Ah YouTube, a place where any beautifully bearded British bald man with a microphone and nerdy, socially awkward American, who despite being 42 from the sounds of it is still waiting on puberty to hit, can go to team up across oceans and make the world’s greatest edutainment channel according to the words that just came out of my mouth. In fact, just about anyone these days with a cell phone and a dream can make it big coming to this platform and, with very little technical know-how, launch whatever channel they want and put it in front of one of the largest audiences in the world, no longer beholden to the gatekeepers of yor. And, hey, if you don’t yet have the knowledge or skills needed to implement your vision, we’re quite confident that there are hundreds, if not thousands, of youtube videos out there that will teach you exactly what you need to know, for free. All that is required of you is time, effort, and a fair amount of determination to keep going and improving. On that note, fun fact about this channel, it took 532 videos until the channel took off. But while today YouTube is arguably one of the most well known brands and websites in the world, with about 2 billion active users in any given month, and has been one of the biggest revolutions in entertainment since Napster, Youtube isn’t even old enough to drink in the United States, at just 18 years old. Not only that, it turns out when YouTube was first started, it was not meant to be a general video sharing platform but, rather, a dating and hookup website.

So how did they go from a site to seek a spicy time partner to one where even this author can somehow be watched by millions? And just what was the first ever YouTube video? (Which by the way doesn’t appear to be what literally everyone says. More on that in the Bonus Facts later.) But for now, have a seat on your porcelain throne or prepare your meal and sit down to eat, which we’re pretty sure comprises 90% of all views on YouTube outside of people using these videos to distract their brains from thoughts of the inevitability of death while trying to fall asleep… And, either way, let’s dive into it shall we?

We will begin, naturally, by talking about Paypal.

Why?

Well, without Paypal, YouTube would likely not be a thing. In fact, the same can be said about countless other staples of the business world today, like AirBnB, LinkedIn, Palantir, Facebook, Uber, SpaceX, Tesla, Quora, Lyft, Tumblr, Yelp, Care.com, Change.org, Square, Mu Sigma, Unity 3D, Whisper, Natera, Instagram, we could go on and on and on. But the point being- all either started by former Paypal employees or with said employees helping to fund and/or shape a truly astonishing number of such companies from their early days into what they are today.

How did Paypal manage to have so many of its former workers go on to define the next generation of web companies after the dotcom bubble burst? Well, it turns out, because in the early days of Paypal, they specifically targeted entrepreneurial employees. Paypal co-founder Max Levchin would state of this, “At PayPal, we first and foremost, hired people always looking for those that could [form companies], and many did… A key interview question was ‘are you thinking of starting your own company after this?’ Most said ‘yes.’”

On top of that, Paypal also had a culture of encouraging close friendships and bonds among their employees, which further helped many of their later careers as you’ll see very starkly in the story of YouTube.

On this one, enter three young Paypal employees- Chad Hurley, Jawed Karim, and Steve Chen. Hurley’s background was in art and design. (Fun fact, he designed the original Paypal logo.) Chen and Karim’s background was in computer science.

Important to the story today is also how Paypal morphed over time, changing the vision of what the company specifically did a handful of times before settling on what they are today. Karim would state of this, one of the best lessons they learned while at Paypal was to “Stay flexible.”

This is a tried and true business tenant that has seen many other titans of the business world morph over time, while those entities that refuse to change often go the way of the dodo, such as Kodak which developed one of the world’s first digital cameras all the way back in 1975, but executives refused to do anything with it as their business was built on the sale of film, which that camera didn’t need. On the other side of things, Nintendo has evolved several times in the near century and a half they have been around, starting as a playing card company all the way back in 1889. Moving on from there, the company behind Kleenex started out making gas mask filters during WW1, then menstrual pads after, then Kleenex tissues, originally meant as disposable cleaning cloths. Several years later, they pivoted that product to be used as a disposable handkerchief after one of their employees suggested the idea to their ad department. This notion was initially rejected, but later when a few small ad runs with this use in mind saw sales explode in those markets, they pivoted on what their product was supposed to be for.

Speaking of pivoting on what a product is supposed to be for, this all brings us back to YouTube.

After Paypal sold to eBay in 2002, the employees had varying levels of cash to play with, and some experience starting and helping to run such an online company in the modern world.

As for Hurley, he left Paypal to become a freelance design consultant, even working on the incredibly underrated film Thank You for Smoking, which by the way other members of the so-called Paypal Mafia also were involved in on some level, included David Sacks, Elon Musk, Max Levchin, and Peter Thiel. A bit of a theme as you’ll soon see is that when one former Paypal Mafia member is doing something, others often support the project in some way as well.

As for Chen and Karim, they stayed with Paypal for a time. Though shortly before co-founding YouTube, Chen had moved on to being one of the early employees at Facebook. And, once again a theme here, Facebook’s first investor was none other than the Paypal Mafia don Peter Thiel- though almost was instead a different Paypal Mafia member, Reid Hoffman. However, Hoffman initially passed on Facebook as he was too busy building LinkedIn. However, he would also invest in Facebook not long after.

Fast-forward to 2005, the 28 year old Hurley, 26 year old Karim, and 27 year old Chen decided to focus on online video, something that literally hundreds of other companies at the time, including Google, were already doing. But the three had something that made their service special, which we’ll get into shortly.

As for the impetus for the creation of YouTube, a later story would be that it was partially inspired by the famous Janet Jackson boob reveal during the Super Bowl XXXVIII (38) halftime show, as well as the 2004 Indonesian tsunami. On the former, it is claimed they noticed that while everyone was talking about the wardrobe malfunction, there were no videos of it anywhere online to go see it if you hadn’t seen it on TV. And on the latter, Karim stated he felt there were probably tons of home videos of the tsunami and aftermath, but nowhere for anyone to share them with the world.

That said, some have called into question this version of the inspiration for the company, as the Janet Jackson thing happened almost a year before and the notion that you couldn’t find pictures, animated gifs, and even video of it online wasn’t accurate at all. And as for the tsunami angle, while it is true there probably were countless home videos of it that people had they weren’t uploading anywhere, it wasn’t, as alluded to, because there weren’t other online video services at the time. YouTube, in fact, was pretty late to the game on this front. As head of marketing in their earliest days, Julie Supan noted, “We were basically last to market. Really no service launched as far as I could remember after YouTube.” Although, again, YouTube did a few things critically different than most anyone else at the time, as we’ll shortly get into.

Another story told by the founders was that it was in January of 2005 that, after attending a dinner at Chen’s home together, they wanted to share videos of it with each other, but there was no quick way to do it and it inspired them to make a service that would allow people to do this.

However, once again, this origin story, for similar reasons as the other, slightly strains credibility as the actual impetus. Not just because there were many other sites you could do this on at the time, but also because what they actually went with creating was to found a dating and hookup site as the initial plan. Thus, many have speculated, and indeed there is some evidence of a PR firm involvement in it, that these stories more came about as a bit of a better way to talk about youtube’s origins than a website that first had the slogan “Tune In, Hook Up”.

Thus, while these ideas may well have been things the trio were thinking about when forming the company, as Chen himself would later state, those stories were “very strengthened by marketing ideas around creating a story that was very digestible.”

What is less digestible is a company that started out not really having a cohesive idea of what they would be, other than trying to carve out a niche in the online video space. Chen would go on of this, “We always thought there was something with video there, but what would be the actual practical application? We thought dating would be the obvious choice.”

Karim would also state for his inspiration, “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. That was a new concept because up until that point, it was always the people who owned the website who would provide the content.”

Karim also wrote to his co-founders when they were mulling things, “A dating-focused video site will draw much more attention than stupid videos. Why? Because dating and finding girls is what most people who are not married are primarily occupied with.”

Funny enough on that point, their original launch was on Valentine’s Day of 2005, because, as Chen quipped, they were, “Just three guys on Valentine’s Day that had nothing to do.” Karim would also chime in on this, “That’s one of those things about being a computer science major. Valentine’s Day is just another day.”

That said, it should be noted that Hurley, of course the design guy rather than computer science, was the sole one among them who actually did have something to do on Valentine’s Day… You see, he was married to one Kathy Clark. As a fun side fact on this one, Kathy is the daughter of now billionaire James H. Clark. How did Clark earn his fortune? Among many other things, he is perhaps best known for co-founding the revolution that was Netscape and, later, a company called Healtheon, which you probably haven’t heard of. But that’s because the name today, thanks to a merger in the early going, is WebMD.

But in any event, using the video platform they’d created, in combination with a $129 unlimited data plan from the ISP ServerBeach, the trio of nerds launched YouTube on February 14, 2005, again with the slogan “Tune In, Hook Up”. Meant to be a service to allow people to post videos of themselves describing where they live, who they are, and what they are looking for in a potential partner or hookup, hence the name YouTube, all about you.

…Except, nobody posted anything.

Karim would later state, “We were so desperate for some actual dating videos… that we turned to the website any desperate person would turn to, Craigslist.”

Specifically, they posted on Craigslist offering any woman $20 (about $31 today) who would upload such a video of herself on their new platform. Afterall, where the women are in the dating and hookup world, men will flock like the Salmon of Capistrano… Except, it turns out few women, or men for that matter, back then wanted to post so publicly trying to look for a dating or hookup partner, not even when offered money to do so. This was still an era where online dating was widely mocked. The fact that they had no real audience at the time for people to meet also didn’t exactly lend itself to things taking off that way. So, ya, this didn’t work either, and not a single woman, or person at all, uploaded any dating videos.

Chen would state of this, “It was almost too bold of us to say we were going to create a generic platform where we could host all the videos on the internet. A week went by, we didn’t receive a single video of the dating variety. At that point we just said, ‘it makes no difference, let’s make it a generalized site.’ So a week later, we changed it.”

Karim would chime in, “Our users were one step ahead of us. They began using YouTube to share videos of all kinds. Their dogs, vacations, anything. We found this very interesting. We said, ‘Why not let the users define what YouTube is all about?’ By June, we had completely revamped the website, making it more open and general. It worked.”

On this note, once again, we are going to get into in the Bonus Facts later what everyone says is the first YouTube video. But, we’re also going to dive into why quite literally everyone seems to be wrong on this. Stay tuned.

But for now, they pivoted, among other things, changing their slogan from “Tune In, Hook Up” to, eventually, “Your Digital Video Repository”.

That said, it still would be several more months before they’d really zero in on the purpose of the site definitively. As the aforementioned Julie Supan would state, when she was first hired later that year in September, the first task was to figure out what YouTube actually was, in terms of how to pitch it publicly to investors, other companies, and the world. She states the team brainstormed endlessly for a couple months before settling on that it was, according to their eventual November 7 press release, “a consumer media company for people to watch and share original videos through a Web experience.” In a nutshell- a broadcast medium for normal people.

As mentioned, this wasn’t terribly unique on its face, with several hundred other prominent sites at the time attempting the same thing, most all of which launched before YouTube, even Google Video, which launched three weeks before YouTube offering more or less the same service that YouTube would pivot to after their dating niche idea failed.

So why did YouTube win?

There is always a lot that goes into who comes out on top in these sorts of things, and even sometimes a bit of luck or advantageous connections, that sometimes even allows an inferior service to win. And YouTube certainly had a bit of the former going on. But they weren’t an inferior service. While perhaps their initial vision of what the service they offered would be wasn’t a good one, the platform they had built was something special compared to most of their competition, even Google Video.

As fellow Paypal Mafia member and later partner at famed firm Sequoia Capital, Roelof Botha, would state of YouTube vs. most of its competitors at the time, “I often liken building consumer products to playing music or art. You can get 98% of the notes correct and it will still be off.” And dear lord would Botha know some things about this. Because, this guys’ resume is something else- involved on some level with the early days of Paypal, YouTube, Tumblr, Square, Mu Sigma, Unity 3D, Whisper, Natera, Instagram, Evernote, the list goes on and on and on. Like, we genuinely wonder if even he could list all the companies he’s been involved with from memory.

But in any event, on all this, nothing is simple when it comes to why one service succeeded where countless others failed. But if we do try to simplify it, in a nutshell, YouTube did one key thing above all that set them apart- at every level from creator to viewer, they adhered to Steve Krug’s famous design principle of “Don’t make me think,” which also was a huge part of why such companies as Amazon and Google made it big where so many others doing the same thing went the way of the dodo. They just made every part of the process of using their service easy, and user friendly in all ways.

As for YouTube, where some similar services at the time were requiring you to sign up for an account to view a video on the platform, YouTube made no such restriction. Where most services required installing custom plugins to play their videos, or even potentially have to download the video altogether to view it, YouTube didn’t. Even when the video could be streamed on other services, many had incredibly long buffer times before they’d start to play. YouTube chose a technology that didn’t need this and was able to start playing relatively quickly, even if you had a slow connection. You just needed to have the flash plugin, which was already installed on about 90% of home computers in the world at the time. Further, where some other services were very restrictive in size of video and specific format you could upload, YouTube was about as all inclusive as they came. If it was a relatively common format, their system would get it to what it needed to be on their end to play it on their website.

They simply made every step of the process extremely user friendly and idiot proof, even more so than Google Video. As YouTube’s first ever official hire, software engineer Yu Pan, would later state of this, “With Google Video, you needed to know what codec your video and what was the dimension of the video frame. 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.’”

Thus, at all stages and on most home computers, it just worked, something that couldn’t be said of most of their competitors.

But, while this was arguably the most critical factor to their success, they still needed an audience to generate and view the content in the first place. And here, too, they had a big advantage over even Google Video. You see, many such services like Google Video were very focussed on high end content, trying to mimic and push more professional stuff you’d see on TV. YouTube pretty explicitly was populated by mostly crap, often very grainy, low quality videos with little to no editing done to them. But this encouraged people to post on YouTube, instead of elsewhere. Essentially, YouTube embraced its identity as for the everyday person, whereas many other such services had far loftier goals. And on this, while most of the things posted were crap, people were sharing their crap with friends and family en masse, which self promoted everything. And, beyond that, by sheer volume, sifting through it all, there were gems there too that would appeal to a mass audience, even if video quality was poor and production was non-existent. Afterall, shows like America’s Funniest Home Video have been popular since 1989 for a reason. It doesn’t need to be professional, just entertaining in some way.

But there still was the matter of getting the audience in the first place- something Google had a massive advantage in and a several month headstart. Here, YouTube did two things that were key, one which Google did as well, the other which Google tried to avoid, and YouTube seemingly absolutely embraced, though no one will officially say this.

As to the former thing, they allowed people to embed videos onto other web pages, which most critically allowed people to put their videos on their social media pages.

As for the inspiration behind allowing putting their videos on other sites, which most similar services didn’t do, Hurley would state, that, too, came from their experience with Paypal, allowing people to embed the Paypal button on their sites. He states, “That button took them back to the PayPal experience. We tried to do the same thing with a video solution.”

In Chen’s opinion, this was all key to their success, “You didn’t have to download [videos], they played in the browser, and you could embed the video onto [platforms such as] Myspace, Facebook and eBay.”

There was one more factor that none of the founders seem keen to discuss so openly, and that was that their service had another type of video that proliferated their website- copyrighted content. And, at least for a time, they also had the ability to look the other way on it. We’ll get to that more in a bit, but this was something this small startup could take advantage of that Google simply could not on their service.

That said, it was not all hookers and blow at this point, despite that the company grew at an almost unprecedented rate starting in late April. For reference here, by the end of May, they hit 30,000 views per day, and within 6 months had risen to over 2 million views per day. By around the one year mark, they were already at approximately 100 million views per day and about one new video posted on the platform per second. Nevertheless, the path to dominance was an extremely rocky and ratfilled one, quite literally on the latter point.

You see, when the company first started gaining traction, they moved headquarters from Hurley’s garage into the office of their initial investor, Sequoia Capital, which we’ll get to the story of how they got that investment in a bit. But on the office, said the aforementioned Roelof Botha, “They worked out of our office for about three months, until they were about 12 people. Because they were in our office, I would see them every single day. We could have these sort of daily interactions and conversations.”

From there, they moved into a small office above a pizzeria and a Japanese restaurant in San Mateo, California, and, according to former CFO Gideon Yu, “The executives had to take turns removing… rats from the rat traps.”

One of the designers at YouTube, Christina Brodbeck, would state of the infestation, “Giant rats — like the size of cats! I remember sleeping in the office one night on this old slip-covered sofa, and you could hear the rats crawling around…”

Misty Ewing-Davis also chimed in summing up, “The office itself was disgusting…”

That said, they also, much like Paypal before them, had an extremely great work culture and tight-knit team. Gideon Yu would state, “This is going to sound very corny, but a lot of us describe our time at YouTube really like Camelot. It was very pure, very innocent. The dichotomy of how big YouTube seemed from the outside and the low-key nature of Chad and Steve, the really humble office that we had, the really humble number of people that we had, the really close-knit group that we had that was unspoiled by massive amounts of venture capital or everybody having all these huge wins under their belt. It was truly astonishing how different it was internally versus externally.”

Pierre Lamond of Sequoia Capital would also chime in, “Steve had a strange way of working. Basically, him and the engineers would work at night. They would show up in late afternoon and work most of the night. When we would show up at 9 a.m. for board meetings, there were very few people there. If you showed up at 7 p.m., all the engineers were there sharing a pizza dinner. It was a fun place.”

If you’re now wondering why everyone is only mentioning Chad Hurley and Steve Chen, Karim bowed out very early on in an operational sense, as he was accepted into Stanford in a computer science PhD program. As to this decision to leave, he would later state, “I’ve created a number of products that have been quite successful. And of course YouTube is the most well known among those. And over the years, I’ve sort of specialized in the process of coming up with new concepts. Developing them, marketing them, and also raising money for them. So at YouTube that’s really what I wanted to focus on. That’s sort of the stage of the startup that I’m most effective at. And that I find most interesting.”

And, thus, he decided to step away from the venture and pursue his degree. Although don’t sleep on his choice there, beyond helping to found YouTube, he’s also helped a couple other of the biggest online companies in the world get going as well, as we’ll get into later.

Going back to Chen and Hurley, they were in it for the long haul. But they needed money and as alluded to, they got it from Sequoia Capital. As to how, luckily, they had friends in high places thanks to Paypal. Most notably, the aforementioned Roelof Botha and another Paypal Mafia member, Keith Rabois who, among other things, has been involved on some level in LinkedIn, Square, Yelp, Xoom, Palantir, Lyft, Quora, and AirBnb. And, for the purposes of this story, YouTube.

On this one, Karim was at a barbecue at fellow former Paypal employee Mike Greenfield’s home. Rabois was also attending said BBQ and when discussing what they were respectively currently working on, Rabois became extremely intrigued with YouTube, especially given the fact that they were using flash, their service could host long form video, and the videos could be viewed directly from the web. Karim and Rabois then went onto Greenfield’s computer and spent the next half hour watching almost all the videos that then existed on YouTube.

Rabois immediately wanted in, stating in a later interview, “There were only two times I’ve done that. The other was with Airbnb.”

Rabois was also critical to them getting funding beyond, which was key to the company continuing at that stage. Chen noted at the time they had an ever expanding number of credit cards to pay the bandwidth bills, and close to 10 employees that were unpaid, mostly drawn from people they’d previously worked with at Paypal. Of this, then director of product management at Google would state of this initial team coming mostly from Paypal, “As YouTube grew, that team reassembled. This was a real advantage versus someone who would have had to recruit from an unknown pool of talent.”

Beyond investing himself, Rabois reached out to Botha at Sequoia Capital, and, not long after, Botha got Sequoia to invest $500,000, and later in November another $3.5 million (about $5.4 million today). And, not long after that, another $8 million from that same firm, partially with the help of hedge fund Artis Capital Management.

Botha stated of his initial impression of YouTube, “I was sold immediately. There were so many people who were negative on the company at the time, even after we made the investment. So many people were mocking me for making that investment: ‘Online video has been tried and failed.’ There was a lot of skepticism about the business.”

Needless to say, things were trending in the right direction on all fronts, rapidly. But of course, one of the most dangerous points of any business life cycle is often not downturns, but rather, times of explosive growth, something that has killed many a company over the years very rapidly, and is in part why so many founders are so eager to sell to larger companies who have the expertise and resource buffer to navigate this period successfully.

And YouTube certainly dealt with all this. Employees noted in the early going trying to keep up with their growth was incredibly difficult on countless fronts. Product Manager Matthew Liu stated of the server side, “The viral growth was just sensational. And that’s not just, ‘Hey, how do we get users to watch this video?’ It’s also: How do we get the current infrastructure of the internet, like data centers, machines within those data centers, the software configurations, to scale without literally having computers meltdown?”

And as for the content, the aforementioned Ewing-Davis would state, “I think the greatest challenge was just the type of content that we had to look at was, uh … horrible. People didn’t know what was OK and what wasn’t because there was no precedent set. Nobody really knew. Like, is it OK to post porn on this free website that children are looking at? I don’t know! We actually caught ourselves several times in public places talking about things that were totally normal to us, but realizing that it was not normal and it was actually really terrible and people did not want to hear that while they were eating their lunch…. There were a lot of conversations about things that were like, ‘Do you think that this is OK?’ ‘I don’t know, it makes me feel gross.’ And that was kind of our judge, our judge was our gut. And then we saw more and more of it, and we were able to actually write policies around it and actually have a framework around what is OK and what is not.”

Zahavah Levine, one time General Counsel and VP of Business Development, would further state, “It wasn’t just the [content moderators] that were conducting that review, it was everybody that was walking by them in this open office. I remember one time … these fancy executives from LA pulling up in their limousine coming up to our little tiny office and we’re taking them through it and they walk right by these kids reviewing inappropriate content all over their screens.”

Then there were the copyright issues.

While these caused Levine, the only lawyer in the bunch, considerable consternation, in the early going, YouTube seemed to have an extremely lax, or non-existent, policy on this front. And they seemed to try to get around confronting the issue any way they could. For example, Chen would later state one of the ways they deflected most of the lawsuits was that many were foreign based. So he states, “whenever any lawsuits would come in [from abroad], we would just say we’re an American company.”

As for the rest, their general argument was they couldn’t be held responsible for what users posted, but were happy to remove anything upon request. Of course, they didn’t seem to be actively removing copyrighted content they knew about if it wasn’t requested. This lax attitude all worked to their advantage at first, especially in the earliest days before many of the big boys were paying too much attention, helping to grow YouTube even more rapidly.

In fact, one of their first truly viral videos was a Saturday Night Live rap music parody called “Lazy Sunday”, posted shortly after its debut on SNL on December 17, 2005, receiving 1.2 million views in its first 10 days, and it just kept rising.

While these were huge numbers on the site, it wasn’t quite as game changing as the media at the time made it out to be, with growth simply continuing its general exponential rise with the help of things like this. But what was different on this one was how the media began to view the fledgling site after this.

As one of their competitors at VMIX, Greg Kostello, noted, after this, “When I first started out reporters would ask me what VMIX did. By December people kept asking me ‘How are you different from YouTube?’ I knew at that point the game was over.”

On the downside, Lazy Sunday also got the company a lot of negative attention from the likes of the very companies that were having their copyrighted content put on the platform. In this case, NBC who, by February, officially issued a takedown request for the video, as well as for hundreds of other videos that were infringing on their copyrights. Youtube, of course, happily took down the videos without a fight. But, once again, they really didn’t seem to be doing much to stop new copyrighted videos from being posted- partially because they didn’t have the manpower, but also, many have speculated, once again, because it was simply good for the site to let it continue at that stage of the growth cycle.

On this, Viacom would claim, “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.”

That said, the networks were also embracing YouTube to an extent, with, for example, Good Morning America starting to run a segment on the most viral videos at a given time on YouTube. Further, the quality of original content was also steadily increasing, with an early example being the Ask a Ninja comedy series, which, fun fact, was the author of this piece and co-host here, Daven’s, first ever exposure to YouTube, along with the timeless Fat Shakira- Hips Don’t Lie parody. And going back and binge watching while writing this, Ask a Ninja absolutely holds up today in entertainment value. And we here at TodayIFoundOut demand the Ninja do another series run. I mean, we know he’s a ninja so he’s good at disappearing, but no need to flaunt it. We have bell subscribed, and eagerly anticipate you killing us soon.

In any event, in a nutshell, while YouTube was in the earliest going having most of its viral content leveraging existing Hollywood stars and often copyrighted content, as the months progressed, it began to not just borrow stars from other outlets, but with some uploaders starting to become stars in their own right, just because of their videos on YouTube.

Hurley would later state of all this, in his view, the industry wasn’t so much concerned about the copyrighted content. That was always just going to be a matter of making a deal so they got their cut, something Google had already been slowly working on quite successfully for Google Video before they acquired YouTube. But, rather, he states, “I feel the industry was making a lot of noise because they’re more scared about losing control, not necessarily just creation of content, because everyone has a camera in their hand, but also the distribution of that content. YouTube is presenting a new, meaningful way to distribute content on a global basis. They’re more concerned about that than potentially any copyright infringement that would come up.”

It was all still a risk though. At any time, YouTube could be taken to court and potentially lose in such a way that could be beyond their ability to cope with.

As Botha would state, “The litigation around music was a very big risk for the company. It made Chad and Steve question whether it was worth soldiering on with the company. We didn’t have the resources to keep on fighting.”

Thus, the founders began thinking about selling to someone who could deal with such a thing happening, as well as all the other major issues they were facing with their extreme growth.

That said, it wasn’t always a sure thing that they would sell. Botha would state that despite the legal issues, “The company could have made it on its own. YouTube had 55 people at the time of the acquisition, and we were profitable.” They were also poised well to seek out substantial further venture capital to accomplish the needed growth and to deal with the legal side of things.

But going back to Hurley, from his side on a sale, it “felt like it was something that was necessary.”

He would elaborate, “If it was up to us, we would have liked the opportunity to stay independent and continue to create YouTube on our own, but unfortunately [because of] the forces of growth, the situation that we found ourselves in, that wasn’t an option for us and Google, luckily enough for us, has provided the support and resources to take things to the next level. We needed resources, not just money for people [and] for infrastructure, but we needed those things quickly to keep up with growth — demand — and to build a critical base. Google provided the groundwork with what they’d already set up businesswise with their team and structure. It would have taken us years and years to get that stuff up and running; [selling to Google] basically allowed us to instantaneously — overnight — take things to the next level. If it wasn’t for that, I really feel that it would be hard to imagine YouTube being here today, at least to the extent or size that it is today.”

Levine, would chime in, “What’s hard to appreciate is how quickly we had grown beyond our capacity to manage the business. Our global data infrastructure was cracking, our bank account was dwindling, angry music company executives demanding hundreds of millions of dollars, partners banging doors down trying to get our attention.”

Thus, platform thoroughly established, they decided to seek a buyer with more expertise in such matters both in mass scaling and on the legal side of things. Seemingly all the major tech players of the day were in play including News Corp (who owned MySpace), Yahoo, Microsoft, and Google.

That said, Supan would claim of them all, “They were just trying to make sure the other one didn’t acquire [YouTube]. None of them understood what they were buying. They just didn’t want Microsoft to buy it.”

Very quickly, however, Yahoo and Google became the top two bidders, with Google seeming to have the clearest vision of what the site could be someday. Because of this, as Chen stated, “Google was able to move quickly.”

Of course, they weren’t the obvious choice to buy it, given they already had their own similar and established competing service in the aforementioned Google Video, that was at the time number 2 in the world on that front, with YouTube serving about 60% of online videos and Google 17%. But YouTube was growing ever faster, and Google Video not so much.

From the YouTube founders’ side, Google was the perfect partner- significant, very recent experience (remember Google itself at this point was only about 8 years old) in scaling to any level with data centers around the world to boot to do it; significant resources to make sure any amount of growth would likewise be able to be accommodated regardless of finances of the moment; and, critically, expertise and clout to be able to resolve the copyright issues both from a legal and technical side, as Google themselves had recently gone through some similar battles. They had also recently established revenue sharing deals with some major entities for Google Video, allowing them to host certain copyrighted content.

So on all this, tons of advantages for YouTube by joining the Google team, who also had a very clear vision of where to take things. And on Google’s side, for nothing but stock in the company, they could overnight take their market share for online video from 17%, to a total of 77%.

Thus, a deal was struck in October of 2006. With the YouTube founders meeting with unnamed Yahoo executives at Denny’s for Yahoo’s final pitch, and then the next day with Larry Page and Eric Schmidt of Google at the same Broadway street Denny’s in Redwood City, California, with the deal signed that day in the parking lot.

Fun fact on this one, thanks to the publicity of that signing there, Denny’s sent Hurley and Chen gift cards to Denny’s of an undisclosed amount.

But in any event, after only about a year and a half after its original launch as a dating site, YouTube sold for a cool $1.65 billion (about $2.6 billion today) in Google stock. As for the three original founders, Hurley reportedly received $395 million (about $609 million today). Chen got $326 million (about $503 million today). And Karim got $64.6 million (about $100 million today). For taking an around $11 million chance on the video upstart, Sequoia saw about a one year return on their investment at $442 million (about $681 million today). All of the YouTube employees likewise did well for themselves, right down to their receptionist, Shannon Hermes, getting a cool $1.3 million (about $2 million today) in Google Stock.

And note, since then, Google, or Alphabet if you prefer, stock value has multiplied a handful of times. So, depending on how much any of those involved kept their stock in Google, and given how YouTube has done since, it’s fair to say the deal has worked out well for all parties involved pretty substantially.

Now, we’ll get to the supposed first ever video on YouTube and why everyone sure seems to be wrong on this point shortly. But for now, as for the aftermath of the deal, by pure coincidence, the company had long planned for that day to be a moving day into a bigger, less rat infested office. Then director of ad sales Jamie Byrne describes the scene, “We all show up in this new office for the very first day, we’re all kind of getting our desks organized, and Larry [Page], Eric [Schmidt], and Sergey [Brin] walked in to announce the acquisition with Chad and Steve. So this completely surreal, shocking moment.”

After, to celebrate, Ewing-Davis states, “We all went to TGI Friday’s pretty early and, being in my early 20s, we all drank a lot that day. My mom thinks this is hilarious: I called my mom to tell her, ’cause I didn’t want her to find out from the news, and I left her a voicemail at her job, and she kept the voicemail until she retired like four years ago. She kept the voicemail because she said I was so hilariously drunk screaming over the phone about how excited I was. So apparently I was very excited.”

Levine had a different interaction with his parents, stating, “I do remember calling my parents who I hadn’t talked to in some time because I had just disappeared off the face of the earth. And I emerge after the agreement was announced and I called my parents who had already read about the sale in the press and I remember my mom just saying in her effusive manner: ‘Honey, you’ve worked so hard! No one has worked harder. You deserve this!’ and then I remember my dad chiming in, in all his wisdom, saying, ‘Hold on, hold on, wait a minute. Honey,’ he said to me, ‘I love you dearly, I really do, but I want to be clear, no one deserves this.’ And that observation just resonated with me, I think it kept me really grounded at that moment.”

Of the general feel, designer Christina Brodbeck stated, “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.”

As for the three founders, Hurley and Chen stayed on with YouTube for a few years after the acquisition, with Hurley as CEO until 2010, but seemingly not changing much after striking it rich. With Supan noting, “[Hurley] doesn’t need fame. He’s actually a really down-to-earth guy. He has great values and comes from a great family.”

After leaving YouTube, Hurley and Chen continued to work together, for example founding AVOS Systems, which, among other things, created the mobile video-sharing service MixBit, and other such ventures. They both went on to invest in countless companies, and Hurley even co-owns the LA Football Club and is part owner of the Golden State Warriors football club.

Thanks to the sale, Karim got the spotlight back on him, abandoned his PhD program at Stanford, and ultimately founded the Venture Capitalist fund Youniversity Ventures, which was one of Airbnb’s first investors, along with having variously investing in Reddit, Palantir, and Eventbrite, similar to other of the Paypal Mafia members.

As for YouTube, unlike so many acquisitions that don’t quite pan out when the giant company takes over and the original founders’ are mostly out of the picture, YouTube is an example of when things go the other way. With Google ultimately resolving the copyright issues with their contentID system and revenue sharing deals with various major outlets. They also began likewise sharing revenue with content creators on the platform in late 2007. They also began investing in content creators directly to up the professionalism of the site, perhaps most famously helping to fund the Green brothers via Crash Course- all part of YouTube’s $100 million Original Channel Initiative. Further, Google’s expertise on infrastructure made sure YouTube never really had the major issues most companies growing that fast would on that side of things. One, for example, remembers the days when Reddit going down many times a day for a couple years there was just a fact of life for the website as they simply couldn’t keep up with their growth once Digg shot itself in the foot quite literally, and then doubled down on it during the revolt directly after, rather than listening to their revolting users, more or less saying “it’s our way or the highway”, and then everyone promptly all took the highway to reddit in one of the most spectacular almost overnight falls in social media history.

In any event, as to the overall appeal of YouTube and why it’s risen as it has since, in an interview shortly after the company sold to Google, Karim would sum up, “I mean I think we’re just beginning to see the potential that youtube is unlocking. Youtube has really given anyone a stage to be seen. So anyone who has any sort of talent that they want to show to the world whether singing, dancing, or comedy, or whatever, they can instantly go on youtube and upload their video and get an audience of millions for free. And that was never possible before. And I think we’re just beginning to see what is really possible with this new medium.”

As for Hurley, he would sum up of his opinion on all this, “I think video is a different experience. A lot of the brands that we’re dealing with are brands that are trying to tell a story, [like] Coca-Cola and American Express. You can’t tell those stories through text links or relevance. It’s really about engaging people with something that’s interesting to them. So we see that as an opportunity to keep developing these concepts that engage brands and engage users.”

Chen would likewise chime in of the power of Youtube vs other services like Tiktok today, “people only tend to view the most recently uploaded videos on TikTok. On the other hand, YouTube is more expansive as it tends to be a destination where you go to search and find any content, new and old…. The only thing that would take down YouTube at this point [would be an] unforeseen technological leap.”

In the end, while nobody within the company or without would argue that YouTube is a perfect system today, it is, as Karim noted, a platform that allows anyone, for free, to not have to go through any gatekeeper to share their videos with an audience comprising a large percentage of humans on Earth. YouTube further has an algorithm that has, over the years, gotten better and better at putting the best of those videos in front of the eyeballs of the portion of the audience that would love them the most- all with little video making or technical expertise needed on the part of the creator of the video to do it. And any expertise that is needed, can be learned from other videos on this very platform. Not only that, unlike so many other similar services even today, they share revenue generated on those videos relatively equitably with the copyright holders of the content, from major corporations like NBC, to just one bald dude sitting in his basement talking about interesting things like this. So, perhaps not a perfect system, but, as U.S. Founding Father James Madison would sum up when talking of governments, no “human device, & human administration can be perfect; [thus] that which is the least imperfect is therefore the best.“

Bonus Fact:

Ever wonder what the first ever YouTube video was? Well, we hope so, because we’d like you to keep watching to the end of this video for algorithmic reasons. It turns out, the first video is seemingly not what literally every source we could find says.

On this, the supposed first ever video on YouTube was posted on April 23, 2005. The video was created by Karim, and is still up today and now has 291 million views. Not exactly up to par with more modern videos that get that number of views, it was a good representation of what they were going for at the time- just an everyday person, doing everyday things and posting it. Specifically, just a 19 second video of Karim at the San Diego Zoo, filmed by a friend of his, Yakov Lapitsky, with elephants in the background in which he states, “All right so here we are in front of the elephants. And the cool thing about these guys is that they have really, really, really long… um… trunks. And that’s cool. And that’s pretty much all there is to say.”

The supposed second video was a 10 second video posted on the same day titled “My Snowboarding Skillz” featuring a guy falling flat on his face while snowboarding. The next was titled Tribute, posted the next day featuring a guy jumping up such that his legs span two walls and then smiling and yelling…

Yep…

The fourth video, Premature Baldness, is notable as it’s the first long form video- 1 minute and 59 seconds- the first known youtube video to have been edited before uploading, and, most critically, the first video featuring superior baldness on YouTube. It even features music in it. The video itself is of a guy getting his head shaved in such a way as to appear to be balding, comb over and all.

Here’s the thing. There is a couple month gap between YouTube’s launch on February 14 and April 23. And while the founders did all note nobody was uploading their intended dating videos, they also say within a couple weeks they switched tact. So are we to believe not even they uploaded any videos, not even a test one, to the site during that span? Just to get things going? On this, while no specific videos can be pointed to, it does seem there were videos during this time.

For example, their aforementioned first employee Yu Pan, stated Karim showed him the early version of the site at a party and that, “I think he knew I liked [Adobe] Flash and he said, ‘Oh look, what I can do with Flash and video’ and stuff like that. I was like, ‘Oh wow, that’s pretty cool.’ It just had a video, I think it was of Chad [Hurley] in a convertible or something like that. That was kind of cute. I think at the time it had a dating bent to it, but it showed off the fact that you can get a link and you see the video.”

Beyond this, Karim would note during a commencement speech he gave in 2007 at the University of Illinois, “We didn’t have any videos. Realizing videos of anything would be better than no videos, I populated our new dating site with videos of 747s taking off and landing…” Before going on to note after this the aforementioned quote, “We were so desperate for some actual dating videos… that we turned to the website any desperate person would turn to, Craigslist.”

Looking at Karim’s channel, it was, however, created on April 23, 2005, the same day the Zoo video was posted. Seemingly implying, if the quotes about uploading 747 videos during the dating niche phase and the convertible video are correct, he previously uploaded under a different channel name that no longer exists.

So, from these quotes and the fact that it would be really weird for them to have launched the site in February and not at least posted something on it themselves for over two months, it would sure seem the Zoo video is not actually the first ever video published on YouTube. It’s perhaps more accurate to say that it is likely simply the oldest video that still exists on YouTube. And we’re speculating the purging of the handful of the rest before was probably from completing the update from a dating themed video sharing platform to a general video sharing platform. But if one of the founders would like to jump in the comments for more clarity here, we sure would be interested in learning more about this discrepancy.

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