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It's a YouTube world ... we just surf in it

Will Google's $1.65 billion acquisition of the website squash its independent spirit?

By Clayton CollinsStaff writer of The Christian Science Monitor / October 13, 2006



SAN MATEO, CALIF.

Talk about a virtual company.

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It takes three slow passes to find the headquarters of the Web's most-watched video site, a place where 65,000 mostly homemade, often offbeat, digital clips are uploaded daily to be shared online.

Behind a glass door with no sign – between Amici's pizzeria and Ni-Mo Japanese Cuisine in this high-tech hotbed south of San Francisco – the lobby is a bare 8-by-10-foot cube.

This surprisingly light public footprint belongs to 20-month-old firm YouTube Inc., which had been clomping noisily through the news almost daily even before Google acquired it this week for $1.65 billion in stock. Little YouTube might be moving to plusher quarters.

"This is the next step in the evolution of the Internet," Google chief Eric Schmidt said Monday. Welcome to the culture-shaping website of the hour, a bottom-up media distributor with broadening clout – and not just among the fast-fingered youths that observers like to call "the YouTube generation."

The site streams 100 million videos a day – and has notched 72 million unique visitors to date.

"YouTube has allowed itself to flow into the center of culture, by becoming of the culture," says Marian Salzman, author of several books on trends and executive vice president at ad agency JWT Worldwide. "It feels like it started as a buzz wave, but today it's a ... pillar post in the world of user-generated content."

It has been a guarded post. During a visit to San Mateo last month – before the reason for reticence became clear – security turned away an unscheduled visitor. (Calls and e-mails aimed at arranging a visit had gone unanswered.)

The Google deal begins to answer analysts' concerns about how YouTube might "monetize" its business. It was a blockbuster: By comparison, Rupert Murdoch's News Corp. paid $580 million for social-network superstar MySpace.com last July.

Now some experts wonder if the site's core users – youths first attracted to clips of a founder's cat – will feel disenfranchised if its deeply invested new parent is too quick to leverage the site's reach.

"Advertising always wins," says Jim Twitchell, a pop-culture tracker at the University of Florida. "It's been the history of radio, of TV, of newsprint; if it doesn't carry advertising, it's not going to make it."

YouTube might sacrifice some allure if it becomes too ad-heavy, Professor Twitchell and others say. But Twitchell adds that in the near term he doesn't think the Google deal will impede YouTube's ability to ply "the edges of taste."

At least one question predates the megadeal: How did this small firm, founded by former PayPal cohorts Steven Chen and Chad Hurley – who initially funded it with credit cards – manage to effectively brand the outwardly simple business of providing a home for home-grown "content" online? With a well-built aggregator site that quickly attracted some $11 million in venture capital, say experts, and with a sustained stream of conversation-starting, "viral" clips – beginning with one tipping-point video last December.

"Basically they were doing everything right, but they didn't have a graph [of page views] that was showing they were doing anything better than anyone else until they posted that 'Chronicles of Narnia' rap," a music-video film spoof that ran on TV's "Saturday Night Live," says Rand Fishkin, a social-media expert and founder of SEOmoz, a search-marketing consulting firm in Seattle. "That single video actually took them from obscurity to fame overnight."

And even though such giants as Yahoo – and alternatives including Metacafe – offer similar services, YouTube has cornered the market on cachet in a surging segment – user-generated content.

Broadly, revenues tied to online video should exceed $850 million by 2010, according to In-Stat, a market-research firm. Experts credit that to the magnetism of sites like YouTube that let participants "tag," "flame," and discuss one another's work – niche material that could offer opportunities.

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