In part two of How YouTube Ate TV, Fast Company’s oral history of YouTube, we look at how the company’s rapid ascent after its 2005 founding led to multiple challenges, from bandwidth costs to unhappy copyright holders. This prompted the startup to consider selling itself, and on October 9, 2006, Google announced that it would be buying it, for $1.65 billion. That deal came with the promise that the web giant would help YouTube scale up even further without micromanaging it. Eventually, the balance they struck between integration and independence paid off. But when YouTube was still a tiny, plucky startup, nobody was looking that far ahead.
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Part one: YouTube failed as a dating site. This one change altered its fortunes forever
Steve Chen, cofounder—with Chad Hurley and Jawed Karim—of YouTube: I would take care of the product team, the engineering team, the technology side of it, building out this product. And [Hurley] would be managing finance, business development, and content partnerships, the legal side. But we always shared an office, or even shared a desk when we were small.
Chris Maxcy, YouTube VP of business development (2005-2013): When I got hired, there were about 11 of us operating out of a back office in Sequoia’s offices. Then we moved to San Mateo to the infamous spot above the pizza shop. It was truly rat infested.Zahavah Levine, YouTube general counsel, chief counsel (2006-2011): On my first day, Steve handed me a sealed box from Ikea, and invited me to erect my desk. “Oh yeah,” he added, “you might also want to order a computer online.” Of the 23 employees, most were under the age of 25. At 37, I often felt like the adult in the room, and at times I felt like the corporate grandmother.Mia Quagliarello, YouTube senior product marketing manager, content and community (2006-2011): On my first day of work, I was seven months pregnant. There was an engineer sleeping on the couch. It really felt like a small family.
Levine: I remember taking calls in the janitor’s closet when I needed privacy.
Lyor Cohen, Warner Music Group CEO of recorded music (2004-2012); YouTube and Google global head of music (2016-present): It felt like an independent record company. No formality. Everybody in full motion. Jake McGuire, YouTube software engineer (2006-present): It was like, “If something is going to blow up next week, then who cares? We’ll deal with it next week, because we’ve got something that’s blowing up right now.” It was actually kind of fun.Levine: There was a lot of interest in buying us, including from the same L.A. media companies that were threatening us with lawsuits.Maxcy: We had a number of overtures even very early on from large tech companies in the Valley. At the time, Chad and Steve were pretty adamant that they wanted to stay independent.
McGuire: Chad and Steve had actually mentioned—at an all-hands meeting with, I don’t know, 40 people at the time—that they got an offer to sell the company for $500 million. And they turned it down. I just shouted out, “You idiots! Why didn’t you take it?“
Tara Walpert Levy, Google ads director (2011-2021); VP, Americas at YouTube (2021-present): Back in 2005 I was consulting, mostly to large media networks. And I had advised one of them, passionately, to buy YouTube. They chose to go a different direction.
How YouTube Shaped Culture“Here It Goes Again, ” July 2006Rock band OK Go was founded in 1998, well before YouTube existed, but its eye-popping, single-shot music videos feel they were born to go viral on the site. Featuring beautifully choreographed treadmill choreography, “Here It Goes Again” was watched more than 50 million times before being yanked by EMI during a dispute with YouTube; after being restored, it racked up another 60 million-plus views.
Multiple factors ultimately led the company to confront the possibility that it would need to be part of a larger organization to prosper.
Levine: We couldn’t keep up with the inquiries, content deals, takedown requests and legal threats, law enforcement subpoenas, press inquiries, infrastructure growth, hiring. It didn’t stop.Dmitry Shapiro, founder and CEO, Veoh: They were blowing through millions of dollars a month in bandwidth costs.
Maxcy: We’d wait for a server to get delivered, and then we’d see this immediate spike in traffic once we got the new infrastructure installed. We knew there was a lot of demand, but we also knew we just couldn’t afford it.
Chen: We were able to build a form of our own cloud in the various data centers around the U.S. But from a legal standpoint, it was just a big question mark.
Levine: We had Mark Cuban in the press repeatedly insisting that YouTube wasn’t worth a dime because of the copyright issues.Roelof Botha, former PayPal CFO and partner at Sequoia Capital, YouTube’s first investor: We’d gone down for a meeting in Los Angeles with Universal Music, and it was probably the worst business meeting of our lives. They were pit bulls, and when you looked at the demands they had, it wouldn’t benefit artists. I think the [YouTube] founders left feeling quite defeated, and so the prospect of an acquisition became far more attractive.
Two tech behemoths quickly emerged as the most likely buyers.
Chen: It was a big decision whether to move forward with Yahoo or Google. Google was still the search engine, and Yahoo was everything else.
Botha: Yahoo was maybe the more natural acquirer because it had media experience and [former Warner Bros. co-CEO] Terry Semel was leading the company. But some of the dysfunction of the company was starting to show up in its ineptitude in landing the opportunity.
Maxcy: Google had the infrastructure, they had the know-how, they had the capital to really make it work.
How YouTube Shaped Culture “Charlie Bit My Finger—Again!,” May 2007Charlie, an English 1-year-old, chomps on his 3-year-old brother Harry’s finger. Nobody is injured in the process, and millions of viewers find it adorably hysterical. Countless YouTubers riff on the duo’s video—including, a decade later, the brothers themselves.
Chen: What we liked about Google was not so much on the financial side. Eric Schmidt, the CEO, took me and Chad aside and basically told us, “We’ve been doing all these things with Google Video to try to compete, but there’s some magic vibe within this YouTube group and community. We want to make sure that through this acquisition, we don’t do anything to decelerate that. If anything, we should be here to help.”
Eric Schmidt, CEO, Google (2001-2011): YouTube was the clear winner when it came to the social side of online video. It wasn’t just about watching clips. It was about community, sharing, and connection. That’s what really drew us to the company.
John Harding, Google software engineer (2005-2007); YouTube engineering manager, director, VP (2007-present): Most of us on Google Video were infrastructure-focused. YouTube had this great consumer product. We all immediately saw, “Okay, this is actually a perfect match.”
Schmidt: They were right about the product, and we were right about how to scale it.
Levine: I think it took five days from signing the term sheet to signing the long-form agreement. I was operating on pure adrenaline.
Maxcy: The day of the acquisition, we were moving into new offices in San Bruno. Chad’s car was broken, so we rode to work together in mine. We show up and there are satellite trucks outside the building, and it’s this entire circus.
Quagliarello: I was about to go get lunch and leave the building. My manager’s like, “You might wanna stay here for this.”
McGuire: My phone started blowing up with all these text messages. They’d announced we got bought. We all went to TGI Fridays on the other side of the parking lot at the end of the night to celebrate.
Google honored its pledge to provide YouTube with resources while letting it chart its own course.
Suzie Reider, YouTube CMO (2006-2013): Chad [became] co-CEO with a longtime Googler named Salar [Kamangar], and they sat together in an office. I think Google did a good job of helping us come into the fold.
McGuire: They had one of their cafés in Mountain View cook lunch and they would drive it up in a van and serve it in our basement every day.
Chen: We’d been stumbling into hurdles when it came to search, recommendations on videos, internationalization. We were able to decide where we thought the most help was needed to continue the growth of YouTube as a platform.
How YouTube Shaped Culture CNN/YouTube Presidential Debate, July 2007 YouTubers get face time with Hillary Clinton, Barack Obama, and other Democratic candidates with the service’s first-ever debate livestream. The Republican contenders follow in November.
YouTubers get face time with Hillary Clinton, Barack Obama, and other Democratic candidates with the service’s first-ever debate livestream. The Republican contenders follow in November.
Harding: There was a lot of quick triage: “Okay, what’s in the most risky shape, and how quickly can we get those things moved onto the Google infrastructure that’s more scalable?” Search was one of the first things, and then pretty quickly after that we moved the video processing.
McGuire: Google previously had a strategy of making all their acquisitions rewrite their stuff in the Google way. I don’t know if they decided that wasn’t working out for them, but we were the first people who were not given that advice. They did send over a small number of engineers who were almost all pretty good. But even then, they were just trying to work with what we had.
Chen: That’s very different from what we thought would happen if Yahoo had been the acquiring group. We wanted to really avoid what happened with eBay and PayPal.
Billy Biggs, Google/YouTube software engineer (2006-present): After [Google] bought the company, I saw that some of the technical choices they made were very elegant. It was a master class in learning how to scale.
The mothership’s influence did grow over time.
Quagliarello: They said, “Nothing’s going to change. You guys keep doing what you’re doing.” It felt like that for about a year. But then it was pretty clear that things were going to change. There was more rigor and discipline around goals and OKRs. It just became more hierarchical.
Matthew Darby, YouTube director of product management (2008-present): There’s definitely a lot of the Google culture that got imbued into YouTube. It’s a very analytical, very engineering-driven culture, very rigorous. It’s hard to know whether YouTube on its own would’ve been quite the same.
Reider: For me, it was calming, because I’d worked in larger organizations and I was used to a little more rigor and structure. I think it was hard for people who had never worked for a big company like that before. But we needed it.
Three months after Google acquired YouTube, Apple announced the iPhone, pitching video-watching as a core feature. When the phone shipped in 2007, it had YouTube onboard. Google’s own mobile platform, Android, made YouTube even more of a strategic asset.
Harding: In 2007 and 2008, it wasn’t obvious that mobile was going to become what it did.
Biggs: It was truly unclear whether people would really want to watch a lot of video on their phone, or whether that was just not going to be a thing.
Chen: There was no SDK for third-party iPhone apps. Apple reached out to us to say, “We think in order for the iPhone to be fully demonstrated, it needs to have YouTube on it.” And so we were the only third-party company that rolled out with the initial set of apps that came with the iPhone.
Harding: We had a couple weeks to build the YouTube app for the iPhone, in partnership with the Apple team, before they had to send it off to manufacturing. I was like, “I know exactly how to do that. I’ve already built this for Google Video, but nobody wants it.”
Chen: We had to make sure that all the videos that we had were transcoded to be streamed on their video player. It just completely took off.
Darby: There was a concerted effort to get everybody at Google to think about mobile first. Android ended up sort of eating the entire world, and YouTube rode along that.
In the wake of the Google acquisition, YouTube’s cultural influence was already extraordinary and still growing. It was reflected in everything from a TV ad that repurposed a YouTube video’s Chicken McNuggets rap to the U.S. presidential campaign.
Chris Edwards, Arnold Worldwide creative director (1999-2012): A colleague of mine shared a link to the video with a comment saying, “What do they need us for anymore? I thought, “Shit, this would make a great 30-second [McDonald’s] spot.” It got over a million views in the first few weeks—back in 2007 that was a lot!—and tons of comments and copycats doing parody videos on YouTube. We did local TV buys in three markets, and McNuggets sales shot up an average of 42%.
Chen: YouTube did a collaboration with CNN for the Democratic and Republican [primary] debates. Instead of having a bunch of panelists speaking into the camera for the questions, they had them coming from YouTube creators. I remember traveling to Charleston and appearing with Anderson Cooper. I was like, “We’ve reached the pinnacle of anything that YouTube can do.” But this was just 2007.
Additional reporting by María José Gutiérrez Chávez, Yasmin Gagne, and Steven Melendez.
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