in user signups.”
Supan, however, said “Lazy Sunday” was a big deal for YouTube because it made the company realize the site’s entertainment potential. From an outsider’s standpoint, “Lazy Sunday” was also a defining moment. Greg Kostello, who ran a rival video-sharing site called VMIX, recalls that things changed for him that December. “When I first started out reporters would ask me what Vmix did,” said Kostello. “By December people kept asking me ‘How are you different from YouTube?’ I knew at that point the game was over.”
The video got NBC’s attention. On Feb. 17, 2006, the network asked YouTube to take down “Lazy Sunday” as well as about 500 other copyrighted clips. In late October, after Google bought YouTube, the site purged more than 30,000 copyrighted clips.
In its 2007 lawsuit against YouTube, Viacom claimed the company didn’t crack down on copyrighted clips. “Indeed, the presence of infringing copyrighted material on YouTube is fully intended…to drive traffic and increase YouTube’s network, market share and enterprise value,” Viacom wrote in its complaint.
Viacom wasn’t alone in thinking that YouTube was looking the other way with regard to copyrighted material. “We got funding around the same time and we saw what they were doing,” said Kostello. “They had a lot of copyrighted material on their site.” In Kostello’s view, YouTube calculatedly loaded its site with copyrighted material, then sold itself to Google, which could handle the legal challenges. “Having Google’s endless pockets made all the difference in the world,” he said.
The idea that the studios were preparing to sue YouTube out of existence may be misguided. Fearing another Napster, media companies were faced with a dilemma: Crack down on copyrighted videos and you miss the chance to go viral. Take a laissez-faire approach and lose out on ad dollars.
When it became apparent that people would soon be watching TV programming on their computers, the stage was set for a deal. The realization also spawned Hulu, a venture backed by Fox, NBC Universal and Disney-ABC. By the time the Viacom lawsuit was settled in March 2014, the YouTube issue was a footnote.
Later, the Google-owned YouTube would score agreements with all the major movie studios for an iTunes-like rental service. Google also introduced a fingerprint-like technology called Content ID for YouTube that let the studios and networks track copyrighted material and decide whether to pull it, share ad revenues or look the other way.
Others in the industry were quick to see the entertainment value of YouTube, which served as a talent scout for crowdsourced talent. In March 2006, YouTube also got a big break when Good Morning America began devoting a regular segment to viral views on the site. Every Wednesday, the ABC morning program showcased three videos. The relationship not only got YouTube’s name out, but solidified its image as a consumer media brand that specialized in amateur, unpolished and sometimes oddball content. Some entrepreneurs were quick to see the site’s potential. Supan recalled that by March 2006, “Ask a Decorator” was a hit and spawned imitators like “Ask a Contractor,” “Ask a Gay Man” and “Ask a Ninja.”
Traffic continued to build. In January, YouTube was getting 15 million views per day. By March, the figure had jumped to 40 million. In June, it hit 80 million. The growth was buoyed by increasing press attention. Supan says that a notable moment in press coverage was in April 2006, when Virginia Heffernan wrote about the YouTube phenomenon in The New York Times, which for the first time posited the idea that YouTube could create its own stars.
In mid-2006, YouTube was starting to get the attention of some of the top tech companies as well. Supan recalls that she and Hurley had dinner with Bill Gates in May 2006. Gates was “blown away” by the site’s stats.
With interest in YouTube at a fever pitch, Hurley agreed to give the keynote at Allen & Co.’s annual media conference in Sun Valley, Idaho, in July. Hurley began by asking members of the crowd if they had ever watched a video online. A bunch of hands went up.
“YouTube has carved a new market for online video entertainment,” Hurley said. He pointed out that YouTube had inked deals with the top record labels. “We have listened to our community and have built the most innovative and easy-to-use service in the industry.” Hurley then segued into the part that everyone was wondering about, the stats:
“More than 80 million videos are being watched every day on our site … 60% of videos watched online in the U.S. are served from YouTube … YouTube has the largest audience in Internet video with 20 million unique visitors, and we are currently ranked as the twentieth most-visited site on the Internet in the U.S., according to Nielsen NetRatings. More than 80 million videos are watched every day … The average person is on YouTube for 17 minutes a session … Every day 60% of videos are served from YouTube … Our nearest competitor has 17%.”
That was Google.
YouTube had succeeded in disrupting an industry. As a result, it soon became an acquisition target.
At Yahoo, Yu recalls that he first heard of YouTube during a board meeting. “We had a large discussion at one of the board meetings about interesting new companies and YouTube was discussed,” he said. When Yu joined YouTube in September 2006, the company was fielding offers from Yahoo and others, including Google.
In September, David Drummond, Google’s chief legal officer, sent Hurley an email expressing interest in the site. Google wasn’t alone. Yahoo, Microsoft and News Corp. — which owned MySpace — all made overtures to YouTube. “They were just trying to make sure the other one didn’t acquire [YouTube],” Supan said. “None of them understood what they were buying. They just didn’t want Microsoft to buy it.”
Yu disagreed. “Google was strategic in how it viewed YouTube,” he said. “[YouTube] had a big early lead and it looked like we were only getting bigger. It would only get more expensive as every day went by.”
The Denny’s in Redwood City, California, where the YouTube-Google deal might have been consummated.
That month, Hurley and Chen met with Yahoo execs at a Denny’s in Redwood City. A day later, they met with Larry Page and Eric Schmidt of Google.
Yu says even the final deal was signed in the Denny’s parking lot in the middle of the night. Later, after word of Denny’s role in the deal became public, Yu said Denny’s CEO sent Hurley and Chen Denny’s gift cards.
On Oct. 9, Hurley and Chen announced to the world that Google was buying the company for $1.6 billion. Since that happened to be the same day that YouTube was moving into a new office in San Bruno, reporters were confused and swarmed the old office in San Mateo and even Supan’s house.
“We were all pretty shocked,” Supan said. “I was pretty stunned because we were in a major growth phase. There was a bit of a feeling that we were cut short.”
Brodbeck recalls a celebratory dinner at TGI Friday after the news hit. “Really you couldn’t help but smile seeing how happy your friends and coworkers were. There is nothing better than seeing genuine smiles on the faces of those you worked so closely with and care so much about,” she said.
A more cynical view is that YouTube’s founders cashed out just before the company was about to go under. Speculation that the firm was in dire straits was fueled by a Forbes report in April 2006, which stated YouTube was burning through $1 million in bandwidth expenses every month.
Supan says that figure was inaccurate. She said the real number was lower, though she can’t recall the exact figure.
Another perception was that if Google didn’t come along, YouTube would be sued out of existence.
Billionaire Mark Cuban was outspoken at the time, stating that only a “moron” would buy YouTube.
Botha said that view is nonsense. “The company could have made it on its own,” he said. “YouTube had 55 people at the time of the acquisition, and we were profitable.” (Yu disputed this account and said YouTube wasn’t profitable at the time.) Botha noted, however, that the 2006 venture capital market was a lot different than today’s. “The one thing that didn’t exist was the expansion-stage capital market that exists today. We could have raised $40-$50 million, but I don’t think we could have raised $100 million.”
Saying yes to Google made sense in that it allowed YouTube to continue to grow without worrying too much about money. As Rabois put it, “They deferred the monetization question and focused on the execution. They allowed the product to flourish.”
Steve Chen and Chad Hurley after winning a Webby award in 2007.
The payout was huge. In February 2007, Hurley got around $345 million in Google stock, while Chen received $326.2 million. At Google’s current stock price, those payouts would be worth $780 million and $736 million, respectively. Karim received $64.6 million. Sequoia, which had invested $13 million total, got $442 million. Even YouTube’s lower-level employees got a handsome payday — receptionist Shannon Hermes got $1.3 million in stock at the time.
Hurley and Chen stayed on for the first few years. Hurley, who is often described as unflappable, hasn’t changed much, Supan said. “He doesn’t need fame. He’s actually a really down-to-earth guy. He has great values and comes from a great family.” She says Chen has mellowed a lot in the last decade. The pair’s personalities complement each other, Supan said. “Chad lets everything roll off him,” she said. “[In the YouTube days] Steve was much more emotional.”
Shortly after the acquisition, Karim reappeared as YouTube’s forgotten third founder. Supan said that was the first and last time she met him.
Karim now runs Youniversity Ventures, a VC fund. He has kept a low profile for the most part, but spoke out in 2013, when Google began requiring YouTube commenters to have Google Plus accounts. Karim left a comment on “Me at the Zoo” stating “I can’t comment here anymore, since i don’t want a google+ account.”
Hurley and Chen continued to work together after Google at incubator Avos Systems, which spawned MixBit, a mobile video-sharing site. Last June, the two finally split up. Hurley stayed on to run MixBit, and Chen left to become entrepreneur-in-residence at Google Ventures.
Chad Hurley Photo by: center
Whatever the three founders do, it will be hard to top YouTube. A 2014 report by Jefferies estimated YouTube’s value at around $40 billion — that’s one-tenth the size of Google, but bigger than Twitter and on par with Uber (at least, Uber at this writing).
Paul Verna, an analyst with eMarketer, said YouTube has proved its value over time. “It has defied expectations,” Verna said. “When Google bought it, the price point was seen as exorbitant. Most people asked whether YouTube would recoup its investment. Many years later, $1.6 billion doesn’t seem like that much.” YouTube made $1.13 billion in U.S. ad revenues from its videos in 2014, according to an eMarketer estimate. Globally, the figure is about six times that.
Culturally, YouTube continues to make a huge impact. When President Obama recently decided to talk to the nation’s youth, he chose to be interviewed by a cadre of YouTube stars. Chasing viral video success has completely transformed the advertising industry, which now measures success in YouTube hits. YouTube’s emergence also forced the movie and TV industries to embrace online video.
By 2014, YouTube had 1 billion users. Some 100 hours of video are now uploaded every minute.
“YouTube — and fear of YouTube — accelerated online video in some major ways,” Walk said. “YouTube removed gatekeepers, let new voices amass millions of subscribers. It also scared broadcasters into moving online with full-length programming faster than they otherwise might have. Hulu was a great product, but does anyone think it launches with the breadth of content and low ad load if YouTube didn’t exist?”