This fall, Susan Wojcicki,
the chief executive of YouTube, appeared on a panel at Vanity Fair’s inaugural
technology conference in San Francisco. Sitting on the same stage at the Yerba
Buena Center for the Arts where Steve Jobs once introduced the iPad to the
world, she discussed the future of the media with Richard Plepler, the chief
executive of HBO. (Picture:
At
one point, the moderator asked Ms. Wojcicki if she thought cable television
would still be around in 10 years. She paused for a moment before answering, with
a bit of a sly smile, “Maybe.” The crowd laughed, even though just about
everyone in the packed auditorium knew she was only half-joking.
If cable TV is gone in a decade, Ms. Wojcicki and the global
digital video empire over which she presides will be one of the main causes.
YouTube, founded in 2005 as a do-it-yourself platform for video hobbyists — its
original motto was “Broadcast Yourself” — now produces more hit programming
than any Hollywood studio.
Smosh, a
pair of 20-something lip-syncing comedians, have roughly 30 million subscribers
to their various YouTube channels. PewDiePie, a
24-year-old Swede who provides humorous commentary while he plays video games,
has a following of similar size. The list goes on and on. For the sake of
perspective, successful network television shows like “NCIS: New Orleans” or
“The Big Bang Theory” average a little more than half that in weekly
viewership. The 46-year-old Ms. Wojcicki — who will soon give birth to her
fifth child — has quietly become one of the most powerful media executives in
the world.
It
wasn’t so many years ago that the entertainment establishment thought it might
be able to kill off YouTube with copyright lawsuits. Now agencies like United
Talent and William Morris Endeavor are scrambling to sign up the site’s native
stars, and prominent studios are paying huge sums to acquire companies that bundle
together YouTube channels. Last year, DreamWorks Animation bought one such
bundler, AwesomenessTV, for $33 million upfront. (It’s already looking like a
bargain: This month, DreamWorks solda 25 percent stake in Awesomeness at a valuation nearly
10 times that.) In March, the Walt Disney Company paid $500
million for Maker Studios, a different company in the same business.
Every
day, one billion people around the world watch more than 300 million hours of
videos on YouTube. In November, 83 percent of Internet users in the United
States watched a video on YouTube, according to comScore.
The YouTube stars Smosh, a pair of 20-something lip-syncing comedians, have roughly 30 million subscribers to their various YouTube channels.
Yet for all of its influence as a cultural force,
YouTube is still finding its way as an economic one. Viewers may be migrating
online in droves from traditional television, but the advertising dollars have
not yet followed. The marketing research company eMarketer estimates that
YouTube will log about $1.13 billion in ad revenue in 2014, a small fraction of
the $200 billion global TV advertising market. CBS, for instance, brought in
nearly $9 billion last year.
It’s not that corporations aren’t eager to
advertise online; they’re desperate to reach the younger demographic that
chooses digital video over cable or broadcast TV. But advertising on YouTube
isn’t like advertising on television. Subscribers don’t translate neatly into
viewers. Airtime on TV is finite. Airtime on YouTube is effectively unlimited —
300 hours of new content are uploaded to the site every minute — which suppresses
the value of ads across the platform.
Above all, the quality of most YouTube programming
is too unpolished to draw big investments from many blue-chip advertisers.
“Despite YouTube’s size, a tiny fraction of it is what we call ‘TV
replaceable,’ content where we would take TV money and swap it over to
YouTube,” said one ad executive who spoke on condition of anonymity because he
does business with YouTube. “It’s a funny thing to be sitting on top of
something this massive and not really be able to totally control what you’re
selling advertising against.”
YouTube creators, meanwhile, complain that the
company takes too much of the ad revenue — as much as 49 percent — and does too
little to market and promote its stars, which makes it hard for them to leverage
their celebrity. The danger for YouTube is that it will become a kind of farm
system, developing talent that is picked off by other distributors that are
willing to make bigger investments in it. Netflix has already been trying to
lure away YouTube creators, as has Vessel, a web video start-up founded by a
former chief executive of Hulu.
YouTube recently ran an ad campaign for its stars including Rosanna Pansino, at far right, who hosts a popular baking show.
Right now, YouTube’s red-and-white “play” button is
everywhere; the site dominates online video. But competition for eyes and
advertisers is coming from pretty much every direction. Not only are
traditional TV networks like CBS and HBO moving content online, but digital
media like Instagram and Twitter are increasing their video offerings. So is
Facebook, with its vast numbers of users and global presence. Some of YouTube’s
most popular channels feature people playing video games; to protect this
franchise, Google, YouTube’s owner, recently tried to buy Twitch,
an enormously successful video game streaming site. It was outbid by Amazon.
These are some of the known quantities. There are
also unknown ones: the legions of young, tech-knowledgeable entrepreneurs who
were raised on YouTube and think they can build something better. It’s worth
remembering that the idea for YouTube was hatched at a dinner party in San
Francisco less than 10 years ago. Just as abruptly as it changed how we watch
TV, it could become the victim of disruption itself.
It’s Ms. Wojcicki’s job to make sure that doesn’t
happen.
A Daughter of Silicon Valley
Not long after the Vanity Fair conference, I
visited Ms. Wojcicki on a brisk, sunny November day in Northern California.
YouTube’s headquarters are across the street from a Carl’s Jr. in San Bruno,
about halfway between San Francisco and Silicon Valley. The space is open and
airy, and filled with predictable college-dorm-style touches — putting green,
foosball table — as well as a steep, triple-chuted red slide. “No children or
guests,” the sign next to it warns.
Ms. Wojcicki runs a media company that has been
valued at $40 billion, yet her office has none of the expected trappings — no
bronze statuettes or pictures of her posing with movie stars. On her bookshelf
is a photograph of her oldest son’s recent bar mitzvah and a small box filled
with her various business cards from Google. (She was employee No. 16.) She
flipped through the cards nostalgically, remembering an early task as the
company’s first marketing manager: redesigning Google’s logo. (She changed the
typeface and removed an exclamation point.)
Nor is there any media-mogul swagger about her.
During our conversations, she didn’t hold forth on the changing nature of
entertainment or lay out a bold vision for YouTube’s future. She volunteered
that she was still learning about content and, for that matter, getting a
handle on YouTube’s place in the entertainment ecosystem.
“I didn’t really get how different a medium this
was until I got here,” Ms. Wojcicki said. She was seated on her office couch,
flanked by red throw pillows embroidered with YouTube “play” buttons and
wearing a maternity shirt and jeans. As she spoke, music drifted up from the
eucalyptus-lined courtyard beneath her window, where hundreds of YouTube
employees were drinking microbrew ale and eating sliders at their weekly Friday
afternoon social.
Silicon Valley legend has it that Google was
started in Ms. Wojcicki’s garage in Menlo Park in 1997. This is not the whole
truth. The company’s founders, Larry Page and Sergey Brin, also rented three of
her four bedrooms for their start-up. It was the first home for Ms. Wojcicki
and her husband, but according to the words scrawled across a whiteboard
inside, it was also “Google Worldwide Headquarters.” Their monthly rent of
$1,700 gave Google’s early employees access to the hot tub and washer-dryer,
too.
Ms. Wojcicki was raised in Silicon Valley before it
was Silicon Valley, the oldest of three girls who would all go on to
high-powered careers. Her middle sister, Janet, is a medical anthropologist at
the University of California, San Francisco, who has studied obesity in the
United States and the decriminalization of prostitution in South Africa. Her
youngest sister, Anne, is the chief executive of 23andMe, a biotech company
near Google headquarters that specializes in genetic testing. (Anne also
married Mr. Brin, though they are now separated.)
The sisters grew up on the campus at Stanford,
where their father, Stanley, taught physics. A next-door neighbor was George
Dantzig, the mathematician who invented a widely used algorithm known as the
simplex method. Many of their family’s friends were scientists.
“Part of what makes us successful in this valley is
that we’re used to people who are superanalytical and not supersocial,” Anne
told me one morning at her office in Mountain View. “Our childhood was spent
with people who challenged Einstein.” (Picture: A Wojcicki family photograph from 1981. Standing at the back are Susan and her sister Janet. In front, from left, are Anne; their father, Stanley; and mother, Esther.)
Their mother, Esther, taught English and journalism
at Palo Alto High School. After winning a state grant for several early
Macintosh computers in 1987, she started putting out one of the country’s first
computerized high school newspapers. “I have to admit that I had no idea how to
even turn them on when they arrived,” Esther told me.
Susan was hard-working and goal-oriented. She went
to Harvard, concentrating on history and literature. “We didn’t know anything
outside of academia,” Anne told me. " When she graduated, we were all
like: ‘What are you going to do? You’re going to get a job that you have to go
to every day? That’s terrifying.' ”
Ms. Wojcicki didn’t really know what she was going
to do herself. She settled on technology after a stint as a photographer at an
English-language newspaper in India — she came home in a sari for Anne’s high
school graduation — and a pair of graduate degrees in business and economics.
She was working at Intel when Mr. Page and Mr. Brin
offered her a job. It wasn’t an easy decision. Ms. Wojcicki was pregnant with
her first child and still paying off her business school loans. She was nothing
if not sensible about money. Growing up, frugality had been a kind of family
religion. When the Wojcickis went out to Sizzler for dinner, they would get
three all-you-can-eat meals for the five of them.
Google had no revenue, and a small, predominantly
male staff, most of whom had just graduated from college. Mr. Page and Mr. Brin
hadn’t even thought about the company’s maternity-leave policy until Ms.
Wojcicki asked.
There was financial upside, at least. “If it works
out, I could make a million dollars,” Ms. Wojcicki told Anne, whose jaw dropped
at the number. Susan, of course, is now worth hundreds of millions. “The
Internet was happening, it was happening all around me, and I wanted to be part
of it,” Ms. Wojcicki said. “I could tell that Google was going to go somewhere.
I wasn’t sure where, but I could tell that it was going to go someplace
interesting.”
Ms. Wojcicki became Google’s first mother and most
senior female executive. She helped recruit and train Sheryl Sandberg, who is
now the chief operating officer of Facebook and the author of “Lean In,” the
manifesto on women in the workplace. “When I was there, she was the working
mother at Google,” Ms. Sandberg told me. “She’s the one who showed me it could
be possible.”
As both the company and her family continued to
expand, Ms. Wojcicki almost accidentally created a model for female tech
executives like Ms. Sandberg to follow. Ms. Wojcicki is home for dinner with
her family almost every night — her husband, Dennis Troper, is a director at
Google — and she generally doesn’t answer weekend emails until 9 p.m. on
Sundays. “Productivity and success in this industry are based a lot of the time
on insights and prioritization and actually on doing the right thing, not
necessarily on 15-hour work days,” she said. “Google is very results-oriented.”
A Video Epiphany
When Ms. Wojcicki was named chief executive of
YouTube in February, succeeding Salar Kamangar (Google employee No. 9), it was
a kind of homecoming. In 2005, she was a leader of Google’s first foray into
video, a short-lived product that came to be known as Google Video. It seemed
to Ms. Wojcicki that people might want to watch videos on their computers, but
she wasn’t sure what sorts of videos would appeal to them. After a little
experimentation at Google Video, she figured it out. The well-known TV clips
that she licensed drove just a fraction of the traffic of a video uploaded by
some college students in China of themselves singing and dancing in their dorm
room to the Backstreet Boys.
“That for me was the insight that this market
really does matter,” Ms. Wojcicki said. “People want to see other people all
over the world. They want to share experiences. They love their TV and they
love their shows, but they’re also interested in seeing new and different
creators and new and different types of video.”
The only problem was that Google Video was getting
crushed by a competing start-up, and Ms. Wojcicki thought it was too late to
catch up. So she encouraged Mr. Page and Mr. Brin to scrap Google Video and buy
that start-up, YouTube, for $1.65 billion.
A 2002 meeting of early Google leaders, from left, the chairman Eric E. Schmidt; the co-founders Larry Page and Sergey Brin; Susan Wojcicki, now YouTube’s C.E.O.; and Marissa Mayer, who has become Yahoo’s chief.
It was a steep price — YouTube had no revenue and was embroiled
in copyright disputes — and the deal was widely criticized, even ridiculed, at
the time. But eight years later, YouTube has become central to its parent
company’s financial future. Google depends heavily on the ad revenue from its
search engine, but that ad growth has begun to slow. People are spending more
and more time on their mobile phones, which thus far haven’t proved very
ad-friendly. YouTube’s extraordinary reach and the booming popularity of online
video make it an obvious candidate to help offset these declines.
At
this point in YouTube’s evolution, it might have made sense for Mr. Page to
bring in a seasoned media executive to run the company. But Google typically
prefers to recruit its leaders from inside. And Ms. Wojcicki had some relevant
experience: She had helped build Google’s $50 billion-plus ad business.
“YouTube is one of the most used media assets in the world and one of the most
undermonetized media assets in the world,” Mary Meeker, a Silicon Valley
venture capitalist, told me. “That’s exactly what the Google search bar was
when Susan first focused on advertising.”
Video
advertising, though, is a very different proposition. Advertising on Google is
the modern-day equivalent of buying space in the Yellow Pages. Producing
digital video ads requires a much bigger investment, and companies expect their
ads to be placed strategically against high-quality and appropriate content.
Those
who have worked with Ms. Wojcicki describe her less as a visionary thinker than
an open-minded and analytical one. There’s an argument to be made that her
understated manner could be an asset as she makes her way in a rapidly
changing, competitive industry where people are naturally wary of one another.
“I think she’s somewhat nonthreatening,” Ms. Meeker said, “and I mean that in a
good way.”
Betting on Its Own Stars
Bethany Mota has nearly eight million subscribers for her fashion and beauty channel.
The day I visited YouTube, in November, the company
had just unveiled a new subscription-music service. YouTube is the world’s most
popular music platform; someone, somewhere has uploaded just about every song
imaginable to the site. And all of them are available for free streaming at a
click.
But the company decided that there was a market for
a premium service, so it rolled out Music Key. For $8 a month, YouTube will
provide users with better-quality audio and remove advertising from music
videos. The new service was at least partly a response to pressure from a music
industry that had grown frustrated with YouTube’s stingy royalty payment
structure. But it also represents a potential new source of revenue for
YouTube. Plans for Music Key were already underway when Ms. Wojcicki arrived at
YouTube, but she describes them as a “first step” toward more subscription
services without ads.
The subscription model, like everything YouTube
does, is an experiment. Despite its size and dominance, YouTube remains a work
in progress. For all of the countless hours of programming created for the
site, YouTube has yet to produce a truly premium show. It may be hard to
imagine something like Netflix’s “House of Cards” or Amazon’s “Transparent” on
YouTube, but if the company wants to generate more revenue, it’s going to need
more professional content.
Toward that end, Ms. Wojcicki is awarding
development deals to creators. YouTube has been down this road before. A couple
of years ago, it invested more than $200 million in 100 new channels; a number
featured mainstream celebrities like Shaquille O’Neal and Ashton Kutcher.
YouTube calls the effort a success, though the consensus in the entertainment
industry is that it failed to create any real breakout channels.
Either way, the conclusion was that YouTube is its
own entertainment universe with a unique breed of programming and talent. This
time, the company will invest only in native YouTubers, spending an undisclosed
amount to help cover the production and marketing costs for a number of new
shows. “We want to invest in people who understand the environment,” Ms.
Wojcicki said.
These investments are part of a broader effort to
quell the long-simmering revolt among YouTube creators. “They have the
recognition so they’re kind of halfway there,” Ms. Wojcicki said, “but how do
we give them the same options or the same economics that they would be able to
get in other places?”
The goal is to bridge the gap between Silicon Valley and
Hollywood, to turn YouTube stars into just plain stars. To help get them there,
Ms. Wojcicki has led a major marketing push — YouTube’s first — with
billboards, magazine ads and even traditional TV commercials for some of its
most popular celebrities. She has also been wooing potential advertisers.
During her first few months on the job, she met with representatives of a
variety of major companies, including PepsiCo, L’Oréal and Unilever. (Picture:
In
the past, when advertisers bought packages on YouTube, they never knew quite
where their ads would appear — a big problem, given the wide range of material
on the site. Ms. Wojcicki is trying to solve that in part with a new product
called Google Preferred, which allows companies to target the site’s
best-performing content across a variety of categories. Early signs have been
encouraging: YouTube’s anticipated advertising revenue for 2014 is up 40
percent from last year’s. The net effect of these initiatives is that YouTube
is doubling down on its biggest stars. “That’s always been my struggle with
them,” said Brian Robbins, the founder of AwesomenessTV. “Look, if you guys
want to get into this business, you have to make bets and you have to market
those bets and you have to get lucky. That’s show business, and it’s exactly
the opposite of their business: ‘We don’t promote anything; we let the
community decide.' ”
It’s a logical move for the company, but not without risk. The
power of YouTube is bound up in its grass-roots, democratic identity — in the
possibility that a group of college students in China can upload a goofy video
in their dorm room that will be seen by millions of people all over the world.
YouTube’s multitude of smaller creators and hobbyists may not be attracting
advertising dollars to the site, but, taken together, they give the site its
defining feature: its towering scale. Without them, YouTube would no longer be
YouTube.
While
I was in San Bruno, I sat in on a meeting in a small conference room about the
beta version of Music Key. A group of marketing executives and engineers — a
few with “play” button stickers on their laptops — were gathered around a
table, listening to a run-through of the early numbers: how many sign-up
requests, how many mentions on social media, how much news coverage. Ms.
Wojcicki was seated at the head of the table, not so much directing the
conversation as guiding it with questions and suggestions.
Most
of the talk revolved around the feedback YouTube had received from its partners
and users and the changes the company might make to the service in response. It
struck me as unusual that a company would introduce such a major product with
so much fanfare, then immediately begin discussing how to tinker with it.
I
asked Ms. Wojcicki about it later, after a party honoring YouTube employees who
were promoted in recent months. “Whenever we launch a product, there’s always
something we didn’t expect,” she said. “Things are always changing. Part of
being successful here is being comfortable with not knowing what’s going to
happen.”
