Chen, Steve and Hurley, Chad

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Steve Chen and Chad Hurley

Creators of YouTube.com

Steve Chen born in August of 1978 in Taiwan. Chad Hurley born c. 1977; married; children: two. Education: Chen: Studied computer science at the University of Illinois—Urbana-Champaign, c. 1995–99. Hurley: Earned degree in fine arts from Indiana University of Pennsylvania, c. 1999.

Addresses: Office—c/o Google, Inc., 1600 Amphitheatre Pkwy., Mountain View, CA 94043.

Career

Chen worked for PayPal, Inc., as a programmer and later with its China operations, c. 1999–2005; Hurley was hired as PayPal's first graphic designer in 1999, and left in 2002 to become a freelance design consultant; the pair established the company that would become YouTube.com with Chen as chief technology officer and Hurley as chief executive officer, February, 2005; YouTube.com acquired by Google, Inc. October, 2006.

Sidelights

Like so many technology pioneers before them, Steve Chen and Chad Hurley had little idea that the video-sharing Web site they created in 2005, YouTube, would turn out to be such a revolutionary force and community-creating phenomenon. The two Californians and former co-workers became overnight millionaires a year later when YouTube was acquired by the search-engine Google for an astounding $1.65 billion. The deal made headlines around the world in October of 2006, and new-technology analysts heralded it as a synergistic union of two of the Web's biggest successes stories in recent years. "We started this to solve a personal problem," Hurley told BusinessWeek's Heather Green. "Now we're creating a new way to reach audiences in an era where the traditional TV time slot doesn't exist anymore."

Hurley and Chen met in the late 1990s when both were working at PayPal, the e-commerce Internet site for money transfers and payments. Hurley was a Pennsylvania native who grew up in suburban Philadelphia, and was working for PayPal as its first-ever graphic designer. An artist from an early age who used to sell his drawings from the sidewalk in front of his home while still in elementary school, Hurley graduated from Twin Valley High School in Elverson, Pennsylvania, in 1995, and went on to earn a fine arts degree from Indiana University of Pennsylvania. He landed at PayPal when he read about the company in Wired magazine and sent an e-mail to inquire about job openings. He was the fifteenth employee hired at PayPal, and created what would become its official logo during his job interview.

Chen was slightly younger than Hurley, and was born in Taiwan in 1978. His family came to the United States when he was eight years old, and settled in suburban Chicago. Schooled at both John Hersey High School in Arlington Heights and the Illinois Mathematics & Science Academy, he was a gifted student who earned money working at the local 7-11 store and Jewel/Osco supermarket during his teens. He went on to the University of Illinois at Urbana-Champaign, where several friends of his in the computer science program headed to the West Coast in 1998 in order to launch the company that eventually became PayPal. The online payment service provider grew so quickly that one of the founders, Max Levchin, began to hire his former computer-science classmates at the University of Illinois; Chen was one of the recruits, and quit school just a few credits short of his degree.

Hurley and Chen worked together for the next three years, until PayPal was bought by eBay in October of 2002 for $1.5 billion. Hurley left the company and worked as a design consultant in the Silicon Valley/San Francisco area, but Chen stayed on another two years to help with PayPal's launch in China. They remained friends, along with several other early-era PayPal employees, and it was this group that made up the bulk of the guest list for a dinner party that Chen hosted in January of 2005 at his San Francisco home. Hurley and Chen recorded some of the festivities with a digital camera as well as a camcorder, but found it difficult to share the video clips with other guests via e-mail; the files proved too large to squeeze through most of the e-mail programs. Realizing that digital photographs were easier to share thanks to new Web sites like Flickr, they reasoned that a similar software package to share videos was possible, too.

Hurley was living in Menlo Park, a nearby suburb, and had a garage on his property, where in February of 2005 he and Chen set to work on creating what became YouTube. They agreed on a few caveats: The site had to be easy to use for a person with only a minimum of computer skills, and it would not require users to download any special software in order to upload or view videos. They also made it easy for site visitors to view clips without going through a registration process, and created a quick search function to access the archives. In May of 2005, they put up a preview version of YouTube, and officially launched in December of that year. Their biggest expense was paying for bandwidth capabilities that would allow thousands of users to visit the site simultaneously without it crashing. Initially, they used some of their own personal lines of credit to pay for that, but then their former bosses at PayPal put them in touch with Sequoia Capital, a Silicon Valley venture capital firm. The partners at Sequoia Capital had provided some of PayPal's seed money, and agreed to fund Hurley and Chen's idea with a $3.5 million check.

YouTube.com caught on almost immediately, and the number of users and available video clips multiplied daily during the first months of 2006. Writing in Forbes Global, journalist Scott Woolley asserted the site was "at the forefront of a new video revolution on the Net. The upstart's birth coincided with a magic moment in Internet history, when online video became cheap enough to give away." Hurley and Chen's idea proved to be one of the biggest Internet phenomena of 2006. Users filmed and uploaded their own home movie clips, and racy television commercials from Europe were also an early staple.

Another round of venture-capital financing came in April of 2006, this time an $8 million check. The company set up shop in office space above a pizza restaurant in San Mateo, and Hurley and Chen hired a few staffers to supplement the work done by their friend, Jawed Karim, a former PayPal colleague who had helped out with some technical issues and uploaded the first ever YouTube video. They also struggled to keep the site running smoothly. The issue of revenue proved their biggest challenge: If the site was free to use, and did not even require viewers to register with an e-mail address, how could it make money, except for selling ad space? Once Web-traffic surveyors like Alexa began to see a spike in visitors to YouTube, advertisers began courting Hurley and Chen. "The ad money was very tantalizing," Chen confessed to Woolley in the Forbes Global interview. "We looked at it every step of the way, every week." The first actual ad to appear was a simple text one in January of 2006, and it included an apology from Hurley and Chen explaining that they were short on cash and the sink in the You-Tube offices was in need of a somewhat costly repair job. They also nixed the idea of a "pre-roll" feature, a ten-to-fifteen second ad spot that would precede all videos posted on the site. "We don't believe in forcing people to watch something," Hurley told New York Times writer Saul Hansell. "We don't think that's the best way to communicate a message to people."

Barely a year after YouTube's launch, there were 100 million videos in its searchable archive, with new ones added at a rate of 65,000 daily. The site also received 34 million unique visitors each month, making it one of the top ten most-visited Web sites in the world. YouTube celebrities emerged, among them geriatric1927, a British man in his seventies who recounted his life story, and lonelygirl15, who claimed to be an American teenager with strict, conservative Christian parents but who was unmasked as a Hollywood hopeful and her bedroom-set videos the creation of budding filmmakers. But as Hurley told Financial Times writers Richard Waters and Kevin Allison, the sudden stardom accorded to both geriatric1927 and lonelygirl15 spoke volumes about YouTube's ultimate appeal. "The more popular users on our site are people who are just telling their stories," he said. "It's almost the ultimate form of reality television."

Hurley and Chen—YouTube's chief executive and chief technology officers, respectively—realized they were operating in somewhat of a gray zone regarding copyright infringement. Their first real skirmish with legal issues came in February of 2006, when a Saturday Night Live skit titled "Lazy Sunday" was uploaded to the site, and e-mail links to it multiplied as the work-week went on. NBC asked You-Tube to remove it, and they complied. That became unofficial company policy—YouTube's 67 or so employees do not prescreen uploads for content, but if NBC, ESPN, or any other holder of copyrighted material, such as a band video, asks them to remove a clip, they comply with the request.

On October 9, 2006, Hurley and Chen became household names and the newest millionaires in what was being called the next big Internet gold rush: Google bought YouTube for $1.65 billion. The deal took less than five days to hammer out, and the final meeting between executives of the two companies took place at a Denny's restaurant. Hurley and Chen then filmed their own brief YouTube clip to deliver the news, which immediately became one of the most-viewed clips in the site's history. Their informal attitude, coupled with the sheer financial magnitude of the deal, was in "stark contrast to the traditional buttoned-down merger pronouncement," noted New York Times journalist Andrew Ross Sorkin, who called it "either the evolution of the corporate announcement—or possibly the devolution of these once ceremonious moments in business." In the new-media era that YouTube had inadvertently created, Hurley and Chen's video clip was quickly parodied by YouTube users.

Hurley and Chen's critics claimed the Google deal was bound to end in regret for at least one of the parties. Copyright issues remained a concern, and some entertainment-industry giants analysts likened it to the next Napster, the music-sharing site that was finally forced to shut down after serious legal challenges from the recording industry. You-Tube also began limiting clips to just ten minutes, which would prevent entire television episodes from being shared—unless a user registered as a "director" and was uploading original material. In September of 2006, Hurley and Chen announced a plan to incorporate new software that would let copyright holders, such as record labels, easily find copyrighted material on the site and request its removal. In the weeks following the Google deal, several thousand clips were removed from the site, including popular morning-after bits from Comedy Central's Daily Show with Jon Stewart.

Media companies also saw the potential in YouTube as a new way to reach consumers, and some even began using it as a tool. As Hurley explained to Oliver Ryan in a Fortune profile of the company, "We're seeing situations where we have the marketing side of the company posting clips to our site, and then we're getting notifications from the legal side asking us to take it down." He also stressed the possibilities whenever he could when discussing the YouTube potential in the media. "People just don't sit down and just watch TV at night," he told Hansell, the New York Times journalist. "It comes down to time management. And I think [advertisers are] just looking for new opportunities to get in front of an audience, and that's what we're providing for them."