The Virtual Explosion: YouTube’s Success Soars Off the Charts

After that fateful dinner party, where Hurley and Chen wanted to create a simpler way to share their videos of the night, they immediately went to work creating the answer. “In February, we started developing the product,” says Hurley. “In May, we had our first public preview. And in December, we officially launched YouTube. By that time we were serving over three million videos a day.”

The YouTube.com domain name was first activated on February 15, 2005. Using their own money as well as some angel investment, the duo slowly began to build up their website. But, it was not until the backing of venture capital firm Sequoia Capital in November 2005 that the company really took off. Roelof Botha, the former CFO of PayPal and current partner at Sequoia Capital, also took a seat on the YouTube board of directors. Sequoia’s initial investment was $3.5 million, but it later put an additional $8 million into the tech startup.

Combining their artistic and engineering skills, Hurley and Chen created a website that would use Adobe Flash technology, something already installed in most personal computers, to display videos online. They also created an interactive user community by allowing members to tag and search for related videos. It also began using the Google AdSense program to bring in revenue and help cover the enormous costs per month of maintaining the bandwidth it required.

By the summer of 2006, YouTube had become one of the fastest-growing websites on the Internet. It was even ranked fifth most popular by Alexa, beating out the rapid growth of MySpace. Today, Hurley says the company is “three to four times larger than Google Video or Yahoo Video Search. And growing much faster too. It’s a side project for them.” In fact, according to a survey conducted in July 2006, it was estimated that over 100 million video clips were being viewed on a daily basis on YouTube, while more than 65,000 new videos were being uploaded ever day. Nielsen/Net Ratings also suggests that YouTube receives nearly 20 million unique visitors each month.

Towards the end of the summer of 2006, YouTube had been doing so well for itself that the inevitable rumours of a buyout began to circulate. Many suggested that purchasing such a company, one whose business model would be fraught with liabilities for the foreseeable future, was a bad move. Entrepreneur Mark Cuban even said, “Only a moron would buy YouTube.”

But, YouTube was doing what it could to escape lawsuits related to copyright infringement. Hurley and Chen even signed deals with three major media companies to allow their materials to be legally broadcast on YouTube. Cuban might not have been interested in the Silicon Valley startup but Google definitely was.

On October 9, 2006, Hurley and Chen made the announcement that YouTube would be sold to Google for $1.65 billion in Google stock, making it Google’s second largest acquisition ever. The deal officially closed on November 13, 2006, and kept Hurley and Chen on board to continue their integral roles in the company.



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