How YouTube Won
For a while now I’ve wanted to record my personal analysis of why YouTube won (at least so far!) the “video sharing” market. And it is a huge market. Just consider the combined traffic of YouTube, Google Video, Dailymotion, and Metacafe, all of which are sites that essentially didn’t exist three years ago.
These observations are based on my experience working for a competitor to YouTube during 2005, Gofish.com. While I worked for Gofish (through May 2006) we were never more than an also-ran in the video sharing market. Nonetheless, we had identified the importance of the market in mid-2005, and launched our own product in the fall of that year. I had no insider knowledge of YouTube, I just knew them as a competing service.
A number of services first identified “viral video” as compelling content and were featuring it throughout 2005. Big-boys.com, which later became Break.com, at that time featured like 5 videos on their site every day, and encouraged users to submit their own videos. Submission was by email.
But by summer of 2005 YouTube had launched and a number of other smaller sites were offering “self-service” video upload and hosting.
The following are my observations of the YouTube service and team and why their service became the dominant winner in the space.
1. Early to market. YT entered the market at a very early stage. They were probably not first to market, but they were building a venture-backed service and team well before the market became crowded. Launching 6 months later could well have prevented them reaching their level of dominance.
2. Exploiting existing behavior. As I mentioned above, there was lots of “viral video” already present on the web when YT launched. Where much of this content previously had been traded by email or P2P networks, a number of sites had figured out that watching that video on the web was a lot easier for users. YT definitely tapped into this vein of existing content and trading behavior to support their early growth.
3. Sharing of copyrighted content. This advantage was not specific to YT, as all the early players in the video sharing space gained lots of traffic from users sharing copyrighted content. As the biggest service, YT just gained the most from the practice. Times have changed, and a new video service could not hope to grow so quickly without confronting the copyright issue more painfully than YT did.
1. YT built the best video sharing product early. The YT site was just easier to use, easier to navigate, easier to upload to, and looked better and worked faster than just about everyone else. While obvious now, this advantage made it a lot easier for YT to become an early favorite.
2. Optimistic content filtering. This and the use of Flash video were probably the two key masterful moves that helped YT build their early lead. YT had the key insight that reducing the time lag from a user uploading the video to publishing it publically on the site was a key factor to user satisfaction. Early gratification ruled. To enable the fastest possible publishing time, YT published user-uploaded videos without ever manually reviewing the content. Instead they relied on the community to report inappropriate (read: porn) content after it was already published. Many, many services (Gofish, Google Video and others) did not have the confidence to do this, and instead required manually reviewing video before publishing it. The difference meant that publishing on YT took well under an hour, while publishing to another service might take days.
3. Flash video. In early 2005, the video format wars were still raging on the web. Windows Media, Quicktime, and Real Video could be found in heavy use across different sites. But in a brilliant stroke, the YT team decided to publish in the Flash video format, a format supported by every browser that had the Flash plug-in installed. This decision was pivotal. It meant that the video you uploaded to YT “just worked” for almost everyone who came to watch it. A number of video sharing services attempted to use other formats (Gofish used Windows Media) and eventually everyone converted to Flash, because the actual watching experience was so much better. This advance was not only important to YT, but actually to the 0verall growth of the video market on the web.
4. Embeddable video widgets. I’m pretty sure that other sites had been offered embeddable video codes before YT did. By the summer of 2005 there were already lots of sites serving the Myspace community that did nothing but link-jack music videos from other sites, and offer embed codes for those videos to Myspace users (along with a bunch of ads). But YT institutionalized the practice. They let you take any video off their site and play it on any other site you wanted, any time you liked. While the marketing advantage of those distributed links was clear, paying for all that bandwidth off your own site seemed pretty dear! At Gofish we tried to limit the playback time of embedded videos to save on bandwidth costs. Whether YT didn’t care about the money, figured the marketing was worth it, or just did it because their users wanted it – I don’t know. But the spread of those videos throughout the web was an incredible marketing tool for them early on. It also provided a nice barrier to others since it increased someone’s bandwidth costs (potentially dramatically – what if your video got posted to a super popular Myspace page?) to offer the same service. Here’s a video where some folks talk about the importance of other social networks to YT’s success:Vodpod videos no longer available.
5. The name. You. Tube. Simple, descriptive, easy to remember, easy to type in. As much as it seems like a small thing, YT just had a better name than everyone else (and frankly, they still do. Veoh?? Revver??) More than anything, I think this helped them in winning lots of free early press. It just rolled off the tongue, and was easy to quote in an article. When Mark Shields talked about how “people watching video on YouTube has changed the dynamics of congressional races” on “The News Hour” on PBS, it just hammered home to me how much YT has benefited from free press.
Exploiting the early advantage
With these key advantages in place (good overall service, fast publishing to Flash video), YT just grew faster than everybody else in the early days. Despite lots of players (Grouper, Revver, Dailymotion, Metacafe, StupidVideos and others all were around in 2005) people found YT (through emails from users and through the widgets) and they stayed with it.
I attribute YT’s “middle” success to the following factors:
1. Staying ahead of the competition. YT improved their service at least as quickly as any of their competitors, and faster than most. What was already the best service just kept getting better.
2. Riding the cultural wave. Video sharing “hit the big time” at the end of 2005 and early 2006. In December the “Lazy Sunday” video from SNL appeared on YT, and over the Christmas break it was viewed hundreds of thousands of times. This led to lots of press notice, and tons of free marketing for YT. As the press started catching on to all the time that kids were spending watch and sharing video online, YT was the main beneficiary, being mentioned in countless articles. I don’t know what moves YT may have made behind the scenes, but their early lead and great name definitely made it easy to crown them the new darlings of cyberspace. No doubt YT identified and exploited the free marketing advantage to the hilt.
3. No advertising. YT played a wonderful game of chicken through most of its two years of independent life. How long can you keep paying $1M bandwidth bills every month before you start running some ads? While other sites experimented with ads (Gofish, Revver), YT kept the user experience as clean as possible. This prevented other players from paying their bills, and kept the user experience bar high. Competitors faced a quandrty: even if they could attract as much traffic as YT, could they actually afford it?
4. Scaling the service. There is a great video online of a talk from one of YT’s core engineers about how they scaled up their service. Those engineers did an incredible job of keeping the service humming and responsive in the face of massive growth. No doubt having observed the failures of others (lack of scaling pretty much killed Friendster, and definitely hurt Myspace before their acquisition), YT kept their service growing and kept their users happy. As people like to say “performance is a feature”, and YT pushed that feature hard.
I think there are some important and generalizable lessons from the YT history. The most important one (and I suspect YT themselves would agree with this) is simple: do what’s right for your users. From the very beginning (flash video, optimistic video review) and through at least up to the acquisition (no ads, great performance, no crackdown on copyrighted content) its clear that YT’s priority was to please their users. And their users, by the millions, have rewarded them for it.
We can reasonably argue about whether YT can reach the goal of building a profitable service, rather than just a popular one. And it’s clear that the Google acquisition allowed them to escape making a really hard trade-offs to spur profits. Nonetheless, if you can convince yourself that building a popular service on the web is an important goal, than the most mportant thing to do is what’s best for your users, and for the “user experience” on your site.
The second lesson is: build a great service as quickly as you can. When you stumble into a hot new market, the agility to capture that early audience is critical. YT employees have much to say about the advantages of open source, dynamic languages, and keeping your solutions simple. If you’re startup is trying to choose technology based on its perceived “ability to scale”, you better consider whether the technology you’re choosing will be agile enough to allow you to get into a place to worry about scalability!
The final lesson is the advantage of small teams. YT achieved much of their growth with a very small team, especially on the product side. Small teams of great people can achieve amazing things when they’re not distracted by office politics and the design details for the new corporate campus.
I think it’s notable, and humurous, to see the “New Site” effort with its $100M
valuation investment and layers of managers. The advantages of running lean seem to be the biggest lesson that big companies can’t seem to learn. That blind-spot should give hope to startups everywhere!