How YouTube's Global Platform Is Redefining the Entertainment Business

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Star Maker: Kamangar loves that YouTube is creating the stars of tomorrow-and that advertisers want in. | Photograph by Robyn Twomey

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Discovery Network: Stewart's goal is to make sure there's a flood of personalized content waiting for users every time they visit YouTube. | Photograph by Robyn Twomey

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Double Rainbow

Salar Kamangar floats unnoticed through YouTube's sprawling San Bruno, California, offices dressed in a navy blue hooded sweater and jeans, laptop cocked on his hip. he might as well be just another anonymous, nomadic programmer rather than YouTube's newly named CEO.

The exceedingly shy 34-year-old escorts me into a corner office filled with a cornucopia of Silicon Valley souvenirs, including hundreds of conference badges and, naturally, a Segway. "None of this is mine," Kamangar tells me. The office belongs to YouTube founders Chad Hurley and Steve Chen, even though neither technically works there anymore. Kamangar's own desk is a naked cubicle right outside. Jeff Zucker he isn't.

Sitting stiffly on Hurley's tan couch, Kamangar has a nervous demeanor, which only begins to melt after I accept his offer to take a spin through his favorite YouTube channels. "This is pretty funny. Have you seen this before?" he asks, sounding almost like a teenager. He props his worn Lenovo on his lap. "It's Indian pole gymnastics," which is exactly what it sounds like. With his eyes glued to the screen, he shows me vintage footage of bluegrass flatpicker Doc Watson; the fan-created Lord of the Rings prequel "The Hunt for Gollum," which, he tells me, has been mistaken for a Peter Jackson flick; and Sal Khan, the young hedge-fund manager who ditched his career to become the most prolific math instructor on the web and whose audience, says Kamangar, surpasses those for recorded Stanford and MIT lectures. Kamangar's tour is a peek into a side of himself that he doesn't show the public, even if some of the videos are the kind of baseline entertainment that has made YouTube beloved by audiences but infamous to advertisers. (I mean, seriously: Gymnasts flinging themselves onto a pole is a few steps above talking-cat voyeurism.)

Since YouTube's earliest days, Kamangar has envisioned the site's transformational potential. Unknown to many, he was the driving force behind Google's acquisition of YouTube for $1.65 billion in 2006, less than 20 months after Hurley, Chen, and Jawed Karim registered the domain youtube.com. Google's youngest VP at the time, Kamangar ran Google Apps, including Google Video. "As quickly as Google Video was going, we realized it wasn't that likely to catch up with YouTube," he says. He felt that while Google Video obsessed over comprehensiveness, YouTube's founders made the smarter bet of cultivating its vibrant community.

Despite YouTube's issues with copyright infringement and a fuzzy business model, "we realized that YouTube is a rocket ship and that this is an incredibly big space. I started agitating for it," Kamangar says. "I was the most passionate voice for acquiring YouTube: 'The price tag seems really high, but it is going to be worth it.' "

Ever since, the sharpies and know-it-alls have been highly skeptical that YouTube would ever merit its exorbitant cost (which, in the wake of Google's $6 billion offer for coupon service Groupon, doesn't seem all that expensive anymore). The conventional wisdom has been to lampoon YouTube as "Google's folly," an earnings millstone that becomes more expensive to operate every time a new video is uploaded, a "Technicolor cataract of skateboarding dogs, lip-synching college students, political punditry, and porn," as one writer on Henry Blodget's Business Insider site characterized it in 2009.

Kamangar joined YouTube in the fall of 2008 to co-lead the operation along with founder Hurley (who decamped last October, paving the way for Kamangar's promotion). Since then, YouTube has accelerated its momentum as the world's largest video platform. Its monthly global audience has mushroomed from 344 million unique users to 500 million. It has relentlessly experimented with new revenue models, such as creating branded channels and charging advertisers only when viewers actually watch an ad; nurtured a new generation of producers that are building huge audiences by eschewing traditional Hollywood fare; and ushered the YouTube experience onto every screen, particularly TVs.

All of these efforts are translating into more and more money. Google does not break out specific numbers for YouTube, but financial analysts who cover the company estimate that YouTube's revenue has grown from somewhere between $100 million and $250 million in 2008 to just shy of $1 billion in 2010. Google has hinted that profitability is nigh. A company spokesperson would only say that revenue has increased more than sevenfold since 2007.

And yet, the skeptics persist. They believe that YouTube still needs more Hollywood content if it is to compete with Hulu and Netflix -- services that YouTube dwarfs in size and global scope. "It needs to make deals with more TV networks and studios," says David Hallerman, principal analyst at eMarketer.