YouTube began as a longshot idea in 2005, when broadband was just emerging in the US and it wasn't clear if the internet could even support video at scale. Founded by PayPal veterans Steve Chen, Chad Hurley, and Jawed Karim, the platform would go on to fundamentally transform how content is created and consumed worldwide.

In just over a year leading to its Google acquisition, YouTube faced numerous crucible moments that reshaped both technology and popular culture, all while dodging potentially fatal lawsuits. Today, over 700,000 hours of video are uploaded to YouTube every single day.

After PayPal's IPO and acquisition by eBay, Steve Chen found himself at a crossroads:

"I knew that the opportunities were to either join another startup like PayPal or Facebook, work for a much larger established company, or even just stay on at PayPal. I decided to give myself a period of 2 years or about $100,000 of money I'd saved from PayPal. If I ran out, I'd go back to a career path, but I'd be reluctant without trying to make a few swings at the plate."

Chen had already built strong working relationships with:

• Chad Hurley: PayPal's consumer designer who created the original PayPal logo
• Jawed Karim: A software engineer who worked incredibly hard at PayPal while simultaneously completing his degree through night studies

Their shared history at PayPal created the foundation of trust needed to launch a new venture together.

The 2004 Indian Ocean tsunami became a pivotal inspiration for YouTube. Jawed Karim recalls:

"The Indian Ocean tsunami was one of the first times I remember where content recorded by everyday people became really significant. There were no professional newscasters on site."

The founders recognized several key problems with online video in 2005:

• Videos had to be downloaded before viewing
• Files required specific codecs that users might not have installed
• Different devices couldn't play videos taken on other devices
• Browsers couldn't natively play video without additional software

Technologically, the solution came when they discovered Flash could serve videos:

"I remember seeing an ad on some website where they were using Flash to serve up the video and I was Blown Away. I had never seen that before and didn't even know Flash could play videos. As soon as I saw that, I thought 'wow, this could really solve the whole problem with video codecs and formats.'"

This technical insight coincided perfectly with the expansion of broadband, widespread adoption of digital cameras with video capabilities, and the emergence of cloud infrastructure.

Contrary to what many assume, YouTube didn't start as a general video sharing platform. The initial concept was much more specific:

"We weren't bold enough to say we were going to become the video platform for the entire internet. There was a service called Hot-or-Not.com where people uploaded photos of themselves and visitors could vote them hot or not. We just thought, 'Why don't we do a video version of this service?'"

They registered youtube.com on Valentine's Day 2005, designing it as a video dating site with a completely different interface than today's platform:

• Users couldn't choose which videos to watch
• Random videos would play automatically
• Users had to rate each video on a scale of 1-10 before seeing the next one

The result? "A week went by and zero videos were uploaded."

Rather than give up, they made a crucial pivot:

"Instead of being like Hot-or-Not for video, we decided to be like Flickr for video. The good decision was that instead of giving up, we gave it another try and opened it up completely to any video you want to upload and share."

Even after pivoting away from the dating concept, YouTube initially faced deafening silence:

"I would tail the access log, meaning it would display the most recent hit on the web server. I remember tailing this log and there would be absolutely no records for 24 hours. Many days not a single person on the internet—not even the three of us—would hit the site."

As Jawed Karim reflects, "It felt demoralizing. How is this possible? We have all these videos, I think it's a cool idea, but not one person on the planet has looked at this in the last day."

The team faced a crucial challenge: how to spark the network effect that would make YouTube valuable. They adopted a philosophy of rapid experimentation:

"The atmosphere we created inside YouTube was that if you have an idea, present it and we'll try it out. We would launch all sorts of things and see what sticks."

Examples included features like "video responses" where users could create videos replying to other videos, creating conversation threads. Another subtle but important innovation was auto-play: "The video would play automatically as soon as the page loaded. You didn't have to move your cursor and click a play button. It seems like a small feature but it's all these little things that summed up into a delightful experience."

Companies

• PayPal: Where all three YouTube founders worked before starting the video platform
• eBay: Company that acquired PayPal before the founders left to start YouTube
• Hot-or-Not.com: Dating site that inspired YouTube's initial concept
• Flickr: Photo sharing platform that inspired YouTube's pivot to general video sharing
• Google: Eventually acquired YouTube (mentioned briefly)

People

• Steve Chen: Co-founder and CTO of YouTube, former PayPal employee
• Chad Hurley: Co-founder of YouTube, product designer who created the original PayPal logo
• Jawed Karim: Co-founder of YouTube, software engineer who worked at PayPal
• Roelof Botha: Host of the podcast, managing partner at Sequoia Capital, former PayPal executive

Technologies

• Flash: Technology that enabled YouTube to solve the video codec problem
• Broadband: Emerging technology in 2005 that made streaming video possible
• Cloud infrastructure: Emerging technology that helped enable YouTube's scale

Events

• 2004 Indian Ocean Tsunami: Event that highlighted the need for easy video sharing

• YouTube began as a pivot from a failed video dating site that received zero uploads in its first week.

• The founders were PayPal veterans who gave themselves a limited runway (2 years/$100K) to "make a few swings at the plate."

• Initial technical breakthroughs came from discovering Flash could solve the complex problem of video codecs and formats.

• Even after pivoting to general video sharing, YouTube experienced periods where literally no one visited the site for 24+ hours.

• The team embraced rapid experimentation, trying numerous small features (like autoplay) that collectively created a delightful user experience.

• The 2004 Indian Ocean tsunami demonstrated the value of user-generated video content when professional news crews weren't present.

• In 2005, watching online videos was a technical nightmare requiring downloads and specific software - YouTube's solution made it simple.

The key that unlocked YouTube's growth was a seemingly simple feature built from day one: the ability to directly embed videos on other websites.

"This is a new brand that you just created, a new domain you just registered. In order to get this brand out there, you really need the platforms and foundations that people were already familiar with."

The team made it possible to embed YouTube videos anywhere that allowed HTML insertion:

• Craigslist listings
• eBay product pages
• Personal blogs
• Any platform accepting HTML code

But they still needed a popular platform to help spread awareness. In 2005, that platform was MySpace, which became the springboard for YouTube's viral expansion:

"What you would do on MySpace - you would encounter one friend that would be showing a video inside their profile with a YouTube logo. Maybe it's the first time you've seen it, but then maybe 5 minutes later you see another friend with another video with the YouTube logo. By 2-3-4-5 days of this, you start seeing more videos. Ultimately you click through and go to that YouTube link, then ultimately find other videos that you're going to watch on YouTube and share."

This organic distribution strategy required zero dollars in marketing or advertising. The YouTube team had created a perfect viral loop where users themselves marketed the product for their own needs.

As the embed feature spread YouTube across MySpace and beyond, the platform began experiencing its first viral successes - not with an immediate explosion, but with a gradually accelerating cadence:

"In the early days, there wasn't like one day where it suddenly started taking off. What would happen is that suddenly, like, every week we would get some clip that went viral."

The acceleration of viral content followed a clear pattern:

• First, one viral clip per week (like someone throwing quarters into a jar across a room)
• Then viral clips every 3 days
• Then every 2 days
• Eventually, every day brought "some amazing new content"

By late 2005, less than a year after launch, two videos crossed the remarkable threshold of one million views:

1. A Saturday Night Live clip
2. A Nike video of Ronaldinho juggling a soccer ball

This second viral hit revealed something interesting - it was uploaded by "Joe B" who appeared to be a regular user but was actually Nike itself. The YouTube team flew to Oregon to meet with Nike's marketing team, recognizing early on how brands might leverage the platform.

These million-view milestones signaled something profound: "Viral videos" were becoming part of the culture, and YouTube was their home.

In late 2005, with YouTube gaining initial traction but burning through cash to host and serve videos, the founders went looking for financing. Sequoia Capital, led by Roelof Botha, made the decision to back the fledgling platform:

"Like most investment decisions we make at Sequoia Capital, the decision to back YouTube was controversial. There were few precedents at this point for consumer internet companies following the dot-com crash being able to scale successfully and build thriving businesses."

Botha believed YouTube could become "the destination for user-generated video on the internet," impressed by both the team and the product's delightful ease of use.

After Sequoia led YouTube's first financing round, the small team temporarily moved into Sequoia's office while looking for their own space. At this point, something remarkable happened - YouTube began scaling at an unprecedented rate and entered the cultural zeitgeist.

It became common to see people huddled around laptops watching the latest viral clips. YouTube was no longer just a website; it was becoming a cultural phenomenon.

As YouTube's viral success grew, co-founder Jawed Karim made the surprising decision to leave the company to pursue a graduate degree. Meanwhile, Steve Chen and Chad Hurley faced the challenge of recruiting talent while operating under tremendous uncertainty.

Chen's recruiting pitch was remarkably honest about the company's precarious position:

"I don't know if this company's going to be around in 3 to 6 months, but what I can tell you is that it's going to be the most memorable 3 to 6 months of your life in your career working here. This is the largest, fastest growing video service out there, and whatever it's going to do, it's going to be a story - not just for your storybook, but it's going to be a story of the internet. And you know, that could be a bad story, a good story, but it will be a story that people will know."

The core challenge had completely flipped. YouTube no longer struggled to get anyone to notice the platform - now they had to keep the site from crashing under the weight of explosive user growth.

Yu Pan, Senior Software Engineer at YouTube, recalled: "Those early growth days of YouTube, they're exciting and just filled with stories. There are still many of them. The large majority of them are untold."

YouTube's explosive growth created an unprecedented technical challenge. Unlike many startups that focus on building new features, YouTube's engineering team was consumed with the monumental task of scaling infrastructure:

"It was quite a technical achievement to continue to just scale out the service from the back end, from the system side, from the infrastructure side. We were using up to something like 40% of the internet's bandwidth at that time."

The team leveraged early cloud infrastructure and open-source software to drive down costs. They initially partnered with budget hosting providers offering seemingly impossible deals:

"You had companies back in 2005 trying to out-market their competitors in the hosting space by saying 'we're going to offer you 2,000 gigabytes of data transfer for free,' knowing - at least they thought - knowing that nobody possibly could use 2,000 gigabytes of data transfer on a single machine... until we came along."

YouTube found a small provider called Server Beach offering "unlimited bandwidth" - a promise they couldn't possibly fulfill once YouTube started growing. Yu Pan recalls:

"We had the team behind Server Beach freaking out about this startup with seven people in Silicon Valley using up not just their entire bandwidth from their data centers, but they had a whole second connection that was supposed to remain as a backup. We were using up all of it."

The team's solution was simple but unsustainable: "Anytime we measured as we approached 2,000 GB of data transfer per machine, I just went on and got another machine. So another 2,000 gigs, another 2,000... There's no way that was going to be a sustainable model."

No one had anticipated a service coming "out of nowhere in 2005 and occupying up what, 20-30% of the internet's traffic in a matter of months."

With cloud providers unable to sustain YouTube's growth under their original terms, the company faced a critical decision point - they needed to build their own infrastructure:

"As we looked at the future costs of running our infrastructure in managed hosting, the numbers were very concerning."

Colin Corbett, who joined as Director of Networking at YouTube, recalls one of his first tasks: "I signed us up for our first data center so that we would operate our own infrastructure and be able to more closely control the costs."

This shift allowed YouTube to negotiate directly for:

• Bandwidth costs
• Server prices
• Networking equipment

But building their own infrastructure in 2005-2006 was an intensely physical, hands-on process:

"You had to be buying every one of the machines. You had to be going into the trucks on Saturday and Sunday mornings to pull the machines out, bringing them up in the elevators, and plugging in each one of the ethernet cables yourself. Power was an issue just to power these huge racks of machines."

The logistics were daunting:

• Physically ordering machines 4-6 weeks in advance
• Being in the parking lot when equipment was delivered
• Manually bringing up 42U racks of servers
• Personally plugging in all network and power cables

Colin Corbett joined in January, and the data center was ready to accept traffic by March - an incredibly rapid deployment. But the transition didn't go as planned:

"What was supposed to be this nice gradual migration became 'the website is down, the database won't be fixed for days, we need to cut tonight to our equipment.' We did our forced migration because we had no other choice."

This emergency migration to their own infrastructure marked another crucial turning point in YouTube's journey to become a stable, scalable platform capable of handling its extraordinary growth.

Companies & Platforms

• MySpace: Social media platform that helped fuel YouTube's early viral growth through embedded videos
• Craigslist: Platform where YouTube videos could be embedded
• eBay: Platform where YouTube videos could be embedded (also the company that acquired PayPal)
• Nike: Brand that uploaded an early viral video through a seemingly personal account
• Sequoia Capital: Venture capital firm that led YouTube's first financing round
• Server Beach: Small hosting provider that initially offered YouTube "unlimited bandwidth"
• AWS: Mentioned as not yet existing during YouTube's early infrastructure challenges

People

• Steve Chen: Co-founder who stayed with YouTube after Jawed's departure
• Chad Hurley: Co-founder who stayed with YouTube after Jawed's departure
• Jawed Karim: Co-founder who left YouTube to pursue a graduate degree
• Yu Pan: Senior Software Engineer at YouTube
• Colin Corbett: Director of Networking at YouTube who helped build their own infrastructure
• Roelof Botha: Sequoia Capital partner who led the investment in YouTube
• Ronaldinho: Soccer player featured in an early viral Nike video

Events/Content

• Saturday Night Live clip: One of the first videos to reach one million views
• Nike's Ronaldinho video: One of the first videos to reach one million views
• Quarter-throwing video: Early viral content mentioned

Technologies/Concepts

• Embedding: The feature that allowed YouTube videos to spread across other websites
• Viral videos: Concept that became culturally significant through YouTube
• Cloud infrastructure: Early technology that YouTube leveraged before building their own data centers
• Open source software: Used by YouTube to drive down costs
• Data centers: Physical infrastructure YouTube eventually built to control their costs

• The embed feature was YouTube's secret weapon for growth – enabling videos to spread organically across MySpace and other platforms without spending money on marketing.

• YouTube's viral growth followed a pattern: from one viral clip per week to ultimately new viral content emerging every single day.

• By 2005, YouTube was consuming up to 40% of the internet's bandwidth, forcing small hosting providers to break their "unlimited bandwidth" promises.

• Steve Chen's recruiting pitch acknowledged uncertainty ("I don't know if this company will be around in 3-6 months") but promised candidates they'd be part of internet history.

• YouTube's technical challenges shifted from product development to pure infrastructure scaling - a different challenge than most startups face.

• The company had to physically build their own data center infrastructure, with engineers literally unloading servers from trucks and plugging in cables on weekends.

• An emergency infrastructure migration ("the website is down, we need to cut tonight") forced YouTube to accelerate their move to self-managed infrastructure.

• Early viral success included both genuine user-generated content and stealth marketing by brands like Nike posting through seemingly personal accounts.

Even after establishing their own data center, YouTube continued facing infrastructure challenges that required heroic efforts from the small team. A typical example shows how close they came to disaster:

"We realized we were going to run out of web capacity in a few days. Saturday was always our peak day, and we had a new rack of equipment on order for new web servers, but it wasn't due for weeks."

The team convinced their integrator to deliver the rack early, receiving it at 6:00 PM on Friday - just hours before their anticipated capacity shortfall. But then they encountered another problem:

"The racks fully assembled weighed between 1,600 to 2,500 pounds, and we couldn't get it up the ramp to actually get it to our data center."

With only one data center staff member available, the YouTube team took matters into their own hands. Colin Corbett called a colleague who showed up with his wife, and all three physically pushed the massive rack up the ramp to reach the data center.

That night, they worked tirelessly:

• Bolting down the rack
• Setting up the network
• Imaging the systems
• Deploying everything

This last-minute effort allowed YouTube to survive the weekend traffic spike. As one team member reflected: "I wasn't actually really confident for the bandwidth side at least until we got Colin. I was like, okay, we have a little bit of breathing room now."

The infrastructure challenges YouTube faced coincided with a pivotal moment in internet history:

"In so many ways, 2005-2006 was a period when broadband penetration was just really starting to hit the masses in the US. YouTube was the first case where you really, really needed high network bandwidth, and it required a lot more from the server side than was ever needed before."

Had they not built their own data center, YouTube likely would have faced two fatal problems:

1. "Our hosting providers wouldn't have been able to keep up in scale"
2. "The monthly fees from the hosting providers would have kept climbing, and we would have run out of money sooner"

By 2006, having overcome the immediate infrastructure challenges, YouTube began focusing on generating advertising revenue and building a sustainable business. Their engineering feats meant they could serve videos cost-effectively and earn a margin even with low ad rates.

But this step into monetization led them directly into uncharted legal waters: what were the implications of earning ad revenue on user-generated videos that contained copyrighted materials?

Zahavah Levine joined as YouTube's 23rd employee and first lawyer:

"I joined YouTube as its 23rd employee. On my first day, Steve, one of the founders, handed me a sealed box from IKEA and invited me to build my desk. I was YouTube's first lawyer."

Levine brought critical expertise at a pivotal moment:

"YouTube reached out to me because I was one of a handful of tech startup lawyers at the time with deep experience with licensing music for online services. 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."

The platform was already facing complex copyright issues as users uploaded various types of content containing commercial music:

• "MTV-style" official music videos
• Videos of users singing songs
• Videos of people dancing to music playing in the background

For YouTube to grow as a platform, they needed to find a fair way to work with all parties:

• Content creators
• Content owners (when creators used content they didn't create themselves)
• Advertisers willing to pay for placement

The central legal question became existential: "Whether YouTube could build an advertising-based revenue model without becoming liable for all of the infringing content that users uploaded to the site."

Having witnessed Napster's aggressive approach to copyright issues lead to its downfall, YouTube sought a different path. Their strategy centered on the Digital Millennium Copyright Act (DMCA) of 1998:

"The DMCA was designed to balance the rights of copyright owners on the one hand and online service providers on the other. The DMCA strikes this balance by providing for a limitation of liability known as a 'safe harbor' for online service providers who comply with certain requirements designed to address copyright infringement."

The stakes couldn't have been higher:

"It was clear to me that if YouTube qualified for this DMCA Safe Harbor, it had the potential to be wildly successful. But if it didn't, and YouTube could be held liable for copyright infringement for all of the infringing user videos, I couldn't see how the company could be successful."

The challenge was that the law contained significant ambiguity. When Levine consulted with "one of the world's great copyright lawyers" about whether YouTube would "face massive lawsuits and get sued out of existence," he simply shrugged and said, "Who knows."

YouTube faced a fundamental business dilemma:

• Earning any revenue created some risk, as it could be viewed as "financial benefit directly attributable to infringement"
• But without revenue, there was no business

As Levine recalled:

"If we have to be the first movers in figuring this out, what is the way to make everybody happy in this picture?"

Despite YouTube believing it was shielded by the DMCA's Safe Harbor clause and that it could create a win-win business model for all parties, the entertainment industry did not share this interpretation.

The clash between YouTube and traditional entertainment gatekeepers represented a fundamental power shift in media:

"Hollywood were the gatekeepers, and then YouTube opened its own gate and a lot of people walked through it."

The entertainment industry responded forcefully:

"The music companies and Hollywood had large anti-piracy teams that were sending us hundreds and in some cases thousands of copyright takedown notices a week."

YouTube quickly realized they would need to negotiate content licenses with the music industry and Hollywood. While they managed to strike deals with companies like Warner Music and EMI, others took a more confrontational approach—particularly Universal Music Group (UMG).

After months of somewhat friendly negotiations, UMG suddenly changed tactics:

"I remember UMG just suddenly flipped on us. I recall one exec with whom I had previously had a good relationship literally scream at me over the phone: 'YouTube was built on the backs of our artists and owes us hundreds of millions of dollars!'"

Zahavah Levine described a particularly hostile meeting in Los Angeles with Universal Music as "the single worst business meeting of my life":

"They put all of their senior heavy lawyers in a conference room, and as soon as the meeting began, they started waving a copy of a lawsuit complaint and demanding tons of money. It really struck me that they were not interested in a win-win relationship with the service and that they would do everything in their power to make our life miserable."

The power dynamics were clear:

"They hold all the cards. You have something on your platform that is owned by Universal, and there aren't that many choices you could take."

Under this pressure, YouTube co-founder Chad Hurley agreed to pay "a big sum of money in exchange for a license agreement"—even though the company had "no way to pay" such an amount at the time.

The confrontational approach from Universal Music Group revealed a profound cultural clash between Silicon Valley's innovation mindset and the entertainment industry's protective stance:

"I had rarely encountered a business experience like this. Silicon Valley just has a very different tone and mentality when it comes to business relationships—much more of a win-win, 'let's build something together' attitude."

Zahavah Levine articulated the contrasting philosophies:

"The idea was that you were going to create value, and yes, there's a question about exactly how to divide the pie, but ultimately the goal should be to grow the pie as big as possible. The sense I got from my meeting at Universal Music was a fixed mindset: 'There's only so much value, and we, Universal, need to do everything in our power to squeeze as much out of this as possible to your detriment.'"

This confrontational meeting became a pivotal moment for YouTube:

"I think this UMG shakedown was a turning point. I think it helped Chad and Roelof appreciate the gravity of our copyright issues and perhaps warm up to the idea that selling YouTube to a company that could commit more resources to our legal challenges was not a terrible idea."

The realization was setting in: "It was now clear that a flood of litigation from rights holders was inevitable." YouTube would need substantial resources and protection to navigate these treacherous legal waters.

Companies & Organizations

• IKEA: Mentioned as providing the desk box for Zahavah Levine on her first day
• Universal Music Group (UMG): Major music company that took an aggressive stance against YouTube
• Warner Music: Music company that negotiated deals with YouTube
• EMI: Music company that negotiated deals with YouTube
• Napster: Earlier file-sharing service that took an aggressive legal approach and failed

People

• Steve Chen: YouTube co-founder who handed Zahavah Levine an IKEA box on her first day
• Chad Hurley: YouTube co-founder who agreed to pay UMG for licensing during the contentious meeting
• Zahavah Levine: YouTube's first lawyer and General Counsel/VP of Business Affairs
• Colin Corbett: YouTube team member who helped with the physical infrastructure challenges
• Roelof Botha (referred to as "Ruoff"): Sequoia partner who began to consider the Google sale option

Laws & Legal Concepts

• Digital Millennium Copyright Act (DMCA): 1998 law providing "safe harbor" protections for online platforms
• DMCA Safe Harbor: Legal protection that limited liability for platforms if they followed certain requirements
• Copyright takedown notices: Formal requests to remove infringing content

Technologies/Concepts

• Broadband penetration: Just reaching mass adoption in the US during 2005-2006
• High network bandwidth: YouTube was the first major service requiring unprecedented server-side bandwidth
• Data center infrastructure: Physical server equipment YouTube needed to handle its traffic

• YouTube's team literally pushed 2,500-pound server racks up ramps themselves to avoid running out of capacity during weekend traffic peaks.

• The 2005-2006 period marked a crucial inflection point when broadband was "just starting to hit the masses" in the US, with YouTube being the first service requiring unprecedented bandwidth.

• YouTube's engineering success allowed them to serve videos cost-effectively, but monetization immediately created legal exposure.

• The company's legal strategy hinged on qualifying for DMCA "safe harbor" protections, but the law contained significant ambiguities.

• A dramatic cultural clash emerged between Silicon Valley's "grow the pie" collaborative mentality and the entertainment industry's "fixed pie" competitive approach.

• Universal Music Group's aggressive tactics (waving lawsuit papers, demanding "tons of money") represented "the single worst business meeting" in the career of YouTube's first lawyer.

• The confrontational meeting with UMG became a turning point that helped YouTube's leadership consider acquisition by a larger company with more resources to fight legal battles.

• YouTube faced an existential paradox: earning revenue created legal risk, but without revenue there was no business.

With lawsuits from major entertainment companies looming, YouTube faced an existential threat. The young company simply didn't have the resources to fight some of the world's largest corporations in court. Meanwhile, several companies had shown interest in acquiring YouTube, including Google, whose own video product had failed to gain traction.

"Anytime you contemplate the sale of your company, I think it should be called a crucible moment. It's at this point where the founders, even if they have the ambition to build something enduring that is standalone, may feel that the company's future is in better hands with somebody else that can help them realize that ultimate vision."

For YouTube's founders, the decision was challenging but ultimately unavoidable:

"We were kind of forced down that path of going down the acquisition route with Google. It was really on the legal side of things. We were just too small. We could barely even hire because everybody was so busy keeping it all together with Band-Aids."

The financial reality of fighting these battles as an independent company was daunting:

"In 2006, you didn't have the kind of late-stage financing environment that you have today. It wasn't easy for us to go and raise $100 or $200 million to fight the lawsuit. I think it would have been pretty tricky to go and raise money for the explicit purpose of winning a lawsuit."

Despite believing they would ultimately prevail in the copyright battles, the founders recognized that partnering with a larger company offered the best chance for YouTube to realize its potential:

"For me, that was a very difficult period. The product was working great, the engineers, we had a great team, but it was really survival of this product, of being able to share videos online on the internet. Is that going to be feasible or not? Is it time to sell the company?"

The internal decision was made primarily by Chad Hurley and Steve Chen: "In order for this thing to scale out, we really need a bigger partner and somebody to be able to hand-hold us through this."

Once the decision to pursue acquisition was made, the YouTube team faced another challenge – they needed to move quickly and secretly to prevent media companies from accelerating their threatened lawsuits.

"We reached out directly to the board of Google and arranged a meeting. We want to move forward with a sale, but we need to move quickly on this. We need to do it in a kind of secretive manner because we don't want it to be known by Universal and EMI that we're talking to a much bigger company for an acquisition."

What followed was one of the fastest major acquisitions in tech history:

"The sale of YouTube to Google has got to be one of the fastest deals of its size of all time. I think it took something like five days from signing the term sheet to signing the long form, and I think it was probably the hardest 5 days of my life."

Zahavah Levine recalls operating on "pure adrenaline" while juggling multiple critical tasks simultaneously:

1. Negotiating the merger agreements with Google
2. Closing deals with the three remaining major record labels (which Google wanted done before acquisition)
3. Moving YouTube's offices (which had been planned for months)

The team worked around the clock in increasingly chaotic conditions:

"Chris Maxcy and I were in the office in San Mateo above Amici at like 2 a.m. on a Saturday night/morning, trying to finish the record company deals. We were sending drafts back and forth with the record companies in the middle of the night. We'd print each draft and mark up our comments in pen, and suddenly in the middle of all this, our printer stopped working."

The cause of the printer problem? "We realized the movers had unplugged it and were packing it up. We had to beg them: 'Sir, I know you're just doing your job, but please leave the printers. I promise we're authorized to instruct you to leave the printers!'"

Levine barely slept during this period, staying in a hotel room next to their law firm rather than going home. But somehow, they got everything done.

In November 2006, Google acquired YouTube for $1.65 billion – a staggering sum at the time. Unlike many acquisitions where the larger company absorbs and transforms the smaller one, Google took a different approach with YouTube.

Google asked Steve Chen and Chad Hurley to stay on to lead YouTube as a standalone brand under its umbrella, while phasing out its own Google Video product.

"I think there was a real meeting of the mind and an appreciation that Google's interest was in helping YouTube flourish. It was clear to the founders that Google had a sincere desire to enable YouTube as an independent business."

Google made several key commitments that were crucial to YouTube's continued success:

1. Maintaining YouTube's independent brand (not renaming it Google Video)
2. Allowing YouTube to keep a separate office in San Carlos (not forcing relocation to Google's Mountain View headquarters)
3. Investing in the infrastructure needed for YouTube's continued growth
4. Providing resources to fight the impending copyright lawsuits

Steve Chen remains grateful for Google's approach: "I'm just still grateful of the way that Google handled that acquisition, that they were able to put us in control, to trust a couple of 28-year-olds to run this thing."

This hands-off approach continues to this day: "Google did a fantastic job in never completely enforcing this Google umbrella over YouTube. They continue to, even till this day, YouTube stays separate in terms of a lot of its reporting structure, organizational structure, and even just physical addresses of the buildings."

Most importantly, "Google had the resources to defer revenue and to take the long view" – a luxury YouTube wouldn't have had as an independent company facing existential legal threats.

Just as the YouTube team had feared, the lawsuits came shortly after the acquisition. Viacom sued Google seeking over a billion dollars in damages, arguing that YouTube was responsible for copyright infringement by users who had allegedly uploaded over 150,000 clips of Viacom-owned programming, which had collectively been viewed 1.5 billion times.

"This was it. This was the existential lawsuit we all knew was coming."

The situation worsened when "at least two class actions were filed against Google on behalf of sports leagues and music publishers and a class of 'all copyright holders in the world,' which was quite something."

These lawsuits confirmed that selling to Google had been the right decision:

"I'm absolutely clear that we made the right decision to sell it, with that amount, at the time that we did, and to sell it to Google. There was a high risk that YouTube would have never made it out of 2006-2007 if it weren't for that acquisition with Google."

With Google's resources behind it, YouTube was able to develop a crucial technological solution that would cement its future relationship with copyright holders: Content ID.

"One of the heralded pieces of technology that YouTube built that assured its survival, and honestly why I think the company has thrived, is Copyright ID."

While fighting the Viacom lawsuit, YouTube worked to build "very sophisticated automated systems to accommodate copyright management and content licensing at scale."

The resulting Content ID system was revolutionary:

• It scans each of the millions of videos uploaded every day
• Compares them against a massive database of sound recordings and audiovisual works provided by copyright owners globally
• When it detects a match (third-party copyrighted material in a user-uploaded video), it honors the rights holder's choice to either:
  • License and monetize it, sharing in the revenue
  • Have it removed from the site

The system transformed the relationship between YouTube and copyright holders:

"An overwhelming majority of the content of the rights holders using the Content ID system elect to license their content and share the revenue on YouTube."

This technological innovation is widely regarded as groundbreaking: "As far as I know, the YouTube content identification system is the most advanced system of its kind in the world to this day."

Perhaps most importantly, "it wins the hearts and minds of copyright holders that know that YouTube is a partner to theirs, not an adversary. YouTube is a valuable distribution partner. It generates revenue that it shares back with these copyright owners."

By building this platform to responsibly share revenue with creators and rights holders alike, YouTube would go on to create what we now call the "Creator Economy" – enabling everyday users to monetize their content.

The legal battles eventually concluded in YouTube's favor when, in 2010, a District Court threw out Viacom's lawsuit, ruling that YouTube was indeed eligible for the DMCA Safe Harbor and therefore protected from copyright liability.

Nearly 20 years after its founding, YouTube has shaped some of the most seminal cultural moments of the 21st century and evolved far beyond what its founders could have imagined.

For Steve Chen, a pivotal realization of YouTube's broader impact came in 2007:

"One of the most memorable moments for me at YouTube was when we received a call from CNN. They wanted to host the Democratic debates for the elections in 2007, and they wanted to do it utilizing and partnering with YouTube, where the questions wouldn't just be coming from the two or three moderators, but it would actually be coming from YouTube users. That was when I started realizing this is far bigger than something that we created back in 2005."

Today, YouTube's reach is staggering:

• Over 2.5 billion monthly active users
• More than 100 million paid subscribers
• Approximately one-third of the world's entire population watches YouTube every month

The platform has achieved numerous technical and business milestones:

• Building infrastructure to store and deliver an unprecedented volume of video worldwide
• Creating historic licensing deals with the music industry
• Establishing the first platform that licensed entire catalogs of music for use in user-uploaded videos

For the founders, the journey offers perspective on entrepreneurship:

"It's not fair to look at the end result, to see where YouTube is and how all this magic happened. I think it's a lot more realistic to look at where I was in 2005. It was a video dating service that we thought was going to be the next big thing, and of course it went through hundreds of cycles of evolution and path-turning to be able to get to where YouTube is today."

YouTube has become deeply embedded in global culture:

• "Multiple generations are watching YouTube as their primary source of entertainment, source of education, source of content globally all around the world."
• "People are entirely creating careers completely just built off of YouTube the platform."

Steve Chen offers this advice to aspiring entrepreneurs:

"If you have an idea, if you want to start something, don't ask anybody else. Just, especially, don't ask your mom like I did. At least once in your life, I just recommend highly, try to do something on your own, especially if you do have an idea that's been brewing in your head for a while. Try it, and you'll know in 3 to 6 months if it's going to work. And even if it doesn't work, it's going to be the most memorable 3 to 6 months of your life."

The most rewarding part? "It's so entertaining, such a great gift when you actually see other users using this product idea that you had in your head. It's just hard to be able to get that same kind of return on anything else you do in life."

Companies & Organizations

• Google: Acquired YouTube in 2006 for $1.65 billion
• Viacom: Media conglomerate that sued Google/YouTube seeking over $1 billion in damages
• CNN: Partnered with YouTube for 2007 Democratic debates
• Universal Music Group: Major music company mentioned as potential legal threat
• EMI: Music company mentioned as potential legal threat

People

• Chad Hurley: YouTube co-founder who stayed on after the Google acquisition
• Steve Chen: YouTube co-founder who stayed on after the Google acquisition
• Zahavah Levine: YouTube's first lawyer who helped negotiate the Google deal
• Chris Maxcy: YouTube team member who worked on record label deals
• Susan Wojcicki: Early Google employee who championed acquiring YouTube and later served as its CEO for 9 years until 2023 (passed away in August 2024)

Legal & Business Concepts

• DMCA Safe Harbor: Legal protection that YouTube was ultimately found eligible for in 2010
• Content ID system: YouTube's technological solution for copyright management
• Creator Economy: The ecosystem of content creators monetizing their work, pioneered by YouTube

Events

• Google's acquisition of YouTube: November 2006 for $1.65 billion
• Viacom lawsuit: Filed shortly after Google's acquisition, seeking over $1 billion
• 2007 CNN/YouTube Democratic debates: Early example of YouTube's cultural impact
• 2010 District Court ruling: Dismissed Viacom's lawsuit, confirming YouTube's DMCA protection

• YouTube's founders were "forced down the path" of acquisition by legal threats they couldn't fight as a small company without the late-stage financing options available today.

• Google's acquisition of YouTube was completed in just five days—one of the fastest major tech deals in history—while the team simultaneously closed music licensing deals and moved offices.

• Unlike many acquisitions where the larger company absorbs the smaller one, Google maintained YouTube as a separate brand with its own offices and leadership structure.

• Content ID technology was the breakthrough that transformed YouTube's relationship with copyright holders from adversarial to collaborative, with most rights holders choosing to monetize rather than remove content.

• YouTube pioneered what we now call the "Creator Economy," enabling everyday users to build careers around content creation and monetization.

• From its humble beginnings as a failed video dating site, YouTube now reaches one-third of the global population monthly with over 2.5 billion users.

• Susan Wojcicki, an early Google employee who championed acquiring YouTube and later served as its CEO for 9 years, was described as an "unsung hero" in YouTube's story before her passing in 2024.

• The founders' advice for entrepreneurs: "Try it, and you'll know in 3-6 months if it's going to work. Even if it doesn't work, it's going to be the most memorable 3-6 months of your life."