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

Talk about a virtual company.

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.

"Google has one of the more successful track records with online advertising," says Kevin Howley, associate professor of media studies at DePauw University in Indiana. "No doubt, Google ... sees a way to make very big money on the YouTube phenomenon." That could be hard for a site that gets its identity from fans. "Apart from making the YouTube team filthy rich, this deal begs one very important question," says Prof. Howley. "Will the YouTube ethos survive in a commercial context?"

Amid the wild works of exhibitionists staging physical feats and elaborate parodies – or reposting bits recorded from David Letterman or "The Daily Show" – flow "most watched" shorts that spawn cult followings.

Consider "Numa Numa guy" Gary Brolsma, joyously lip-syncing to a Romanian pop song in a wildly popular clip originally posted in 2004 on Newgrounds.com but a YouTube hit last year.

Or "Bus Uncle," a grainy six-minute video of a man upbraiding a fellow Hong Kong bus rider for interrupting his cellphone call. It has drawn millions of views since its posting last spring, spinning off spoofs and catch phrases.

Some find little that is substantive among the rampant quirkiness. "YouTube is just another form of self-indulgence and immediate gratification that is enslaving ... teens and 20-somethings," maintains James Farrelly, director of film studies at the University of Dayton, Ohio.

But YouTube also can serve up rare film clips, wrote film critic Terry Teachout in his blog at ArtsJournal.com in July – adding that seekers would be required to do some dross-filtering to find gems.

Viewers have praised the innovation of a widely watched video by comedian Judson Laipply that traces the evolution of dance. The site rippled with debate last month over Lonelygirl15, a four-month experiment in filmmaking in which an actress portrayed a teen who poured out her thoughts in video segments.

It's not all improvisation art. This summer, a 23-year-old operative for the Democratic opponent of a Republican senator caught the lawmaker appearing to fight off sleep during a Montana farm-bill hearing.

Also this summer, a former engineer posted a 10-minute video asserting that a major defense contractor for which he had worked had left uncorrected what he viewed as security flaws in a number of refurbished Coast Guard vessels.

The real attraction of YouTube, like other Internet media, is "its ability to be unquantifiable, at least for now," says Chris Garvin, a professor in the College of Media and Communication (CMAC) at The University of the Arts in Philadelphia, who was interviewed before the deal. "That is the very reason the young FYI (Free Youth Internet) types are drawn to it," he wrote in an e-mail. "It is the ultimate outsider!"

It also aligns with a big-media metamorphosis. YouTube had aggressively pursued alliances – with NBC, Warner Music, Cingular, and Fox – aimed at fending off inevitable attempts to sue YouTube over issues that surround the posting of copyrighted music and video. Under Google it has already announced additional deals with Sony, Universal, and CBS.

"YouTube's success is one part media savvy, one part consequence of digital culture," says Howley. "[It] has charted a course that addresses the changing needs and preferences of big-media companies and media audiences alike."

Distribution has long been a big challenge for digital auteurs. "YouTube addresses this problem in a dramatic fashion," Howley says. At the same time, he adds, traditional producers of television programming are eager to make their content available online while retaining control over copyright and ad revenue.

Recalling Napster's experience with the recording industry, he says, YouTube "deftly walked the fine line between encouraging file-sharing among a growing user population and 'piracy'...."

The importance of this media convergence escapes no one. Ms. Salzman recalls the buzz that YouTube generated at the Cannes Advertising Festival this past June.

"Twelve thousand advertising-industry executives were talking it up," she says, "even heading to their rooms and computers to see it and experience it." It's not hard to imagine that they're talking now.