The first time Evan Weiss saw his new star he got a splitting headache. Weiss, a journeyman Hollywood agent, had been producing TV shows for household names—Tyra Banks, Pamela Anderson—but had grown tired of the network grind and began scoping out smaller screens. One day a friend showed him a rising star on YouTube.
Fred: “Fred on Halloween.” October 30, 2006. 4:32.
A young kid’s face, far too close to the camera. A cheap green wig, witch’s hat, braces covering his teeth. His voice many registers too high—and sped up, fast and frantic, like the editing. “My mom took me to our school counselor a few times. She said I have, I have temper problems.” Pause. Scream. “I don’t have fuc—” Chaos. The reel spins around violently for a few seconds, then back to the kid. “I think I broke my mom’s camera,” he squeaks.
“It’s in your face,” Weiss concluded. “Over the top.” But his friend insisted. He worked in licensing and had just taken this kid to a mall in the suburbs to sign T-shirts outside a Hot Topic, and he had to shut it down when hordes of young fans mobbed them. Weiss watched some more.
Lucas Cruikshank loved to goof around with his cousins and a camera in his small Nebraska town. It beat middle school, where he never fit in. For inspiration he watched Mad TV and Brookers, the madcap YouTube comic, then invented his own outlandish characters and practiced stretching his elastic face. Fred Figglehorn, his YouTube persona, was born after Cruikshank discovered how to speed up his voice with editing software. In mere months Fred had surpassed lonelygirl15 and every other account on YouTube in viewership. Older YouTubers (barely out of their teens) were pissed about the usurper. People within the company were flummoxed, ascribing his popularity to a youth zeitgeist they couldn’t comprehend.
Weiss rethought his first instinct. He considered the four markers of a good comic he had learned over the years: (1) The comic must have an original voice; Fred had that. (2) The comic must be popular. Check. (3) The comic must be subversive. (4) The comic must have a point of view. Chipmunk squeal aside, Fred’s shtick was surprisingly dark and heavy. His skits touched on bullying, gender, mental health, abusive parents, the complex inner life of an adolescent. (Cruikshank, who was twelve, had lied about his age to break YouTube’s rules prohibiting those under thirteen from opening accounts.) “This is it,” Weiss concluded. He had to sign Fred.
Google, for its part, was not at all certain what to do with YouTube’s constellations of broadcasters or how to make money from them. Some clearly had commercial potential, netting audiences on par with those for prime-time TV. But commercialism was anathema to many other YouTubers. At the CES conference in January 2007, YouTube’s business executive, Kevin Donahue, remarked briefly that the site was “noodling” with turning its popular clips into a TV channel. This did not play well. boh3m3, a popular YouTuber with a goatee and a sordid opinion on everything, posted a video titled “Dear Kevin Donahue,” tearing into the executive. Fans echoed the sentiment in reply videos, with one inviting boh3m3 to check out some YouTube clips of cats on acid. These sorts of videos fueled concerns for some at Google that wide swaths of their new video service would not play well with advertisers.
A few YouTubers tested commercial waters on their own. DVRs were all the rage at the time, letting people skip TV commercials on recorded broadcasts. The ad industry, panicking, had invented product placement, which put marketing messages directly inside shows. lonelygirl15 ran a product plug for Neutrogena. In late 2006, Brendan Gahan, a twentysomething working at an agency in San Francisco, overheard a partner pass on an offer to run a TV commercial because the production budget was too low. Gahan proposed instead approaching some teenagers blowing up on YouTube: Smosh, an account from Ian Hecox and Anthony Padilla, two recent high school grads in Sacramento with swooping emo hair, who adored “Lazy Sunday” and emulated its style in lo-fi sketches. Smoothie King once gave them $500 to make a video, a princely sum. (Hecox still dressed up as Chuck E. Cheese part time for minimum wage.) Gahan, the adman, invited the Smosh teens to their first-ever office meeting and made his pitch: produce a video that mentions the Zvue, a squat portable iPod rival, and a check is yours.
Smosh uploaded “Feet for Hands,” a three-minute absurdist sketch with a premise that’s exactly what its title suggests. The Zvue appeared on-screen for roughly eighteen seconds. The YouTubers received $15,000. A cottage industry of influencer marketing turned in its womb.
Chad Hurley initially opposed paying YouTubers. “We didn’t want to build a system that was motivated by monetary reward,” he explained at a conference. YouTube’s mandate from Google didn’t involve monetary rewards, either. “You guys get to completely run the ship,” Eric Schmidt told Steve Chen during acquisition talks. “As long as we agree on this simple checkbox”: grow users, videos, and views. Another executive recalled Schmidt saying, “Just grow this thing. Don’t worry about how much money you spend.”
But growth required keeping people motivated to upload. Revver, a rival amateur video site, paid uploaders, and popular YouTubers sometimes touted this fact in videos. Hurley finally came around, devising a project called Apple Pie to develop ways to fund YouTubers—as in, paying people to make video was as American as apple pie.
And yet Hurley continued to resist Google’s bailiwick: ads. He particularly disliked “pre-rolls,” commercials that appeared before a video, which he found disruptive to the viewer experience. The few times colleagues ever saw Hurley grow animated involved interruptions to people’s experience of his site. Hurley once shot and uploaded a clip during a meeting and counted the second-hand ticks as they passed, demanding, “Why hasn’t this posted yet?”
YouTube ran tiny billboard ads on its home page, but, unlike TV, it didn’t have an audience accustomed to regular commercial breaks. Sales staff tried hawking “brand pages,” custom accounts for companies, like YouTube.com/Coke, that played videos automatically when someone landed on the site, but there were few takers. YouTube tried award shows for funniest videos, sponsored by Sierra Mist. And it tried clever pop-up ads—Homer Simpson chasing a pink doughnut across the screen to promote a movie premiere. But those were time intensive and didn’t “scale,” transferring easily and widely—two big strikes as far as Google was concerned, because it worshipped speed and scale. The hodgepodge approach didn’t take. For its first few quarters at Google, YouTube’s advertising sales team failed to meet goals.
To better approach the problem, YouTube’s business unit divvied up its massive corpus as if it were a beast. There was the Head, consisting of top-shelf, quality stuff—footage from TV networks, studios, and musicians signed to labels. Then the Torso, amateur YouTubers like Fred and Smosh with prospects of going pro or at least having commercial appeal. The Long Tail was the bottomless heaps of clips where Google, for now, saw little economic value. (Google ranked these, as it did with everything. Videos categorized as nine and ten went to the Head, six through eight the Torso, the rest to the Long Tail.)
George Strompolos, the Google Video transplant, sat at YouTube’s Torso unit. As a lanky teenager in Denver, he would set a camera on the pavement with his friends, hit record, and attempt skateboarding feats, gathering around TVs to watch the results. At Google staff were encouraged to set aside a day a week to work on harebrained ideas, a “20 percent project,” and Strompolos used his harebrained days to sketch out commercial concepts for video producers. At Google Video he had persuaded a sponsor to back a pair of broadcasters who wore lab coats and exploded Diet Coke and Mentos. Strompolos had a perma-scruff and an easy, approachable manner, particularly for a Googler. After the acquisition he sent out introductory emails to handfuls of YouTube’s most popular accounts. Half didn’t reply. They had never heard from anyone at YouTube before, so they mistook it for spam. But Strompolos managed to wrangle a few to participate in YouTube’s first grand economic experiment. He assembled thirty popular accounts willing to host ads next to their videos or as tiny pop-up banners within them, in exchange for a share of the take. The group included screwball comics (Smosh and Ask a Ninja, a single-shtick troupe), indefatigable video bloggers (sxephil and What the Buck?), and, of course, lonelygirl15.
The men behind lonelygirl15 asked Strompolos for an advance to fund their show, a normal arrangement in Hollywood. Strompolos took the request to his boss, who turned it down. This would be a simple ad split, no advances. More views, more money. For every dollar of advertising that ran with the videos, Google would take forty-five cents and give the balance to the YouTuber. YouTube’s “partner program” launched in May. Those paying close attention saw it coming: back in January, Hurley, hungover, on a stage next to Bill Gates at Davos, had blurted out plans to share revenue with producers.
YouTube’s ability to mint money also suffered from a technical hiccup unrelated to its broadcasters. The company was using somebody else’s machines.
In San Bruno, Shiva Rajaraman, the Google product manager, had joined YouTube’s team determining where and how ads appeared on the site. Early on Susan Wojcicki called him into a meeting. In addition to Google Video, Wojcicki oversaw much of Google’s advertising technology, and she had a blunt question, “Why aren’t you using our stuff?” Rajaraman had to explain that YouTube’s software pipes were already tied intricately to the plumbing of another company, DoubleClick.
DoubleClick Incorporated was the Mad Men of the internet age. Created in 1995, the Manhattan-based company devised a clever name—a nod to the computer mouse tap-tap—and a shrewd business model. The web was then searching for ways to stand on its legs. DoubleClick invented software that could place digital billboards online and pay website owners for the space. The company also used cookies, invisible bits of code that clung to someone’s browser whenever they visited a web page, tracking them nearly everywhere they surfed. Browse a few sites on home decor, then click on a news article and boom: waves of “banner” ads for furniture. Thank cookies for that. DoubleClick set up an exchange for buying and selling these “behavioral” ads, a Nasdaq for web marketing. In 2006, DoubleClick raked in an estimated $300 million. Its true grit was its Madison Avenue wheeling and dealing, a sales force of old-media types who convinced marketing chiefs and ad agencies their commercials belonged online. One banker who worked with the firm called them “bald dudes banging on phones.”
Before Google bought YouTube, someone at DoubleClick had phoned the hot video site and arranged to place banner ads there. YouTube was DoubleClick’s single largest account when YouTube joined Google. But DoubleClick had gone through the wringer—probes from regulators over its data-collection habits, a messy sale to private equity—and was now on the auction block again. And Google was looking for a way to get more of a foothold in another sector to complement search ads. Its executives disagreed with Hurley and thought YouTube videos were a natural place to serve banner ads. So just months after spending an eye-popping sum on YouTube, Google prepared to spend more on DoubleClick.
Wojcicki got involved, and a banker who worked on the sale process recalled an odd meeting that offered a glimpse into her mind. Everyone present walked through DoubleClick’s financial figures before Wojcicki spoke up. “The real question is,” she said, “would I buy this for free?” Blank stares. Price tags floated in the press were about $2 billion, and everyone knew Microsoft was also gunning for the company. Was she really proposing . . . paying nothing? Wojcicki continued to think out loud. Buying DoubleClick would bring instant revenue, sure, but it also meant years of operational integration—sales teams to mix, software to meld, human resource headaches, and so on. If someone just handed her the business, would it be worthwhile? Finally she concluded, “Yeah, I would take it for free.” In April, Google announced plans to purchase DoubleClick for $3.1 billion.
Over a decade later, many U.S. lawmakers would question why Google was permitted to buy DoubleClick, a mammoth property that, paired with YouTube, helped Google dominate online advertising. But, at the time, YouTube’s business outlook looked so paltry that few cared.
While Google closed its DoubleClick purchase, two Googlers walked into a brand-new building on Avenue of the Stars in Los Angeles, with dark slabs of glass and a big rectangular hole in its center that made it look like a giant movie screen. The building housed the headquarters of Creative Artists Agency (CAA), the talent firm, and other makers and breakers of dreams. Later, in Hollywood circles, the office complex would be known as “the Death Star.”
Kevin Morris, a Hollywood lawyer who represented edgy TV fare like South Park, had convened a gathering at his office there—part mixer, part creative brainstorm, but mostly a détente between old media and new. A year after Google’s YouTube acquisition, Hollywood’s power brokers, aware of how digital music had destroyed the recording industry, had no interest in suffering the same fate. From one camp Morris had invited familiar faces—TV network execs, a screenwriter, and a sprinkling of movie stars. The other side included a Sequoia investor; Marc Andreessen, the software wunderkind behind the Netscape browser; and two guys from Google.
Jordan Hoffner, a YouTube director with a horseshoe hairline and fashionable glasses, sat on tech’s side of the soiree. He knew the other side well; he had spent twelve years at NBC before joining YouTube’s Head unit. But since entering the tech world, Hoffner had seen a yawning language gap between his new industry and his old one. At the mixer he tried a routine to explain YouTube that many of his old-media peers had already heard. Hoffner went to the whiteboard. “Let’s all agree,” he began, “a YouTube video that gets a million views, that’s a hit?” Nods all around. (“Charlie Bit My Finger,” a charming home video a British father uploaded in May, would hit a million views in a matter of months.) “Let’s assume,” Hoffner continued, “that a commercial on that can sell at $20 CPMs.” (TV sold ads on rates called CPM, cost-per-thousand viewers.) Everyone agreed twenty bucks was an acceptable rate for TV. YouTube had begun showing more banner ads on videos, but a big chunk of the site’s audience came from overseas, where YouTube didn’t run ads yet, Hoffner explained. For simplicity’s sake he put U.S. viewership on that million-view hit at 50 percent. He did the math on the board. At $20 rates, with only half the audience seeing ads, this YouTube hit would generate $10,000.
Dead silence.
Mad Men, which debuted that year, drew in about a million viewers per episode. It cost around $2.5 million just to make each one. Of course, popular TV shows could recoup those costs with cable subscribers and commercial breaks. YouTube was free, and its brass weren’t sure how many commercial breaks viewers would tolerate, if any. When YouTube first let pop-up ads run on Smosh, the account’s teenage creators disabled most of them, worried that viewers would be turned off. People still called them “sellouts” in comments. Hoffner wanted media types to adjust their business forecasts to the world of YouTube, where talent like Smosh owned their intellectual property and a new commercial model needed to be built. His economics lesson raised unsettling questions for those in the room: How long would TV’s old-fashioned model hold? With TV viewership slipping away to the web, what the hell happened next? The next year Jeff Zucker, NBC’s CEO, would urge his industry to hastily find a workable business for the internet lest they “end up trading analog dollars for digital pennies.”
Google believed the internet was coming for TV no matter what. But company brass were less confident in the potential of Smosh or Charlie’s finger biting to make YouTube’s business work. They wanted more esteemed media, what they called “premium content.” Members of YouTube’s Head team flew to New York, Los Angeles, Tokyo, everywhere, pitching networks and studios on placing their materials on the site. Tim Armstrong, Google’s jocular sales chief, lobbied heads of sports leagues, TV’s big moneymakers, on making the jump. Almost immediately after buying DoubleClick, Google hunted down another ad company, Donovan Data Systems, which sold electronic invoices to TV networks. It was, essentially, the DoubleClick of TV, and Google arranged to buy it and plug it into YouTube. The companies batted around a price as high as $2 billion but couldn’t agree on terms, and talks fizzled.
Still, by late 2007, Google unleashed what it thought would be a huge selling point: the “fingerprinting” service, which YouTube’s lawyers had created with record labels, was ready for prime time. Google called it Content ID, and it did precisely that: it identified copyrighted content on YouTube, letting rights owners automatically delete it or (Google hoped) leave it up and reap money from any ads that ran on the footage. YouTube had devised tools to recognize reuploads of audio and visual files and, eventually, snippets of material that suited the music industry’s commercial complexity, forming the most robust media rights systems ever. Of all YouTube’s inventions, Content ID eventually contributed the most to making its business survive and thrive.
And yet, at first, the Head had few takers. Streaming, on-demand video was not yet a thing. Netflix still shipped DVDs in the mail. Media companies that didn’t regard YouTube with outright malice (Viacom) were, at best, deeply uneasy. “None of them wanted to be first out of the foxhole,” recalled one Google executive. Mostly the unease came down to money. For decades TV networks had been collecting licensing commissions for their shows, called carriage fees. A cable provider, like Comcast, paid fees to ESPN, packaged ESPN in a cable bundle, and charged consumers for ESPN on their cable box. Naturally, TV networks expected this fee from YouTube. Some at Google argued they should pay it, but the c-suite disagreed. Paying violated a central tenet of Google; it did not pay fees to the millions of websites its search engine indexed to show on Google.com or Google News. If not there, why pay for content on YouTube? If it did pay for shows on YouTube, what was to stop all the websites, newspapers, and blogs from demanding the same? So, no carriage fees.
This stance wasn’t always clear to Hollywood. After Jordan Hoffner finished his presentation inside CAA, an A-list actor in attendance approached him. Something about YouTube’s magic stuck, if not its economics. The A-lister had an idea for a series of sprightly shorts, à la Charlie Chaplin, in which he would star on YouTube. “Great!” Hoffner enthused. “Who’s going to fund it?”
The movie star looked at the man from Google, a company worth more than $100 billion. “You.”
“No,” Hoffner replied, taken aback. “We just run the ads.”
The Chaplin homage never happened. And when YouTube did manage to get A-listers on board, the outcome wasn’t always pretty. Damon Wayans, an edgy comic star, created a YouTube account, WayoutTV, tailored to young male audiences. In one clip, “Abortion Man,” a young man, informed of his girlfriend’s pregnancy, rushes to the window to yell, “Help!” The titular superhero swoops down in a cape to punch the girlfriend in her womb until a prop bloody fetus pops out. “Are you ready for the most disgusting, insensitive, unfunny, and offensive video you’ve ever seen?” the website Jezebel asked. YouTube had recruited Toyota to sponsor WayoutTV videos, and staff had to orchestrate an apology and salvage its multimillion-dollar deal.
Google’s business teams adjusted on the fly to this “unfettered upload world” of YouTube, recalled Patrick Keane, a former sales director. “How quickly can you take stuff down? How quickly can you defend stuff? Is ad targeting really going to work?” No one knew. Meanwhile, Google was working to settle in both YouTube and DoubleClick, its $4 billion prizes. “You have these real pillars-of-the-internet-type acquisitions trying to be integrated,” said Keane, “at a time when the chaos was still very real.” The competition was real, too. Media conglomerates that weren’t suing YouTube were plotting to take it on. For months executives at NBC, Fox, and Sony Pictures planned a web video service to host their shows, movies, and advertisers. Word of the project made it to Google, where it was met mostly with scoffs. The music industry had tried this Traveling Wilburys approach to the web and totally stepped in it. Besides, old media lacked technical chops to pull off streaming. Someone at Google coined a pet name for the media endeavor: “Clown Co.”
The cocky Googlers underestimated the competition. When “Clown Co.” finally launched, as Hulu, in March 2008, it sent shock waves of paranoia across Google. Hulu’s press release mentioned the word “premium” five times. Inside YouTube, discussions began over whether it should launch its own “premium” service and where, exactly, that premium stuff would come from. The Head redoubled its efforts. When an executive based in London, Patrick Walker, heard about Hulu’s planned launch in the U.K., he called contacts at TV networks and persuaded them to stay off Hulu, kneecapping the rival’s launch. Twice, YouTube neared significant American deals. Officials had a series of negotiations with CBS to bring shows like The Amazing Race online, flying to meet the network chief, Les Moonves, in Manhattan and hammering out proposal after proposal. Once, after a meeting with CBS in Las Vegas, a YouTube exec told a deputy, “The deal’s done.” It wasn’t. Talks fell apart after the two sides couldn’t agree on terms for splitting ad sales. It did not help that CBS, while a stand-alone company, was still controlled by Viacom’s Redstone. As YouTube courted CBS, Viacom higher-ups made their displeasure known, according to a former network executive.
Still, YouTube didn’t have Viacom mucking up a deal with the remaining Hulu holdout, ABC. Discussions advanced with plans to give the network guaranteed promotions on YouTube, and some YouTube staff were pumped that their favorite show, Lost, might join their site. At the last minute, ABC signed with Hulu instead. (Google’s “Clown Co.” jab at old media, per one person involved, soured negotiations.)
Not every media entity sat out. WWE, the faux-pro-wrestling channel, embraced YouTube. At first, fans uploaded shaky footage of WWE’s pricey pay-per-view shows to YouTube, taking elaborate steps to get around copyright rules. Viewers also loved a digital series from “The Miz,” the old Real World star turned wrestler. WWE leaned into this fandom, posting promotions on YouTube for its shows, including 2007’s “Battle of the Billionaires,” which starred a fading reality star, Donald Trump. WWE also understood a programming philosophy that would later dominate YouTube, summed up in the title of a WWE host’s biography: Controversy Creates Cash.
Even Oprah Winfrey, the queen of TV, joined in. She invited Hurley and Chen on her show in November 2007. YouTube publicists had to drag them to Chicago for the taping; they shied away from publicity and didn’t feel that Winfrey’s audience matched theirs. During the show Winfrey stood next to the YouTube dudes and recorded them with her pink handheld camera, noting YouTube’s 200 million regular visitors and its astounding tally of videos. “Are you able to watch them yourselves?” the queen asked.
“That’s why we don’t have time for these interviews; it’s because we’re watching too many videos,” Hurley joked. Then he added, seriously, “It’s hard to keep up.”
But the more memorable guest on Oprah that day was Tyson, a hit YouTube skateboarding bulldog. That cute, lowbrow act—dogs on skateboards!—defined YouTube in mainstream culture, and the company would spend years trying to prove that it offered much more than that reputation.
While YouTube struggled to bring in ads and premium shows, commerce, like life, found a way. Fred, the squeaky-voiced YouTube sensation, finally met Evan Weiss, the agent hunting him, in a lobby of the Las Vegas Mandalay Bay. Weiss arranged chairs for Cruikshank, Fred’s creator, and his parents at a Starbucks, pitching the Nebraska family on turning their son into a media franchise starting with a Christmas record, like the Chipmunks. Cruikshank wanted to make a movie. “Definitely,” Weiss said. “I’ll guarantee it.”
Other YouTubers searched elsewhere for money or exposure. Some tried blip.tv, a rival service that paid uploaders. iJustine, an early YouTube regular, began to “lifecast,” streaming her entire daily existence with a laptop and a portable camera strapped to her baseball cap. (No bathroom trips or nudity. Friends teased her as being the “PG Princess.”) She broadcast this on a new site called Justin.tv, which would try out various business models before renaming itself Twitch.
Still, the biggest commercial forces emerged right on YouTube. Michelle Phan, an art student in Florida, opened an account in 2007 and shot videos narrating and staring steadily into the camera as she applied makeup, pausing to show particular products and techniques. She transformed herself into a Barbie doll, an anime character, a “seductive vampire.” Viewers could not turn away. Phan helped birth a media phenomenon that would upend fashion. Others followed suit in different industries.
kravvykrav: “iPod nano Video (3g): Complete Hands-On Review and Unboxing.” September 8, 2007. 6:18.
In grainy footage inside a home office, Noah Kravitz, shaved head and tinted glasses, introduces himself. He hoists the tiny device. “New Apple product hits the streets. People going nuts.”
Noah Kravitz wrote reviews for PhoneDog.com, a gadget website, when personal gizmos were all the rage. He began posting his reviews as videos, and his exhaustive commentaries on new devices were a hit. YouTube sent him branded tube socks as a prize for his fandom. Viewers were particularly enamored when Kravitz slowly unpackaged items on film. Once he exchanged messages with a fan to ask why. “You have the phones. We don’t,” the fan replied. “We can’t afford to go buy all of them. It’s the closest thing we can get to that feeling of bringing the phone home and unboxing it on our own.”
Unboxing would soon take another commercial turn that neither Kravitz nor anyone at Google expected.