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 YouTube - an online success story

The YouTube story is indeed a fascinating one. I'm still getting my head around it, but it does certainly go to show how many great ideas, relatively simple in concept, are still waiting to be actualized on the web - and the fact there are many more millionaires yet to be made.

We can all find inspiration in that!

I'm an admirer of YouTube; as much as for their success (perhaps more) as for their service. It doesn't really matter what happens to YouTube from this point onwards, it was the getting to this point which is truly amazing and a story which will be referred to by many in the industry for years to come.

I only started using YouTube a few months ago - to watch The Evolution of Dance which had received a great deal of press around March this year. At the time of writing this, the clip has been viewed nearly 40 million times. 

I sniffed around a little more after viewing the clip and was immediately blown away that just about *any* music video from my misspent youth was available. I tried obscure one-hit wonders from the 80's.. they were all there. Ah, the nostalgia. 

The other point that impressed me was that the service just worked - so easy to use, excellent streaming. Rumor has it that the company currently pays between 1 - 2 million dollars a month in bandwidth bills.

The short evolution of YouTube

YouTube was launched early in 2005 in the same way that most great tech related companies seem to be - a garage and no real cash to speak of (Google, Microsoft and eBay have "garage" type roots). The founders were Chad Hurley, Steve Chen and Jawed Karim - all of whom met via their employment at PayPal. As far as I know, none of them are over the age of 30.

The story is that one night they became frustrated with trying to email a video clip. They then fleshed out the infrastructure for their video sharing platform within a couple of hours. 

It's a classic scenario of identifying a problem from the perspective of a consumer and then addressing a need.

The domain name was registered on the 14th of February 2005 and the site was open to the public by May. It was an instant hit; and word of mouth took over which fuelled the initial growth. 

Towards the end of 2005, YouTube was "officially" launched after securing funding from Sequoia Capital to the tune of 3.5 million dollars. Sequoia Capital sunk in another 8 million clams in April 2006. The thought of outside investors can be rather scary, but for some businesses, growing too fast can be equally as deadly as growing too slow. If YouTube hadn't chased the investor cash, their servers would have bogged down, new features couldn't have been added and users would have quickly gravitated to some of the other services that were rapidly springing up.

As for revenue during this early period - there was none to speak of. This was starting to look rather like a dotcom bubble biz from the late 90's/early 2000.

The very interesting thing here is that even with all the investment cash, very little was put into promoting YouTube; all the money went into infrastructure and responding to user requests for features. That's one major difference to many of the dotcom bubble companies who spent up big on ads. 

YouTube played it very smart by making it easy for their users to do the promotion for them. It was viral marketing at its best; from simple ideas such has having short links to videos (easy to email) and tell-a-friend functions, to allowing videos to easily be embedded in profiles of other social networking services; with YouTube branding of course. Their voting system also helped to create a sense of community as did profile pages for users.

The ensuing buzz and videos such as The Evolution of Dance then caught the attention of the press and spurred on even more activity.

YouTube and copyright

It wasn't always a bed of roses during their growth; the issue of copyright has dogged the company on many occasions and probably will do so for some time to come. While I'm sure that the user created original videos has played a substantial role in their success, I do believe that perhaps it was the copyrighted content being so easily accessible that may have been the *major* factor of their rocket ride. 

In my case, the Evolution of Dance got me there, but it was the 80's music videos that kept me hanging around, reinforcing my awareness and recall of the word "YouTube".

In terms of copyrighted content; how have they survived? Well, they've been very clever in utilizing the very grey area of the DMCA Safe Harbor Provisions; which provides protection to service providers from liability for the activities of its users. As they were seen in the eyes of the law to fall into that category; they've been somewhat protected .. up until now anyway; there's still a few law suits kicking around.

But even on that point, they've been very smart. Instead of trying to be crusaders and digging their heels in; which has been the undoing of other services, they have extended an olive branch to some copyright owners in the form of revenue share partnerships which has seen some content effectively becoming licensed.

The way that works with music videos is YouTube has software in place which can identify soundtracks in videos posted posted by its users; the copyright owner then gets a slice of any advertising revenue run alongside the video.

These partnerships also helped pave the way for what was about to happen next.

YouTube strikes it big

The payoff for the YouTube founders ideas and clever maneuvering occurred on October 9 when Google, Inc., acquired YouTube for $1.65 billion in Google's stock. With Google now in the arena, any lawsuits are most likely to become background noise.

From $0 to $1.65 billion in under two years - my hat is well and truly off to these guys just for that achievement. They played the game well. 

A word of warning though; starting up a site that has a sizeable chunk of copyrighted content without the copyright owner's permission is certainly not for the faint-hearted and does raise some rather tricky ethical dilemmas in my opinion. YouTube has been rather unique in having gotten so far, relatively unscathed - and that perhaps may also have been a key element in their success - the speed at which all the above occurred.

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Michael Bloch
Taming the Beast
http://www.tamingthebeast.net 
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