YouTube is one of the largest and most popular video distribution platforms on the Internet. It has more than 4 billion hours worth of video viewers every month, and an estimated 500 hours of video content are uploaded to YouTube every passing minute.
Since its origins in 2005, YouTube has transformed itself from a showcase for amateur videos to one that distributes original content.
It has also enabled the creation of an entirely new profession — YouTube content creator, which can be a very profitable career for some YouTubers around the world.
What was the original purpose of YouTube?
YouTube was originally created as a platform for anyone to post any video content they desired. It was hoped that users could use the site to upload, share, and view content without restriction.
It has since grown to become one of the foremost video distribution sites in the world. Today, many content creators make a decent living by selling ad space before or on videos they create and upload onto the site.
Thanks to things like YouTube's Partner Program and Google's AdSense, a few people can actually create successful careers as YouTubers.
YouTube was founded on Valentine's Day in 2005. It was the brainchild of Chad Hurley, Steve Chen, and Jawed Karim, who were all former employees of Paypal.
The platform, like so many others in Silicon Valley, began as an angel-funded enterprise with makeshift offices in a garage.
According to its founders, the idea was born at a dinner party in San Fransisco, about a year earlier, in 2004. The trio was frustrated by how hard it was, at the time, to find and share video clips online.
“Video, we felt, really wasn’t being addressed on the Internet,” said Chad Hurley in an early interview. “People were collecting video clips on their cell phones … but there was no easy way to share [them].”
In May of 2005, the beta version of YouTube was up on the net, and within a month, the very first video was posted. It was titled, "Me at the Zoo," and was a 19-second long clip posted by Karim himself. The video featured footage of Karim at the San Diego Zoo, talking about elephants and their trunks.
By September of 2005, YouTube had managed to get its first video with one million views. This was a Nike ad that went and gone viral.
This first YouTube viral video was a clip of Brazilian soccer player Ronaldinho receiving a pair of Golden Boots. Nike was also one of the first major companies to embrace YouTube's promotional potential.
The following month, in November of 2005, the venture capital firm Sequoia Capital invested an impressive $3.5 million in the business. Roelof Botha (who also formerly worked for Paypal) joined YouTube's board of directors.
Sequoia and Artis Capital Management invested an additional $8 million, in 2006, as the website saw significant growth in its first few months.
Who founded YouTube?
As previously mentioned, YouTube was founded by:
All three were working for Paypal at the time of YouTube's founding in 2005.
Chad Hurley studied design at the Indiana University of Pennsylvania prior to joining Ebay's PayPal division after graduating in 1999. At Paypal, he primarily focused on the user experience (UX) of their interface.
Steven Shih Chen was born in 1978 in Taipei, Taiwan. His family emigrated to the U.S. when he was eight years old. Steve left the Illinois Mathematics and Science Academy prior to graduating.
He later attended the University of Illinois at Urbana-Champaign, where he graduated in 2002 with a degree in computer science. He would later join Paypal.
Jawed Karim was born in 1979 in Merseburg, East Germany. His father was Bangladeshi, and his mother was German.
After experiencing xenophobia in Germany, his father moved the family to Saint Paul, Minnesota, in 1992. Jawed would later study computer science at the University of Illinois Urbana-Champaign, but left prior to graduating.
After dropping out, Jawed would become an early employee of the fledgling Paypal. While at Paypal, he continued his coursework and eventually graduated with a degree in computer science, and went on to earn a master's degree in computer science from Stanford University.
How was YouTube created?
Steve Chen, Chad Hurley, and Jawed Karim met at Paypal.
"As a capital-funded startup, the idea for YouTube received an $11.5 million investment from Sequoia Capital in 2005. In February, the domain name was registered in the headquarters above a pizzeria in California. In April, the first-ever video was uploaded by Karim named "Me at the Zoo". After a Beta testing period, the site launched in December 2005, and a Nike commercial became the first video to receive one million views," according to Engadget.
By February of 2004, YouTube's now-famous logo (since changed as of 2017) was registered as a trademark, and the website domain name was also purchased.
The original idea for YouTube was for users to be able to upload videos, introducing themselves, and saying what they were interested in. This didn't really take off, and the co-founders soon pivoted to a more general video sharing site.
Since then, YouTube has grown exponentially. Here are some of the major milestones in the company's history (courtesy, in part, of inverse.com):
- February 2005: Chad Hurley registers the "YouTube" trademark, logo and domain on Valentine's Day.
- April 2005: "Me at the Zoo” becomes the first video to go up on the site. It is fairly self-explanatory.
- May 2005: YouTube's Beta site is launched.
- July 2005: Video HTML embedding added to the site for the very first time.
- August 2005: 5-star rating system added to YouTube.
- September 2005: A Nike ad becomes the first video to hit 1 million views.
- October 2005: YouTube's playlist function is added to YouTube for the first time. This would become an integral part of the platform for content creators and users. Fullscreen video is also added to the site. YouTube also adds its subscription function.
- December 2005: YouTube officially launches out of its Beta status. This is thanks, in part, to a multi-million investment from Sequoia Capital enabling them to improve their servers with increased bandwidth.
- January 2006: YouTube adds its "Groups" feature to the platform.
- February 2006: For the first time user profile personalization is added.
- March 2006: YouTube adds a ten-minute limit to all uploaded video content.
- April 2006: YouTube adds its "Directors" function to the site.
- May 2006: Responses to videos are allowed for the first time. Cellphone video uploading functions are also included on the platform.
- June 2006: Personalization of profiles features is further refined and user viewing history is also added to the site. YouTube also makes a deal with NBC this month to remove some of its footage under copyright infringement laws. YouTube also sets up its Content Verification Program to help prevent a similar issue in the future. NBC later decide to let YouTube actually promote its material on its site.
- October 2006: Google acquires YouTube for $1.65 billion. At the time Google calls YouTube, "the next step in the evolution of the Internet." Amazingly, YouTube only had roughly 65 employees at the time.
- May 2007: YouTube launches its Partner's Program to enable content creators to actually make money off the videos they create and upload. Many content creators can finally turn their hobbies into an actual profitable income stream. This month, a baby named Charlie took the internet by storm in a 56-second viral video. In the video, Charlie bites his brother's finger and smiles. The family who uploaded the video to YouTube is reported to have made $100,000 from it.
- June 2007: YouTube allows other languages to be used on its site for the first time.
- July 2007: YouTube partners with CNN to host its first presidential debate.
- August 2007: This month, Google decides to start making some money from their new acquisition by enabling ads on the platform for the first time. Initially, semi-transparent banners were used that popped up at the bottom of videos, overlaid on the content for between 10 and 15 seconds.
- March 2008: YouTube allows support of 480p videos on the platform. Video analytics are also added to the site.
- December 2008: Audioswap is added to YouTube. This function allows content creators to add music to their videos from a library of licensed songs.
- January 2009: Google Videos uploading service is halted. The U.S. Congress also launches its official YouTube channel this month. For the first time, U.S. citizens can gain access to the goings-on in Congress like never before possible. The Vatican also launches its own official YouTube channel.
- April 2009: YouTube wins a Peabody Award for its outstanding achievements in electronic media. Along with Vivendi, YouTube launches music video service VEVO. Usher also introduces Justin Bieber to an unsuspecting world this month. Depending on your point of view, this was either the darkest day in YouTube history or one of its greatest.
- November 2009: 1080p videos are finally allowed on the platform.
- December 2009: YouTubes automatic speech recognition service launches this month.
- January 2010: YouTube's feature film rental service launches this month. This was a bold move in a gamble to directly challenge the hegemony of Netflix and Apple.
- March 2010: The now ubiquitous "Thumbs" rating system is added to YouTube.
- July 2010: YouTube enables 4K videos to be uploaded to its platform for the first time.
- December 2010: YouTube plays a pivotal role in the coverage of the so-called "Arab Spring". Activists from around the Muslim world used the platform to spread messages of hope and defiance to accelerate the movement.
- April 2011: YouTube Live is launched for the first time. This function enables content creators and corporate/public organizations to stream live content. Concerts, sports events, and even weddings begin to appear on the site.
- October 2011: After the acquisition of Next New Networks (an original video programming company) in March of 2011, YouTube launches its first original channels. From this point forward, Google would offer original content creators serious money to make videos exclusively for the platform.
- November 2011: YouTube launches its "Youtube Analytics" tool. This function enables content creators to intelligently track their channel's performance. They can find out who is watching their videos, for how long, and which are the most popular to target monetization strategies.
- June 2012: YouTube merges with Google Video.
- July 2012: The Olympics are live-streamed for the very first time.
- October 2012: YouTube partners with ABC to live-stream a presidential debate for the first time.
- December 2012: “Gangnam Style” becomes the first video to hit 1 billion views.
- March 2013: YouTube reaches 1 billion unique monthly visitors.
- November 2014: Music Key is added to the site. This was a subscription-based service that enabled users to stream music videos advertisement free from participating labels on YouTube and Google Play Music. It would later be superseded by YouTube Red.
- November 2015: YouTube Red launches. Now called YouTube Premium, this is a subscription service offered by YouTube to provide advertisement-free access to its content.
- January 2016: Adele’s “Hello” becomes the fastest video to hit 1 billion views in just 88 days.
- February 2016: YouTube launches its general subscription service. This replaces YouTube Red.
- April 2018: This month a shooting took place at the YouTube headquarters in San Bruno, California. The shooter was later identified as Nasim Najafi Aghdam. He entered the building from an exterior parking garage and wounded three people before taking his own life.
- October 2019: YouTube launches its "Two Ads" feature for the first time. By adding two ads together (one of which is unskippable) YouTube creators are given a much-needed boost in potential revenue. This followed the so-called "Ad Apocalypse" a few months earlier. This was an event where YouTube demonetized videos or entire channels for perceived "advertiser-unfriendly" content.
- November 2019: This month, Google announced that it would begin to phase out its classic version of YouTube Studio to all content creators by the spring of 2020.
- June 2020: YouTube begins to phase out the ability to use categories on its platform.
How did YouTube get its name?
Unlike a lot of other company names, YouTube's name is actually quite self-explanatory.
"The name “YouTube” is actually pretty straightforward. The “You” represents that the content is user-generated, created by individual users and not the site itself, and “Tube” is a nod toward an older original term for television.
Soon after YouTube's URL was registered, it came under immediate attack by another company called Universal Tube & Rollform Equipment. Their website address just happened to be very similar —www.utube.com. They filed a lawsuit against YouTube, which appears to have been unsuccessful. Today that company's URL is www.utubeonline.com.
Since its early days in 2005, YouTube has grown to become a behemoth of the Internet. It is now present in more than 75 countries and available in 61 languages, with hundreds of hours of video content uploaded every minute!
Today, the site has more than one billion users and has become the de facto video sharing platform on the Internet.
How does YouTube make money?
Like any business, YouTube needs to make money somehow. But, how exactly does YouTube do it?
Let's take a quick look.
Before being purchased by Google, YouTube had declared a monthly income of somewhere in the region of $15 million.
Despite this, when Google acquired the site back in 2006, it was a long way from actually being a profitable business. But profitability wasn't the main reason that Google snapped them up.
Google saw the potential for the platform as an online video service. They surmised that by combining YouTube's platform with Google's enormous internet traffic, it would only be a matter of time before the investment paid off.
Google eventually added their Google ads service to video content on the platform in a bid to bring in some much-needed revenue from the site. And it certainly worked.
By June 2008, Forbes magazine reported that YouTube was making somewhere in the region of $200 million annually, mainly owing to progress in advertising sales.
Through years of refinement, Google began to embed targeted advertising directly into the video clips that its users watched, as well as promoting featured content. This was later replaced by running paid ads before a video began playing.
The company has also recently added the "two-ads" feature, which shows two ads at once, to beef up potential revenue from the content.
But this is not the only revenue source for the platform. YouTube also pulls in money through its subscriber-based model -- now called YouTube Premium (previously YouTube Red), Music Premium service, and paid TV service.
This service offers users exclusive benefits, like removing ads, and charges subscribers a regular subscription fee.
As of 2017, Alphabet no longer breaks down revenue by platform, so it is unclear exactly how much money YouTube brings in. However, as of 2019, YouTube is believed to have generated around $15 billion for Alphabet -- that is about 10% of all of its annual revenue for the year.
Not too shabby.
But revenue is rarely without overheads. YouTube's running costs are thought to be significant, believed by some to be as much as $5 or $6 million a month.
The bulk of this cost is from providing sufficient network bandwidth for its millions of users, as well as a host of other costs related to running such a large company.
For the quarter ending December 2019, Alphabet as a whole reported making $46 billion in revenue. Of that, somewhere in the region of $10.7 billion was profit.
The bulk of this was reaped from Google's main search business, YouTube ad revenue, and income from its Google Cloud service.
As you can see, YouTube has come a long way since its inception back in 2005. As social media begins to see losses from companies pulling their ad campaigns in response to hate content, as well as actions such as the indiscriminate demonetization of some channels, and the banning of certain controversial content creators for promoting hate speech, as well as the rise of Chinese live-streaming platforms, YouTube's future is anyone's guess.
However, given YouTube's size, dominance, and market penetration, it is unlikely to fade away any time soon. But only time will tell.