Outside of the Jacob Javits Convention Center on New York’s far West Side—where YouTube is hosting the Brandcast, its annual presentation to advertisers—fans crush together behind barriers. Young and mostly female, they hover giddily on this chilly May evening, angling for a glimpse of the YouTube stars who are making their way down a red carpet toward the entrance. One fan clutches a sign that reads I’M COLD, BUT IT’S WORTH IT.
Inside, the cavernous hall is filling with 2,800 ad-industry insiders, video creators, and members of the press who will soon sip wine and nibble popcorn as the streaming-video giant debuts a slate of original series. They will be entertained by indefatigable Late Late Show host James Corden, who will perform a splashy number (“YouTube: The Musical”) alongside dancing T. rexes and a Pikachu. Katy Perry—her hair in a new blond buzz cut that seems to leave much of the audience unable to identify her until prompted by Corden—will tout her upcoming live-streamed special and return to end the event with a concert.
But even the surprise appearance of the world’s most successful comedian, Kevin Hart—the star of an upcoming funny fitness show on YouTube—isn’t the evening’s most memorable moment. That comes when YouTube CEO Susan Wojcicki stands alone onstage in a purple dress, issuing something you normally wouldn’t expect to hear at a bash like this: an apology.
For the previous two months, YouTube had been beset by controversy in the wake of newspaper investigations that discovered brand advertising being paired with videos featuring terrorist and white-supremacist rhetoric (and thereby funding their creators). AT&T, Johnson & Johnson, L’Oréal, and reportedly as many as 250 other advertisers suspended campaigns. YouTube was able to quiet the unrest by installing new machine-learning technology to better identify questionable content—it said it was able to realize a 500% improvement within weeks—and offering marketers more finely grained controls for specifying where their messages will appear. It also allowed third-party firms to audit where clients’ ads show up.
Even so, it’s clear that marketers expect humility from YouTube about the whole affair, and that’s what Wojcicki gives them. “We apologize for letting some of you down,” she tells the crowd calmly, in an even tone that sounds natural, genuine, and not overly rehearsed.
The ad-placement kerfuffle was intensely embarrassing for YouTube, but it nonetheless reinforces how different the service remains from traditional television—which is the other part of Wojcicki’s message to the audience tonight. “YouTube is not TV, and we never will be,” she says. From Wojcicki’s perspective, the differences are, in fact, advantages.
TV in its conventional form is among the most micromanaged, focus-grouped businesses on the planet. YouTube, by contrast, is varied and authentic, even slightly anarchic. “We really value the role that YouTube plays in the ecosystem for freedom of expression,” Wojcicki tells me during a conversation a week before Brandcast. “We take that incredibly seriously. We want to make sure we’re enabling all these voices to be heard.” Old-school TV viewing still boasts an awesome 1.25 billion hours a day of watch time in the United States, but Wojcicki states that 18- to 49-year-olds, TV’s most ad-friendly demographic, watch more YouTube on mobile devices during prime time than they do any broadcast or cable network. The service also recently passed 1 billion hours of daily watch time worldwide, prompting Netflix CEO Reed Hastings to confess to pangs of “YouTube envy” during an earnings call in late April.
YouTube sits at the white-hot center of the global evolution of the entertainment and advertising industries, at the precise moment that the boom in mobile video consumption affects how half a trillion dollars per year is divvied up among TV, digital, and other media. For YouTube’s owner, Google—and Google’s own parent company, Alphabet—the stakes are enormous. It wants YouTube to dominate like Google does with display ads and search marketing.
Research firm eMarketer estimates that YouTube netted approximately $5.6 billion worth of advertising sales in 2016, only 9% of Google’s total but up 30% over the previous year. Alphabet doesn’t disclose YouTube’s financial results (including whether it’s turning a profit) but regularly cites its contribution to revenue growth—something it did during its investor call for the first quarter of 2017, dispelling analysts’ warnings that the advertiser backlash could drag down Alphabet’s performance.
Those who have worked with Wojcicki for years stress both her fierce determination and fundamental decency. “She’s got an incredible balance,” says legendary venture capitalist John Doerr, who first met Wojcicki at an early Google party held in her garage, which she famously rented to Larry Page and Sergey Brin as the company’s first headquarters even before she became an employee. “She’s aggressive. She’s calm.” Wojcicki is “as nice as she seems,” adds YouTube VP of engineering Scott Silver, who first teamed with her on Google ads, “but she doesn’t ever give up.”
Wojcicki’s boss, Google CEO Sundar Pichai, simply says that she “has always been someone who could do pretty much anything.” Since joining Google in 1999, she helped create AdWords, the system for auctioning off space for text ads that turned Google into one of history’s most efficient profit machines; she grew the company’s advertising efforts from $400 million in 2002 to $55 billion in 2013; and she had the foresight and persistence to persuade Google to acquire YouTube in 2006 for the then-controversial sum of $1.65 billion.
Wojcicki was also instrumental in Google’s 2007 buyout of DoubleClick for $3.1 billion, the gambit that got the company into the display-advertising business. “She was the one who pounded her fist to get that deal done,” remembers Neal Mohan, who joined Google as part of the transaction, worked with Wojcicki on ads, and reunited with her in 2015 as YouTube’s product chief.
Even at its current size, Wojcicki tends to talk about YouTube as if it’s just getting started. “Our goal, really, is to take this amazing technology, continue to grow it, make it available to all people around the globe, across all platforms, and for all creators,” she tells me. She’s so matter-of-fact about it, one can lose sight of the audacity of her ambition. She pauses for a beat, then allows, “It’s a big mission.”
A Culture Within A Culture
It’s a Friday afternoon in March at YouTube’s headquarters in San Bruno, California, and Wojcicki is hosting this week’s installment of YouTube Fridays, the company’s all-hands meeting, in an assembly space off the lobby done up in YouTube red. Standing behind a lectern bathed in light, she helps direct the event. Ten new recruits—”NewTubers”—get their official welcome, and there are presentations by staffers including an engineer who demonstrates how YouTube uses Google Brain AI technology to predict what a user will want to watch next. In addition, there are, naturally, videos, including a new Samsung commercial featuring YouTube star Casey Neistat, and the whole thing segues into a concert by Matt Jaffe and the Distractions, a local band with an active YouTube presence.
Throughout, Wojcicki is a low-key presence, but a compelling one. With charges of sexual harassment at Uber in the news, she urges employees to report any untoward incidents at YouTube to whoever they feel most at ease speaking with, up to and including her. But she also wryly shares her account of attending the Oscars for the first time the previous weekend (as a guest of producer Harvey Weinstein), which culminated in her guiltily eating a cheeseburger at the Vanity Fair after-party–even though she’s a vegetarian.
Wojcicki instituted the weekly YTF ritual shortly after arriving as CEO in 2014, hoping to encourage the company—already the rare startup that wasn’t screwed up by the big enterprise that acquired it—to become even truer to itself. “It’s a challenge to build a brand within a company,” she admits. “But I started to think about, ‘How do we kind of take the best of Google, but then have people have identity as a YouTube employee?'”
YouTube, like Google, has a culture shaped by and for the engineers who code its creations. But it also serves a vibrant community of creators and media companies. To really understand their concerns, Wojcicki says, “we need to learn how to think like an artist. Like a publishing house. Like a label.” This is why videos are featured at YouTube Fridays. It’s why the meeting ends with a concert. It might even be why Wojcicki, a mother of five who does not generally seek the spotlight, took the time to attend the Oscars. “That linkage of how we are as a product and how we are as a culture is special,” says Emily Nishi, YouTube’s director of people operations.
Forging deeper bonds with the creative community definitely helps explain why, in 2015, Wojcicki recruited Susanne Daniels to spearhead original content. The veteran network programming executive can take credit for developing such youth-friendly programs as Buffy the Vampire Slayer, Dawson’s Creek, and MTV’s Broke A$$ Game Show.
Before Daniels’s arrival, YouTube’s history of funding its own shows was checkered at best. In 2011, the company spent $150 million to commission channels from A-listers like Madonna, Tony Hawk, Deepak Chopra, and Jay Z. All of them fizzled. In a cruel irony, at the same time that it was throwing money around Hollywood six years ago, two sketch-comedy performers, Abbi Jacobson and Ilana Glazer, were creating a series of micro-comedies on the service; Comedy Central later hired the duo to bring Broad City to its network, where its fourth season will premiere in August.
Daniels has been intent on not letting homegrown talent get away. She’s developed vehicles for YouTubers such as comedian/rapper Lilly “IISuperwomanII” Singh and the popular Korean pop group Big Bang. These series, movies, and documentaries run on YouTube’s Netflix-ish Red service, which charges users $9.99 a month for this premium content (and also includes ad-free viewing). In 2017, 30 new series and movies will debut on Red.
This experience of “fishing where the fish are,” as Daniels puts it, also informs her new initiative funding original programming for YouTube’s ad-supported service. There will be shows from native performers such as comedians Rhett McLaughlin and Link Neal, whose Good Mythical Morning is already YouTube’s most popular daily show with nearly 100 million views a month, which will now expand to a 22-minute format. But the stars that Daniels and company have recruited are also already proven YouTube draws. Kevin Hart’s stand-up clips and late-night appearances garner high traffic, and Ellen DeGeneres, who will produce a behind-the-scenes look at her TV program, drives one of YouTube’s top channels, thanks to highlights from her talk show. Katy Perry’s six-year-old “Firework” video is edging in on a billion views, and her upcoming live-streamed album-release special will seek to expand upon the spectacular view-counts for her greatest hits.
Blurring The Line With TV
Part of YouTube’s appeal to mainstream creators is its adoption by a generation of viewers for whom YouTube, Amazon, and Netflix are the new ABC, CBS, and NBC. As James Corden explained at the Brandcast, what makes The Late Late Show work was his epiphany that the program could be divided into highly shareable, fun-size entertainment. “I realized that I didn’t have to make a show for any time slot, because we had the internet,” he told the audience. “And more than that, we had YouTube.”
Corden does this as adroitly as anyone: Adele’s appearance on his “Carpool Karaoke” bit, featuring her renditions of Spice Girls and Nicki Minaj songs, was YouTube’s most viral video of 2016, with more than 155 million views. (By comparison, his TV show has averaged 1.34 million viewers in its 12:37 a.m. time slot this season.) In fact, the late-night wars, the hottest time-slot competition in television, are now effectively being waged on YouTube. Clips from Corden, Jimmy Fallon, Jimmy Kimmel, and Stephen Colbert have been viewed more than 16 billion times in aggregate, according to video-technology company Zefr. “For television networks, what they’ve realized is that fans are watching their content on YouTube whether they’ve programmed it or not,” says Zefr CEO Rich Raddon.
This new reality helped inspire YouTube TV, a $35-a-month streaming service for phones, tablets, PCs, and TVs that offers more than 40 live broadcast and cable channels from the media companies behind ABC, CBS, Fox, and NBC; the same stuff you might be watching on Comcast if you weren’t perusing YouTube videos. Wojcicki unveiled YouTube TV last February at an event at the Los Angeles production studios that it built for creators, located in a 40,000-square-foot former Hughes Aircraft plant that still has a helicopter parked outside the front door. “There’s no question that millennials love great TV content,” she says, teeing up the announcement before a grid of 36 screens that cycle through clips of such mainstays as Modern Family, Keeping Up With the Kardashians, and college basketball. “But what we’ve seen is they don’t want to watch it in the traditional setting. They don’t want to watch it sitting in the living room with their families, waiting for their favorite show to come on. Younger generations want to consume TV the way they’re used to consuming TV content online.” In other words: They want to watch it like YouTube.
When Wojcicki and two of her lieutenants—product chief Mohan and Robert Kyncl, the former Netflix executive who has overseen YouTube’s content and business operations since 2010—spell out the details of the service at the event, they don’t address why YouTube doesn’t have deals with Time Warner (CNN, TBS, and HBO) and Viacom (MTV, Comedy Central). Later, Kyncl says that re-creating a cable lineup was less important than providing something that catered to YouTube fans and carried an attractive price tag. “Our content offering isn’t as complete as the one you can get with your cable or satellite subscription,” he cheerfully concedes when I speak with him in his office, a mini museum of media history featuring such artifacts as a vintage microphone, Beatles LPs, and Snap’s Spectacles. “We think that the older generation will gravitate toward their traditional way of subscribing to TV, and the younger audience will be happy with the offering that we have. That’s my thesis. We’ll see what ends up being the truth.”
YouTube TV launched in April in five cities (New York, Los Angeles, Chicago, San Francisco, and Philadelphia), entering an increasingly crowded market of sub-$70, cable TV–like services delivered via the internet. AT&T/DirecTV, Hulu, Sling, and Sony PlayStation have only slight variations in channel lineup and pricing—and rumors persist that Apple will soon join the competition. YouTube hopes to differentiate itself by creating a better user experience than its rivals’, with features like a cloud DVR with unlimited storage and a search engine that’s smart enough to understand not just show titles but also concepts such as “history” and “superheroes.” In its first seven days, the mobile data-analytics company Apptopia reported that 147,300 people downloaded the YouTube TV app, a relatively promising start if they’ve actually gone on to sign up. (Sling, which has been in the market for two years, reportedly has more than 1 million subscribers.)
For now, YouTube TV is an intriguing rough draft. Although the service mixes conventional TV programming with YouTube Originals available on the Red subscription service, such as Lazer Team and other youth-oriented movies and series, it’s barely begun to integrate YouTube’s virtually infinite cache of entertainment, news, and how-to information, much of which could satiate the desire for any missing cable channels. In addition, its ad experience still mirrors what you’d see on cable TV rather than taking advantage of YouTube’s signature user control and variety of commercial formats. Indeed, the networks are currently controlling the ads, not YouTube. “We obviously have a lot of experience with innovative ad products,” says Kyncl. “We can bring that whenever our partners are ready.” Wojcicki points out that YouTube itself reflects more than a decade of learning and technological advances. YouTube TV just needs time to develop.
Ask Wojcicki about YouTube’s attitude toward monetizing its business, and she sounds like a startup founder. “We’re focused on getting the users to YouTube and happy with the experience, and keeping that growing, with the belief that the advertising will continue to come,” she says. “Because advertisers go where the users are.”
Given her central role in bolstering Google’s overall ad revenue, though, she has put a lot of effort into making ads both more effective for marketers and appealing to users. That’s included a migration away from formats that feel like, well, TV commercials in favor of ad units that are unique to YouTube, including six-second “bumper” spots. “It’s amazing the way you can tell a brand story in a short amount of time,” Wojcicki says. The service plans to phase out unskippable 30-second ads by 2018. These moves represent yet another chapter in YouTube’s history of ad innovation, which began in 2010 when the company started to let viewers bypass many spots after the first five seconds and only charge advertisers when someone didn’t fast-forward.
No YouTube ad initiative has been more important to the company than Google Preferred. Launched in the spring of 2014, three months after Wojcicki’s arrival as CEO, the program allows companies to target ads to the top 5% of YouTube videos in categories such as beauty and fashion, music, and comedy, based on a proprietary algorithm involving total audience and passion level among viewers. It’s engineered to give big marketers brand-safe content that speaks, especially, to 18- to 34-year-olds, allowing YouTube to compete for TV dollars (and charge more like networks too).
Thanks to Google Preferred, during last year’s upfronts—the ad-buying season when networks presold $18.6 billion worth of commercials—YouTube was able to “negotiate side by side with the TV networks rather than being dealt with after the TV discussions were done,” says Tara Walpert Levy, Google’s VP of agency and media solutions. “That speaks to the breakdown of the silos between TV and [digital] video.”
This erosion of boundaries has implications for the entire advertising industry. As 2016’s upfronts approached, media-buying firm Magna Global, part of advertising giant IPG, agreed to spend $250 million of its clients’ money over five quarters on YouTube ads. “The initial reaction was one of disbelief on the part of some of our TV partners,” recalls David Cohen, Magna’s CEO for North America. “They thought it was negotiation [tactics] as opposed to real and substantive. When we went to the upfronts and actually had less money to spend, it was clear. It made networks hungrier for the business.”
That was 2016.
The 2017 upfronts took place less than three months after YouTube’s ad-positioning woes began, reminding marketers that embracing YouTube isn’t as simple as shifting dollars from one budget line to another. Google Preferred was designed specifically to shield advertisers from controversy, and yet a renegade creator like PewDiePie—the YouTube superstar whose failed comedy sketch featuring two guys carrying a sign that read DEATH TO ALL JEWS initiated the trouble—presents risks that simply don’t exist on conventional TV.
“These types of issues can challenge the underlying business model of a YouTube,” says Jason Kint, CEO of Digital Content Next, an association of online publishers. “Their scale is dependent on commoditization and aggregation, and what brands want is dependent on quality and curation.”
Technology can help YouTube greatly reduce the chances of an ad showing up in proximity to unsavory content, but it can’t make the possibility go away. “Advertisers don’t want one in a thousand or one in ten thousand or one in a million,” says Jim Louderback, a partner at venture-capital firm Social Starts and former CEO of streaming TV network Revision3. “They want one in never. And one in never is tough.”
That said, the ad business overall appreciates that YouTube is neither antiseptic nor bland. Marketers promoting an R-rated horror film, for instance, are far less skittish about the content accompanying their ad than the marketer of baby shampoo. In fact, Rob Norman, chief digital officer at GroupM, the world’s largest media buyer, says that he doesn’t know of any instances of movie studios—among the biggest spenders for both YouTube and TV advertising—pulling campaigns in the wake of the dustup.
Wojcicki, too, emphasizes that there’s nothing binary about the science of matchmaking ads with appropriate videos. “Even advertisers at the same company with different brands are going to have a different perspective about what’s suitable for their brand,” she says, noting that she occasionally hears of a complaint from a marketer about a particular video and can’t figure out the objection simply by watching the offending clip. That’s why a big part of the company’s reaction to its recent controversies has been offering advertisers more finely grained controls for specifying where their messages will show up, enabling an especially cautious brand to steer clear of profanity, for instance.
Although networks such as Fox and NBC have publicly trashed YouTube and its rival Facebook as being too risky for TV dollars, there are signs of recovery: Magna CEO Cohen notes that “the vast majority of clients that had paused Google activity are now back and live.” Johnson & Johnson, one of the highest-profile brands to have sidelined its YouTube campaigns, is returning to Google Preferred. Just as important, it also grabbed the sponsorship of Best.Cover.Ever., a new YouTube singing competition hosted by Ludacris and created by Ryan Seacrest’s production company. “We knew immediately that we wanted to be the exclusive sponsor,” Jeff B. Smith, North America company group chairman, says in a statement to Fast Company. If Ryan Seacrest–produced content isn’t brand-safe, nothing is.
The Creative Treadmill
The ad controversy has obscured a longer-running, more intractable issue that Wojcicki has yet to solve: keeping the service’s community of creators happy. This constituency has chafed at a number of real and perceived slights but now fears burning out in the effort to keep pace with the Hollywood talent it’s increasingly competing against for viewers’ (and YouTube’s) attention.
YouTube’s focus on watch time has paid off in that mind-bending billion-hours-a-day stat, but it also puts pressure on creators. “The struggle has always been how do you get from 15 minutes a day per viewer to 60 minutes a day, and what has to change about the content you’re offering to get there?” says venture capitalist Hunter Walk, who worked at YouTube as director of product management from 2007-2013. “It’s not just getting people to watch four times more of the content that was on YouTube in 2012.”
The company “wants longer videos, more videos, more frequency,” says Social Starts’ Louderback. YouTube’s algorithm is rewarding that kind of content, particularly if viewers respond to it. Consequently, some high-profile YouTubers fret that the service is turning against them. Last December, Matthew Patrick, whose gaming channel has more than 8 million subscribers, funneled his angst into—appropriately enough—a YouTube video. “Practically none of YouTube’s organically grown creators can stay on this treadmill 365 days a year,” he said in a voice-over. “But you know who can? Large companies with hundreds of employees who are already used to 24-hour news cycles.” While he spoke, an animation showed YouTubers tumbling off a treadmill while anthropomorphized logos for Today, Ellen, The Late Show, and The Tonight Show jogged gamely onward.
YouTube creators sometimes express doubt about the company’s ability to empathize fully with their lot. “I do wish there were more people who had experience as creators working at YouTube,” sighs Hank Green, the YouTube star who founded VidCon, the online video industry’s business conference/fan festival with his brother and video-making partner John. Then again, he adds, “If you can make a living making YouTube videos, that’s what you want to be doing.” With this in mind, Green formed a nonprofit guild for creators last year, to help them help each other.
YouTube’s artistic community has long grumbled about the company taking a reputed 45% of revenue from ads placed on their videos. Now, as the company fiddles with the levers on its platform to reduce the chances of ads showing up where marketers don’t want them to, some good-citizen video uploaders, from news commentators to wrestling fans, have seen their views and revenue fluctuate wildly—an effect they describe as the “adpocalypse.”
“It’s been tough for the creators, too,” Wojcicki acknowledges. While she isn’t budging on YouTube’s share of ad revenue, the company has greatly expanded its support system for creators, with email support available to all and dedicated phone reps for those with 100,000-plus subscribers. “We work really hard to make sure that any creator that comes onto the platform feels like they have a voice and can get answers to the questions that they have,” says Jamie Byrne, YouTube’s director of global creator and enterprise partnerships, who joined the company shortly after Google agreed to acquire it.
YouTube’s efforts to help make creators more successful go far beyond customer service. A new feature called Community allows them to share items other than videos—such as text, GIFs, and polls—with their fans. Wojcicki has also expanded YouTube’s global network of lavishly equipped production facilities. There are currently nine of them, known as YouTube Spaces, located in cities from L.A. to Mumbai, India. Creators with at least 10,000 subscribers (who number in the hundreds of thousands) have free access to sound stages, editing workstations, 360-degree cameras—everything they need to ramp up the ambition and production values of their videos.
YouTube has grown so pervasive and familiar that it’s easy to lose sight of the unique value at its core. Burnie Burns, cofounder of Austin-based Rooster Teeth, a production company with 300-plus staffers that produced the made-for-YouTube sci-fi comedy Lazer Team and its upcoming sequel, still remembers being dumbstruck almost a decade ago, when Rooster Teeth consisted of little more than a handful of friends, by what the service offered: “They completely changed the game in terms of the ability to monetize video with pre-roll advertising. That did not exist earlier.”
“You have all these people whining and complaining,” adds a cappella singer Peter Hollens, who performs popular renditions of songs, from “The Sound of Silence” to “Let It Go,” in harmony with other YouTubers or multiple recordings of himself. “When in the history of mankind have you been able to have free worldwide marketing on a platform?” Not to mention distribution, hosting, and promotion. Hollens isn’t utterly dependent on YouTube ads for his livelihood: Fans make ongoing pledges to pay for his videos via crowdfunding platform Patreon, which he calls “a quintessential part of my growth income.” But without YouTube, he would never have built the following that supports him there. (Patreon was itself cofounded in 2013 by Jack Conte, a popular YouTube musician who struggled to make a living purely through ad revenue; Fan Funding, YouTube’s own donation feature, floundered and was recently replaced by a new attempt called Super Chat.)
Wojcicki insists that she wants to hear what’s on creators’ minds, even when they’re disgruntled, and no matter what the venue. Sometimes they reach out to her directly on Twitter; sometimes one of her kids will watch a video, encounter a gripe, and relay it. A day before Brandcast, she held a summit for creators in New York. “We have to run this delicate ecosystem between the viewers, the creators, and advertisers,” she says.
When I visit her office at Google’s Googleplex headquarters in Mountain View, California (where she works one day a week and really does have a mountain view), even before she’s shared her perspective on creators and markets, Wojcicki doesn’t start our conversation with her perspective on creators or marketers. Rather, she proudly shows me a small sculpture that her 9-year-old daughter made for her. Fashioned from Tinkertoys and cardboard, the inspirational artwork is emblazoned with slogans such as “Fairness is for everyone,” “Don’t go backward, go forward,” and, at the top, “I see the future in your eyes.” High expectations follow her wherever she goes.