It’s hard to imagine what life was like before YouTube offered a world of content on just about every topic imaginable right at our fingertips. Luckily, it doesn’t appear that YouTube is going anywhere anytime soon. Today we’re going to look at how YouTube emerged and made its way to the top to claim.
The Big Picture
As you well know, YouTube is an American video-sharing platform that allows users to upload and view an extremely wide range of video content. Users can also like and comment on videos and subscribe to certain channels, but you already knew that. YouTube is based out of San Bruno, California, and has been headed by CEO Susan Wojcicki since February 2014. In 2018, the video site introduced two new services, YouTube Premium and YouTube Music followed by YouTube TV, which gave a boost to its valuation. As a subsidiary of Google, YouTube is valued at around $160 billion, accounting for more than one-fourth of Google’s total value. This puts it ahead of numerous big-name companies in terms of valuation, including Disney, Comcast, and Netflix. But it certainly didn’t start out that way, so let’s rewind and see where this success came from.
The Beginning
The idea for YouTube came from two completely different events that occurred in 2004: Janet Jackson’s wardrobe malfunction at Super Bowl 38 and the tragic tsunami in the Indian Ocean that killed at least 225,000 people. Future co-founder Jawed Karim had a hard time finding video clips of both of these events online after they happened. So, like every good entrepreneur, he thought of creating a site that could meet this need he had. At the same time, Karim’s coworkers at PayPal were working on developing a video version of an online dating service, but they were having difficulty getting enough uploads to sustain the site. How these two ideas merged is a topic of debate, even among the three founders, but by early 2005 Jawed Karim, Chad Hurley, and Steve Chen were preparing to launch the earliest version on YouTube out of their first headquarters, which was in a space above a Japanese restaurant in San Mateo, California. The YouTube domain name was activated on February 14, 2005. The very first video was uploaded on April 23, 2005. It was entitled “Me at the Zoo” and showed YouTube co-founder Jawed Karim at the zoo talking about how elephants have long trunks. Today this 19-second video has 79 million views. In May 2005, a beta version of the site was launched. At this time the three founders were working out of an office in a garage, but everything would change once they got some critical financial support.
Early Investors
The founders began to pitch their site to venture capital firms and angel investors. Their first major investment came from Sequoia Capital to the tune of $3.5 million in November 2005. They invested an additional eight million dollars just a few months later. Artis Capital Management also made an eight million dollar investment by early 2006. When the site officially launched on December 15, 2005, about 78 million videos were being watched per day. The site has Saturday Night Live to thank for their initial boost in popularity, specifically a digital short called “Lazy Sunday” by The Lonely Island. Uploads of the skit received about five million views before NBC-Universal requested that they are removed two months later. This helped YouTube widen their base from people who were uploading original content to those who wanted to share TV clips, music videos, and other types of content. By July 2006, over 65,000 new videos were being uploaded daily with over 100 million views per day. Their rapid growth soon caught the eye of some much bigger fish in the sea of tech businesses.
Billion Doller Buyout
In November 2006, Google shocked the tech world by paying 1.65 billion dollars for the start-up, calling it “the next step in the evolution of the internet.” Google was eight years old at the time and this was by far their biggest acquisition up to this point. They faced major criticism; for example, Mark Cuban said Google was crazy for taking on YouTube’s legal liabilities. With all the copyright concerns related to video uploads, a number of experts thought that YouTube would tank under a mountain of lawsuits, much like the music-sharing site Napster did. In a 2010 interview, Google CEO Eric Shmidt said that the company added an extra billion to the offer even though they only valued the company at $600 million. Schmidt said they did this to ensure they blew all competition out of the water as it was rumored that both Yahoo and Microsoft had expressed interest. They could see the potential of YouTube even though it wasn’t a profitable company at the time, and they wanted to be a part of its success. The sale was revealed mere hours after YouTube announced agreements with Universal Music Group, CBS Corp., and Sony BMG Music entertainment to lower the risk of copyright-infringement lawsuits. But, now in hindsight, it’s recognized as one of the best tech acquisitions of the past 20 years.
Revenue
With the strength and resources of Google behind them, YouTube has only grown in terms of popularity, functionality, and revenue over the past 14 years. Google is the king of advertising and they’ve extended their algorithms and AdSense technology to YouTube. This had an immediate impact on the ad revenues, which have been growing significantly year after year. In 2008, ad revenues were around $200 million. Fast forward to 2019 and ad revenues are close to five billion dollars and are expected to surpass that amount in 2020. This helps to provide stability and legitimacy to the staying-power of the site as others look to encroach on their space.
Competitors
While YouTube is clearly at the front of the pack, other competitors are trying to hone in on its territory. The primary threat to YouTube right now appears to be Facebook, which launched its own video-on-demand service called Facebook Watch in 2017. As of June 2019, Watch had 720 million viewers per month and 140 million people per day viewing at least one video. Compare that to YouTube, which has 1.8 billion users per month counting only users who have logged in. However, Facebook has plans to expand its video services and increase content creation. They also offer similar revenue-sharing policies as YouTube. But YouTube has numerous loyal content creators with established channels and subscriber lists. Facebook, or any other competitor for that matter, would need to offer incredible value, including accommodating policies and increased revenue share, to have any hope of attracting YouTube’s massive pool of content creators. And the viewers will tend to follow the creators as well. YouTube has been around long enough now that it’s going to be extremely difficult for competitors to outmatch their brand loyalty and everything else the well-established site has to offer. As of 2019, more than 500 hours of content are uploaded every minute to YouTube. This is up from 400 hours of content uploaded daily in 2017. One billion hours of content are viewed on YouTube daily. It’s the second-most popular site worldwide, falling only behind Google. There are over 50 million content creators on YouTube from all around the world. It is most popular in the United States with over 180 million active users, including 73% of US adults, but it’s available in over 90 countries and territories. Total revenue in 2018 was over $10 billion, and this figure is expected to grow year after year, although YouTube does have some challenges to face.
The Feature
YouTube has been struggling with how to balance free speech with its community guidelines restricting hate speech, harassment, and other content that is considered toxic. In the future, it will become even more of a challenge to moderate the videos on the site without being accused of censorship and bias. This is something that Susan Wojcicki is tackling head-on, but it’s an extremely complex task that if handled poorly could affect YouTube’s overall user engagement and ultimately threaten its very business model. This is something that all social media sites are dealing with to some degree, but we can expect YouTube to be at the forefront of these types of issues in the years to come. If they can tackle these issues effectively, they will likely become even more dominant among their competitors.
Closing
YouTube is the number one video platform out there. There’s no question about that. Not only that, but the site has launched numerous careers, including that of Justin Bieber, Shawn Mendes, the Wknd, and Ed Sheeran. YouTube has evolved over the years and has managed to remain not only relevant but dominant in the video-sharing space. In the fast-paced world of social media, YouTube will certainly need to stay on its toes in order to stay ahead of Facebook and others who want to take advantage of the high revenues and customer engagement associated with video streaming. But for now, YouTube firmly holds onto the crown as the king of video. And if you’d like to also take advantage of YouTube’s success by becoming a content creator. The first video to reach one million views on YouTube was a promotional video by Nike that showed football player Ronaldinho receiving a pair of golden shoes from Nike and showing off his skills. It achieved one million views in November 2005 when YouTube was still in its beta version. But these days, Despacito remains the most viewed video on YouTube with over 6.5 billion views.
So, guys, I meet you with my next blog and you have any suggestions for me tell me in the comment section.
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