YouTube's Rocky Road to the Top

Bloomberg reporter Mark Bergen is the author of the upcoming book Like, Comment, Subscribe: Inside YouTube's Chaotic Rise to World Domination. Motley Fool analyst Dylan Lewis caught up with Bergen recently to talk about topics including:

• YouTube's "Forrest Gump-like" tendency to be a part of world-changing events.
• The platform's complicated relationship with its creator base.
• One missed opportunity around kids and education.
• The acquisition of YouTube, and its early days as a part of Google.

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This video was recorded on Aug. 28, 2022.

Mark Bergen: Inside Google, like YouTube took a long time for its business to really click. There was some initial frustration for several years, and you can go back and find a lot of press reports about how YouTube was serially unprofitable and a drag on Google for a long time.

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Chris Hill: I'm Chris Hill and that's Mark Bergen. He's a reporter for Bloomberg, and author of the upcoming book, Like Comment Subscribe: Inside YouTube's Chaotic Rise to World Domination. Dylan Lewis caught up with Bergen to talk about the rocky road that led YouTube to become one of the most successful tech acquisitions in history, as well as the complicated relationship YouTube has with the people who create video content, and how the platform has an uncanny knack for being a part of world-changing events.

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Dylan Lewis: YouTube is Forrest Gump-like in that there are all these seminal moments along the way over the last 15 or so years where it is there. It is a part of the conversation or it's where the conversation is happening. One of the things I was struck by was, you're embedding these videos as these reminders of what happened on the platform and what was important on the platform. But that very act, the idea that content could be from over there and then brought here onto a webpage, is something that YouTube conditioned us to accept and really made possible on the Internet.

Mark Bergen: Yeah, totally. I love that Forrest Gump comparison. This was, I think I mentioned it early in the book, that like Java script, that the basic YouTube technical infrastructure that you could watch their videos on other sites -- it was pretty revolutionary at the time. MySpace, believe it or not, was one of the things that really kicked off YouTube's popularity -- its first, kind of its Beta version. The site went live in mid-2005, when MySpace was hugely popular, and MySpace didn't have video. So it became this thing where a lot of early YouTubers and employees too, were trying to seed YouTube videos in the comments for MySpace, which was where a lot of early users discovered the site. I think that that portability -- that was something a lot of the other web video sites of the time didn't have, including Google Video, which was the forgotten competitor, and a major reason why YouTube won.

Dylan Lewis: Yeah, I think one of the YouTube insiders that you quote in the book called it the video scaffolding of the Internet. It might not have been obvious that that's what it was in the moment, but now you think about it, and it's the go-to place for most people when they're looking for video content. It's also -- if you're a creator, whether it's something that you're trying to build a platform on YouTube with, or just trying to get a video up, so you can get it on another webpage -- it's the go-to for how people do that.

Mark Bergen: For sure. I think that's a double-edged sword. For YouTube, it's amazing. Now you're seeing that with podcasts, where YouTube is making this big push into podcasting, and in part because it's already been there, I think a lot of YouTubers have podcasts and they just upload their podcasts on YouTube and those do really well. That's just another example of this repository that becomes more complicated as content moderation. But it also becomes ... YouTube's currency is watch time and overall views, and that's what they share with advertisers. That's just continued to climb, in part because of how it exists as the default place where people upload things and where people expect to go search for video.

Dylan Lewis: It's interesting to track how the platform has decided to chase those metrics over time. Because there was a time where that YouTube homepage was curated by individuals. There was a team focused on doing that. Technology quickly took over, and that's not really the case anymore. I think you did a great job in the book of just detailing that development over time, the resistance to it, and now, just the acceptance that we have, even though there are all these limitations that also come with it.

Mark Bergen: Yeah, absolutely. What I found was most fascinating is the sort of alternative histories of what could have been. A lot of it is this debate about curation versus algorithms. I think it's most acutely felt in YouTube Kids, which is the example where when they launched YouTube Kids in 2015, it was a separate app. They didn't really curate it. They have these massive headaches, and now they're being much more aggressive. That's an example where they are, like, the one place where the company is really like white-labeling and being very careful about what videos go in there. In part, I think that there's a missed opportunity. You could argue that there's a huge business opportunity they blew in some sense around kids and education. And they still might ... that's certainly not something they've lost, but in part because of the way they leaned in really hard on the algorithmic free-for-all.

Dylan Lewis: You mentioned the alternate history, and I'm curious: I think to some extent what allowed YouTube to be YouTube is that it started out agnostic. It wasn't the property of someone else who had their own tech bloat, and all of these other strategic things they are working toward. Do you think it could have thrived or that a video provider could have thrived from any of the existing big tech companies, or did it have to come from someone who didn't already have its own property on the Internet?

Mark Bergen: Yeah. These are always fun because we can say anything and not be proven wrong. There's an example which is Google Video. I didn't realize, until I'd gone back and researched the book. Google Video launched initially, it was very careful. They were just trying to do ... their initial service was like an online cable box. They had basketball games a day later or something, and like, CBS. It wasn't super "fingers on the pulse of culture." But they eventually, when YouTube started taking off, Google Video shifted strategy and was like, we're going to do user-generated content. And it didn't go anywhere. I think a major reason why Google bought YouTube was because Google Video wasn't working. The "buy or build" thing: They tried to build it and they ended up buying it, which was a really smart move for Google. Probably one of the most successful tech acquisitions of all time.

Dylan Lewis: Yeah, I think it's hard to argue. It's probably in the top 10, if not the top three, maybe. In 2006, Google announces buying YouTube for, I think $1.7 billion. In the most recent quarter, YouTube drove over $7 billion in revenue, tens of billions of revenue in the last year. Do you think that Google had any sense that that was the potential for this property at the time?

Mark Bergen: I think Eric Schmidt was CEO at the time and there's this anecdote that the price they were talking about was around $600 million and Schmidt was willing to bump up an extra billion or something. I do think they were fixated on it because of its search potential, which, by all measures, YouTube is still the world's second-biggest search engine behind Google. People don't often talk about the fact that Google has the two biggest search engines in the world. I certainly don't think that they had the foresight of what it was going to be. Was it, less than six months later, they got sued by Viacom for $1 billion. You could argue that they certainly saw some legal problems ahead, but Google certainly didn't see that coming. I think there was probably like four people inside Google. Like, YouTube took a long time for its business to really click. There were some initial frustrations for several years, and you can go back and find a lot of press reports about how YouTube was serially unprofitable, and a drag on Google for a long time.

Dylan Lewis: It makes sense to some extent. The challenge that they were trying to solve was so massive. The idea that you could host any video content you wanted, so long as it reached their terms of service and the terms of use, and that that content would be moderated to some extent so that users would have a good experience when that was conforming, and one that advertisers would be willing to participate in. There are so many pieces -- I guess it's a three-legged stool thing, and getting all of those things to work together is a very, very tough thing to do.

Mark Bergen: I think that's been what is lost in some ways about the comparison between ... I think YouTube straddles, it's not really quite social, it's not quite streaming, it's a little bit of both. It's not the same as [Meta's] Facebook and Twitter, largely because it has this massive creator base, which is a huge advantage. I think the world of social media is moving in this direction. Like, Instagram looks a lot more like YouTube, and it wants to look like that. TikTok obviously is, your social feeds are less friends and family, and more influencers and creators. Which is, for these platforms, hopefully unlocking the next big revenue stream. But I don't think we spend enough time [talking] about, you know, YouTube went through a lot of headaches, and there's a lot of complications in a creator economy that TikTok is, I think, certainly going through right now.

Dylan Lewis: I'm curious. Amateur creators were really the lifeblood of YouTube early on, and they continue to be some of the biggest personalities and channels on the platform. But there's always been a little bit of a tension between the individuals that make content for YouTube and the commercial interests of the platform, and that's really the interests of advertisers, but also more traditional media brands. How would you characterize that dynamic over time and where it sits now?

Mark Bergen: That's a really great tension, and I spent a lot of time in the book talking about that, because we went through a lot of twists and turns. One thing that's interesting that I don't think enough people appreciate is, YouTube birthed the creator economy, for sure. 2007 is when it started making payments to creators, which is super early. But for a long time, the company didn't see creators as the central vehicle for their business. Their early business team was like, "We need to get studios and TV networks onto YouTube," and then, there was a big push like, "We need to get the stars to come onto YouTube." Because it was the sense that advertisers needed to see familiar faces, they needed to see A-listers and premium material. There was so much of an effort around premium. It's funny to think it now, but at the time, when Hulu launched, it was like a nightmare scenario for YouTube. Because Hulu came out of the gate being like, "We are the premium online video destination," and that was basically, essentially saying YouTube is not premium for advertisers. And advertisers believed that for a long time. I think there was a turning point around 2014 when it became obvious that YouTube creators were in many ways more popular than conventional celebrities.

Dylan Lewis: I don't think it's a stretch to say they created the modern influencer perspective. The idea that you are interesting, that you can and should be broadcasting your life.

Mark Bergen: Absolutely, and that was not [a] given. And neither was, I think, ... something that's really fascinating with O.G. YouTubers is, they started when there was no guarantee of money. There was no idea that you could make money off YouTube or online. There was no sense about being an influencer. That's a really relatively new category, and even your listeners familiar with multichannel networks like the big boom in the YouTube Studios that happened a decade ago. Many of them kind of imploded. But that was still this novel way of we can build out conventional Hollywood agents and networks around online talent. Now you're seeing, I think, a second, mature wave of that. But that's still a really nascent category. It's still, I think it's being proven out. MrBeast is a great example. MrBeast has basically a giant media company under him now. But there's not a lot of YouTube stars that have that.

Dylan Lewis: I think it's funny you use "dogs on skateboards" as a catch-all phrase when you're talking about some of the early content on the platform. It's been so cool to see the quality of content, even from individual creators, really blossom and become incredibly high-quality while still maintaining that personality that is so core to the relationship with audiences. You mentioned Hulu before, and what's interesting is, YouTube is basically "dogs on skateboards" and Hulu. They've managed to figure out how to be both something that is for everyone and a streaming service. They have a paid model, they have an ad-free one, and they've been able to have their cake and eat it too.

Mark Bergen: Absolutely. Although, I think there's one thing that we haven't touched on, is they have made a big recent pivot in their strategy. This is around 2014, when they started doing originals with YouTube creators. It was basically their version of House of Cards. It was taking on Netflix and Amazon. They've had a few successes from that, but that program largely didn't catch on. I think it's fascinating. They've put out some numbers. They don't disclose revenue about subscriptions.

Hank Green is this YouTuber that said this before. I'll credit him for this idea, but YouTube has the biggest army of influencers in the world, and how often do you hear YouTubers pointing their audience to subscribe to YouTube Premium? Very rarely. In part because the assumption is that the margins they get from their advertising business is way better than competing with Netflix and Disney and HBO Max and everybody else for subscribers. They've certainly pivoted away from the originals; they have shut down the originals program. Now they're purely into shorts and commerce and competing with TikTok and Instagram. But I think you're absolutely right that they can be ... YouTube is very good at being all things to all people, or trying to be. But they've made some strategic decisions that show where they don't necessarily have the strength of other platforms.

Dylan Lewis: I think it's incredible to me that they are able to make amateur content work. They couldn't quite make it work with super-high-quality names, big-time names, Hollywood names. Yet they are in a spot where they're getting incredibly well-produced content from Vox or from Crash Course, or for any of these channels that essentially have studio-level productions. But it's not quite what we're used to from cable or big-budget Hollywood.

Mark Bergen: That's been a bumpy ride. There was a really interesting period, and you talk to a lot of creators -- around 2015, 2016, there was this big push for YouTube to sort of...  Take a step back, and there's been a lot of debate about the algorithm and YouTube, how it drives viewers. But I think what's equally interesting is how the YouTube algorithm drives creators, and what actual content and videos they make. There was a shift around 2015 to not just get the more-extended watch times, but to actually deliver daily viewers. There's a really interesting moment there where a lot of YouTubers were like, "We don't have the capacity to pump out high-quality videos every single day." But Jimmy Kimmel can, TV networks can because they're built up that way. So a lot of YouTube creators, I think pretty fairly, were like, "Well, the platform is tilted to benefit traditional media." I think in YouTube's defense, there's this years-long tradition that YouTubers can go on and criticize YouTube, and YouTube takes it. But you mentioned Vox -- Vox is a venture capital funding media company. Those ones sometimes tend to have a leg up on independent creators.

Dylan Lewis: It makes sense. I ran our YouTube channel here at the Motley Fool for a while. It's a little different when you're working with resources like an in-house multimedia team, an existing base of people who know your brand and appreciate your brand and are on some of your email lists. Building a critical audience is much easier when you already have all those tools. I can understand how a creator might look at all that and say, "How am I supposed to compete with these guys?"

Mark Bergen: I think YouTube has gotten better from my understanding with creators, but it's still tilted towards ... they have senior partner managers that work with creators of a certain size. So in many ways, it's structurally set up to give you more benefits and hand-holding the larger you get.

Dylan Lewis: There's this concept that comes up in the book that I want to talk through, and it's "Joke, Threat, Obvious." It's this motto, but also these chapters that delineate the development of YouTube over time. Can you talk a little bit about that?

Mark Bergen: I thought that one came from Shishir Mehrotra who was a former YouTube VP. This is what he told his troops, and I think it was an old Microsoft saying too. It's like, and I may butcher it here, but: First, they treat you -- business rivals. First, you're seen as a joke, then you're seen as a threat, and then you become obvious. And he thought, I think rightly, it maps pretty well to YouTube's development, where they had the dogs on skateboards phase. Like YouTube was kind of this joke. And I think what's really interesting is, inside Google, people called it the JV team. For a long time, it was not a place that people wanted to work inside Google, necessarily. I think some of that was like literally because they didn't have nice amenities in their office. But because it wasn't seen as a serious business, and it wasn't as moonshot-y as self-driving cars, etc. Then the next phase of that is the threat. Then there's the obvious phase where everything you do works. I think YouTube, there's an argument that they went through that, and I talk about in the book, they felt that phase around 2014, 2015, when things started to click, which really was when the wheels fell apart right in the Trump era.

Dylan Lewis: One of the things I think is interesting is, I would look at them and say, as a consumer, you're in the obvious phase right now, where your path to success is so clear, you're ubiquitous. Everyone knows who you are, and you're the clear destination for people that are creating and want online presence. But even with that and even being at that graduated level, YouTube is frantically fighting for competition, eyeball hours, with the likes of Instagram, Facebook, TikTok, and conventional streaming. The battle is not over even though they've reached that level.

Mark Bergen: I do think that this is part of Silicon Valley culture. You always sort of see yourself as an underdog. I think YouTube, for a long time, it saw itself as an underdog to traditional media, to the Viacoms of the world. It was an underdog to TV. It was an underdog to Facebook. Facebook's business was bigger at one point, and still is overall, but that was sort of. I have this chip-on-the-shoulder, where it was like this insurgent underdog. I think some of the dizzying part of the past few years for companies like Google is, "Oh, we're not the underdogs anymore." I think that people inside the company are aware of that. Certainly, TikTok is like a real substantial competitive threat in a new way, not just for viewers and eyeballs, but actually for creators, which I think is something that YouTube hasn't faced before. You talk to their business team, the thing they're striving for is share of TV market. That's where the bull case for YouTube is -- that money from the advertising is still moving from TV to streaming and digital. I think there's a lot of interesting questions now that Netflix is getting in the ads game. That introduces a new layer of competition that YouTube probably has to respond to.

Dylan Lewis: I can't help but draw parallels between now Alphabet (then Google's) acquisition of YouTube, and now Meta, (then Facebook's) purchase of Instagram. At the time, people couldn't believe that they were paying what they were for them. They've proven to be great acquisitions. But even in spite of that, I think we've seen in the last 12 months, certainly, but maybe the last couple of years, they've really started imitating some of the other features from other providers in order to stay relevant, and stay where people are, what they're interested in.

Mark Bergen: My colleague Sarah Friar wrote a really great book about Instagram in 2020. I think there's obviously some key differences. One is that the founders of Instagram, I think,  just have more personality and like -- personality isn't the right word -- but a really stronger presence. There's a clear sense there that Facebook has over time started to absorb everything about Instagram. Google, to its credit, would never ... it's very unlikely that ever you're going to go to YouTube, and it's like "Brought to you by Google." YouTube is its own brand. The company has kept it that way. I addressed a little interesting bit of history in the book about why it's not actually a separate Alphabet company, but still remains part of Google. The YouTube founders left pretty early. I think they have strong feelings about the site, obviously. It wasn't quite the same... I don't think there was that much tension. Certainly they didn't love aspects of Google, but you didn't see the same... I think at Facebook, Instagram was ascendant in a way that, like ... Google Search has never had that problem. Google Search is like a utility that's not really going away. It's not like they need to depend on YouTube as their next stage of growth, like Search, as a business is still growing at phenomenal rates. I think that's probably the key difference.

Dylan Lewis: I think with Google Search and with YouTube Search, the truth is probably that the algorithm is king. It really sets those businesses up to succeed and keeps them strong. On the user side, when you're going to your YouTube homepage, you're getting content that they expect you to have highly relevant to you and make you watch more, make you stick around longer. It's a flip on its head from the idea of content being king, or really the audience being king, which is a more traditional media. I see where we're going with TikTok and the algorithm driving so much. Do you think that that is just the content future that we need to be ready for, almost no matter what platform it is -- the algorithm is king?

Mark Bergen: It certainly seems that way. To use that phrase, the audience is king. The example that YouTube brings up, the algorithm is just the audience. That's the line that they'll use, which I think is half right in the sense that the algorithm is...  we are as viewers dictating what's being shown to us in some ways based on our prior watching behavior. The algorithm is rewarding what the audience wants. I mentioned earlier, I think, the other side of that is that creators are in this weird dance with the platform where they're trying to appeal to this algorithm. In many ways, there's several examples from YouTube's history where it totally spun out of control in a way that wasn't great for craters, wasn't great for the company, wasn't great for advertisers, and got them into serious trouble.

I do think that there are certain areas now where certainly on YouTube, and I bet TikTok, will move in this direction -- current events, news events, even when they're algorithmically curated, YouTube has a much heavier hand in those cases. This just thinking... Like the recent FBI, if you were to go on YouTube and look at "FBI Trump," when that happened in August, you were going to see just vetted news channels at the top. It's become very, very hard to find anything that's not a vetted, well-known news channel. I think you've seen that with coronavirus, with healthcare -- YouTube has become much more aggressive, and I think that's a different way of curating content, a different algorithmic world than other categories of content.

Dylan Lewis: One thing that I think is fascinating -- and the title of your book hits this exactly, the idea of comment/subscribe -- is that the inputs on the creator side are somewhat known by the audience. We know that these things like views, like likes, like comments, subscriptions, are things that help creators. There's this transparency that creators approach this with. How content is being surfaced to us is still a little bit of a black box on the algorithm side and the platform side though.

Mark Bergen: Yeah, I think that YouTube's made some attempts to communicate this. I think some of them have been clumsy. I write about in the book, some of it is, the AI experts talk about the black box. Algorithms and machine-learning systems are effectively making predictions and pattern recognition in ways that are designed for us to really not understand. I think there's an element of that and that's certainly been the neural network that has been involved in YouTube for, I think, going back to 2015 or so. I think that that's certainly where we are seeing in Europe especially, but even in the U.S. -- Elon Musk has talked a lot about this: algorithmic transparency. It's very unclear what that looks like. If Google one day were to say, oh look, here's ... open-source their code for the YouTube algorithm, myself included, most people wouldn't be able to understand and decipher that.

Yeah, so I think that that's been the defense. YouTube will always say, the reason that we don't share this stuff is because we don't want bad actors to exploit these holes, which I think is a flimsy excuse. I think an interesting perspective on that is just the API that YouTube could give access to to researchers. I think it was earlier this summer, YouTube started to share more data, and this has been a consistent criticism from researchers: Part of the reason there's a lot of scrutiny on Facebook and Twitter is for the obvious failings of the platforms. Because in some ways, it's a little more accessible to researchers, and some of that is just text versus video. Text is so much easier to navigate and understand and parse as data, and video's harder, and YouTube has been pretty reluctant to share. I think maybe that's going to change. To me, that's interesting. Academic research takes a long time and so it might be moving too slowly, but that'll be really something interesting to follow -- how much YouTube is forced to be more transparent than it's been.

Dylan Lewis: It's said often, but I think it's true: The last 15 or so years, really the aughts, were a Wild West period on the internet, both in terms of content, in terms of moderation, but also in terms of how these internet properties acted. The consolidation that happened. What do you think we'll look back on this and think about this period?

Mark Bergen: Oh, yeah. I had this line in the book, I'll tease it, that's from a YouTube employee that was: We'll look back on this period as sort of cars before seat belt laws. I think, to me, that reads pretty true in some ways. I think the analogy falls apart in the sense that, there it is. The seat belt laws don't have to deal with political issues and political speech, which is very complicated, and in defense of the platforms. I think they should have seen this coming in some ways, but they didn't. These things around how do you define hate speech and how do you define incitement to violence when it abuts contemporary politics is incredibly hard. I think this is a period, the major thing that's changed in YouTube I think that other platforms too are, you to have more levers to pull than just "this content gets to live on the Internet or it doesn't." YouTube has started to do things like put things in the recommendations, remove things from recommendations, removed monetization.

Basically, they have all these different tools to be able to treat content on gradients. I think that's going to be the future. And some of that is to our conversation around transparency. When a video is removed from recommendations, it's not like you see it. Not like you're watching a video and they're like: "This video was treated as borderline content that we decided not to recommend to viewers." They're not doing that. They're adding fact-check labels like Twitter and Facebook. But that's a step where I don't know if they would ever make that step. I think the second part of the Wild West era that's now coming back to haunt them is outside the U.S., where you have in places like India and Brazil and Russia, huge YouTube audiences and governments that are cracking down pretty hard on dissent, and using this language about fake news and misinformation to push platforms to remove videos that are critical of the government. And YouTube backed itself into a corner. I think YouTube of the past may have said, "Screw you, we're going to keep his video up." Google is a much bigger and more conservative company, and YouTube is a bigger business. In places like India -- they're not going to back out of India. We're seeing right now, they're not operating their business in Russia, but YouTube is still operational in Russia, which is fascinating. That's the only Western internet service that's basically still operating.

Dylan Lewis: Before I let you go, I'm guessing you've spent a lot of time on YouTube writing the book, and I'm guessing that you weren't working 100% of the time. [laughs] Are there any channels or creators that you'd recommend for our listeners?

Mark Bergen: Oh, yeah, for sure. MatPat is one of my favorites. He has Game Theorists and Film Theorists, and I'm a big, I've been during the pandemic watching a lot of movies, so Film Theorists is one of my favorites. Also during the pandemic, I've become a big NBA fan, I'm sure there's probably some overlap. There's a great channel called Thinking Basketball, and I eat up every single basketball video that he makes.

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Chris Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.