Turning viral videos into a net brand
Interview with Steve Chen and Chad Hurley, Co-founders, YouTube
by Adam Lashinsky, FORTUNE senior writer

(FORTUNE Magazine) - In just five months, YouTube has gone from beta testing to part of the national zeitgeist. The website is a place where anyone with a home video can post it online and create an endlessly entertaining diversion for bored office workers--who've been watching 40 million clips a day.

Giving new meaning to the value of eyeballs over revenue (of which YouTube has precious little), the startup has raised $11.5 million in venture capital. FORTUNE's Adam Lashinsky recently visited the company's founders, CEO Hurley, 29, and chief technology officer Chen, 27, both early employees of PayPal.

Steve Chen and Chad Hurley
Steve Chen and Chad Hurley
The once-dominant online service has some swell ideas for online networking products. Unfortunately, other companies thought of them first. (Read the column)

They chatted at YouTube's San Mateo, Calif., office about how they're keeping pornography off the site, what ideas they've got for collecting money, and why they're not scared of Google (Research) and Yahoo (Research).

What made you think there was a burning desire out there for do-it-yourself videos?

Hurley: Steve and I were at a dinner party in January 2005, and we were taking digital photos and videos. The next day we found it difficult to share the video files because they were too large to e-mail and it took too much time to get them online. We thought there could be a better way. In February we started developing the product. 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. Today it's well over 40 million. We're three to four times larger than Google Video or Yahoo Video Search. And growing much faster too. It's a side project for them.

How do you keep the site G-rated?

Hurley: Well, we say no nudity, obscenity, profanity, or violence.

Chen: More important, it's the community of users themselves. They feel like they've built it up, so they want to try to keep it clean. They let us know when there's content that shouldn't be there, and we take it down.

The important question: How are you going to make money?

Hurley: We're going to sell sponsorships and direct advertisements. But we are building a community, and we don't want to bombard people with advertising.

Chen: If we wanted to, we could instantly turn this into $10 million in revenue per month by running pre-rolls [short video ads] on the videos. But at the same time, we're going to make sure that whatever revenue model we've built is going to be something that's accepted by the users.

Hurley: We're building relationships with studios, networks, and labels because they're looking for ways to reach new audiences, and we have a great platform and a great stage to make that happen.

But it sounds as if you're not ready to talk about any deals in the works. Have you hired a salesperson yet?

Hurley: Not yet. We're really trying to develop something that works for our community first. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.