The Rise of YouTube: From Cat Videos to Global Advertising

The Rise of YouTube: From Cat Videos to Global Advertising

The modern world works in video: from news
reports to education, reaction gifs and just laughing at people injuring themselves. And all of that is really thanks to just one
company. That’s why today we’ll be going a little
meta by looking at our mysterious overlord: YouTube. This video is brought to you by Squarespace. Build beautiful websites easily and affordably
by signing up with the link below. Like the founders of several other big tech
companies, the creators of YouTube met while working at Paypal, back when Elon Musk was
still calling the shots. In October 2002, when eBay acquired PayPal
for $1.5 billion, Chad Hurley, Steve Chen, and Jawed Karim became instant millionaires. This was especially important for the latter
two, because they had both dropped out of college just before graduating. Chad Hurley was a designer, so he quit PayPal
to work on a few projects like designing bags and working on a feature film. Jawed Karim actually finished his degree online,
while Steve Chen stuck around at PayPal for a few more years. The three remained friends, however, and met
up frequently to discuss ideas for their own company. The actual spark that inspired YouTube is
a different story, depending on which founder you talk too. It was either because they couldn’t send
large videos, or because they couldn’t find footage of Janet Jackson’s famous wardrobe
malfunction. Their first ideas for the platform though,
were actually a bit different. Like Mark Zuckerberg, they were big fans of
a website called, where you could rate people’s appearance. They imagined a site where members would put
up a kind of dating profile video, talking about who they were and the kind of person
they were looking for. But pretty soon they dropped the idea, in
favor of a more universal platform. The domain was activated on 14th
February, 2005 and just two months later Jawed Karim uploaded the first ever YouTube video:
him in the zoo. By May 2005, the YouTube website was up and
running, and appropriately featured videos of Chen’s cat. Suffice to say, YouTube was a success from
the very beginning. Much like PayPal, it’s beauty was in its
simplicity. In contrast with competing services, one of
which was Google’s, uploading a Youtube video was free and you could upload as many
as you wanted, as long as they weren’t too big. But with no way to profit from their service,
YouTube was burning money fast. Luckily, the PayPal mafia was here to help,
with former CFO Roelof Botha investing $3.5 million in seed funding, around September
2005. This investment was vital as the site needed
time to grow and to establish itself before monetizing. By November 2005 YouTube was hands-down the
biggest video platform, serving 2 million videos per day. Server costs were becoming so massive that
YouTube ran out of money less than six months later, causing Sequoia Capital to injected
another $8 million. At the time, YouTube’s biggest problem was
licensing, but movie studios and record labels, quickly saw the benefit from short clips being
shared among users, as the first viral videos began to appear. By October 2006 it was clear that YouTube
was the winner in the video platform race, but Google wasn’t ready to give up just
yet. Instead, they put down 3% of the entire company’s
value on the table, which persuaded Hurley, Chen and Karim to sell YouTube. Outsiders thought that Google had paid way
too much, spending over $1.5 billion for a website that hadn’t made a single dime. But Google was confident it had made the right
decision, and the synergies between the two companies were truly exceptional. Google’s army of lawyers quickly settled
the majority of YouTube’s legal troubles and even resulted in profitable deals being
signed with the likes of Sony, Lionsgate, and MGM. With Google capital, YouTube also developed
an automated copyright system, Content ID, which could reliably detect copyrighted content
as soon as a new video was uploaded. By utilizing Google’s vast server farms,
YouTube could also reduce their hosting costs, which were already approaching $2 million
per day. But the ultimate benefit, was the integration
between YouTube’s video platform and Google’s advertising arm, AdSense. One of the reasons behind Google’s success
as an advertising platform was its access to immense amounts of information, which YouTube
could provide in spades. YouTube’s main problem, on the other hand,
was a lack of monetization, which AdSense easily solved. By showing ads next to videos, YouTube finally
started generating revenue, but despite that it has never made a profit. By 2009 YouTube was showing 5 billion videos
every month, earning way less from ads than they spent on hosting. As a consequence, that year YouTube lost $470
million dollars. But that didn’t really matter, because YouTube’s
true value for Google is the information it has about its users: what you watch, what
you like, what you comment. In a way, YouTube is profitable, it’s just
that a big chunk of its value isn’t easy to determine. Of course, the ultimate goal for YouTube is
to replace television, and to do that YouTube needed to be more than just an archive of
TV clips and cat videos. It was in their interest to promote original
content and to that end in 2011, they partnered with numerous celebrities and production companies
to create unique, high-quality content. After a $300 million investment, in March
2013 YouTube was ready for the next step in its master plan: moving towards a subscription
model. The first iteration was called Music Key,
which allowed you to stream music without ads for a monthly fee. In October 2015 it was incorporated into YouTube
Red, which removed ads across the whole platform and gave access to exclusive content. The adoption rate for YouTube Red isn’t
particularly spectacular. By the end of 2016, it had only 1.5 million
subscribers. And it does make sense: in the age of Adblock
it’s hard to get people to pay for something they’ve been getting free for years. Speaking of Adblock, it would only be fair
to discuss the recent trouble YouTube has had with its advertisers, better known as
the Adpocalypse. In short, the Wall Street Journal ran an article
about how ads were being shown next extremist content, particularly attacking the biggest
YouTuber out there, PewDiePie. Big advertisers got worried this could become
a public relations crisis, so they stopped spending money on YouTube. Of course, YouTube need those advertisers
to keep the platform running, so they introduced options for what kind of videos brands don’t
want their ads to be shown on. These categories include “tragedy and conflict”
and “sensitive social issues”, both of which are pretty open to interpretation. This resulted in many videos which should’ve
been ok getting demonetized, so no ads running on them. YouTube were, of course, fine with that, since
it meant bringing back advertisers at the expense of a few channels losing their revenues. Unsurprisingly, that’s exactly what happened. Many YouTubers got their livelihoods destroyed,
while the YouTube advertising platform returned to record profitability. In fact, YouTube’s exclusive ad platform
for high-spending advertisers is already sitting at a record number of participants, way more
than even before the Adpocalypse. What this fiasco really showed, however, is
that YouTube is beholden advertisers. Ultimately, it is the big brands that are
the customers, while both content creators and viewers are merely users of the platform
whose priorities are of lesser importance. The good news is that YouTube channels don’t
have to rely on AdSense revenue alone. Here at Business Casual, for example, I rely
much more heavily on Patreon and sponsorships. In fact, without these two pillars of support,
Business Casual just wouldn’t exist. But luckily I’ve got the support of both
dedicated viewers like you and of awesome companies like Squarespace. If you ever need to build your own website,
be it for a hobby or your CV, Squarespace is the best platform you could use. They cover your domain registration, hosting
needs and most importantly, provide you with over a hundred customizable designer templates,
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been nothing short of exceptional, and to let you get a first-hand experience with them,
I’m giving you a 2 week free trial and 10% off your first order if sign up with the link
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and you’ll be on your way to building a stylish website easily and affordably. Of course, I want to give huge thanks to everybody
on Patreon for supporting me and to you for watching. Make sure to follow me on Facebook, Twitter
and Reddit to stay in touch, and as always: stay smart.

100 thoughts on “The Rise of YouTube: From Cat Videos to Global Advertising

  1. too bad that since the demonetization thing and rising prduction values the barrier to entry for new channels has been raised such that it will be much harder for new content to be produced. the only channels that will be successful are ones with already established viewership's or content created by larger media organizations that can afford to take the kind of risks that the "everyman" creator that made YouTube what it is today wont be able to anymore.

  2. YouTube's Content ID and Copyright ID systems are at best about 20% accurate — and for YT creators are way more trouble than they are worth. You really need to re-UP this vid accounting for these subsystems defects.

  3. As a telecom boffin, I can vouch for their being ways around YT's beyond broken a reprobate C&C ID systems as I have created the spec for a work around … that would work on other similar platforms too.

    That said, in less than 5 years everything will be copyright free and open sourced and not geoblocked as this mess is upcoming :

  4. BC really need to do a vid on the Poleshift, at least from the point of view that it is possible for not only business empires to be wiped out by geophysical events … but nation states too.

    It makes for a compelling thoughtexperiment.

    As long as you are on high ground around geology that is safe and has water … and seeds and steam engines etc … and good nearby people living also preparing …

  5. how about the history of pornhub? I was listening to Jon Ronsons 'Butterfly Effect' podcast and Pornhub has a very interesting story business-wise.

  6. Great video! It made me see things from the company's perspective, and why they make the decisions they do. It's easy to feel like all that stuff about YouTube Red and the demonetization issues were the result of greedy or careless management, but in reality, it's all just about a successful business trying to stay successful. Simply knowing the "why" makes the constant marketing bombardment feel much more tolerable for me.

  7. I uploaded one of the earliest video to YouTube, a funny Toyota commercial I think, to impress a hot blond in my class. There was only a few hundred videos on YouTube at the time and the website was a bit sketchy I didn’t bother to register an account before uploading.

    No idea what happened to that video as I didn’t visit YouTube regularly until 2 years later when I did registered an account. Most people at that time waste their time on MySpace

  8. On this one I think you failed to be fully imparcial, maybe because it's your income or because people have this general feeling that content creators are better than other entrepreneurs.

  9. Its really sad that youtube's purpose is to show you ads. Ive moved so many times over the last few years, the only place that actually feels like home is here. And the value from all the knowledge ive learned from the countless videos watched goes way beyond the " perceived " value of the ads.

  10. Google ruined YouTube. Now it's overcomplicated, full of ads and has paid viewing. Not to mention, they decided to try to force a dead social network on the viewers. I was forced to "upgrade" to a Google+ account. Such BS.

  11. I love your videos man, I learn a lot from then and they are really well made. I'm just a college student I can't afford to send you some money one patreon sorry but believe me if I could I would for sure. Keep doing a great job!

  12. Its honestly a total paradox with youtube. It has huge costs to maintain, and everyone hates the advertisers and 'adpocalypse', but I would guess maybe 5% of youtube users would willingly pay a fee for this service. Most would consider this service and the content of most videos to be not worth money. Those years youtube lost money was probably youtube at it's best. It was essentially ordinary people who just wanted to share videos, but the rise of the 'youtuber' made this site a pile of shit that begs for subs and posts 'clickbait' and shit content. Youtube promotes this stuff because the youtubers who are pulling all the stops to get views, are good for advertising, and a big help youtube gives them is pushing them to the trending section and via their early decision to take away the rating of the video that used to be there with the thumbnail. Rarely is there a quality channel like this one on youtube.

  13. it was't pewds fault i admit that what he did with fiver is very bad but yt already had is problems way before pewds mishaps they were already having troubles with MONITIZED ISIS propaganda vids but the mass media didn't pay attention to those instead both yt and almost all news articles were blaming pewds bc yt needed a scapegoat and who else would it be than the biggest utuber

  14. Your add segways are pretty slick. I'm pretty business illiterate as my back ground in schooling is in hard science but I love your channel and have been binging videos ever since I discovered it last week.


  16. How do you make a video about youtube and not mention the first video to get 1 million views ? I t was basically an advert for nike featuring ronaldinhowho was the best footballer in the world at the time

  17. Speaking of which I paid for YouTube red and I really don't appreciate you in the video. The whole point of pay for YouTube Red is not to have ads.

  18. You are giving me good ideas on how I could start my own YouTube channel and get paid through Patreon and get assistance from that company that has helped you immencely mister narrator.

  19. The formulation of „how ads were being shown next to extremest content, particularly attacking the biggest youtuber out there, PewDiePie“ is so manipulative the way it is set up. ESPECIALLY TODAY where reporting, summarizing and sharing information has become dangerous and must be as well researched and written as possible. I suppose that your channel doesn’t have the exact same audience as PewDiePie does, therefore the way you phrased his case in a few seconds means that in a nutshell, he is the biggest creator of extremist content OR that he is the biggest channel on YouTube creating extremist content. The latter might confuse people who don’t know who PewDiePie is of how YouTube can allow giant channels to stay online and create unfavorite content.
    I hope you know what I mean 🙂 I can’t seem to find a comment in here correcting the phrase so I had to jump in for a sec. Otherwise it’s a good video! Cheers!

  20. YouTube is send new Facebook without all of that insane vanity and look at me photos the Selfies are ridiculous on Facebook

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