The Gurus of YouTube

Let's say you're in your 20s and you start your first Internet company. Let's say 21 months later you sell it for $1.65 billion. What happens next?

At first, not much. Some of the money is tied up in escrow, and the traditions of modesty in Silicon Valley require a period of restraint before you spend in the big, life-changing way that your wealth will permit.

Still, the world wants to talk to you. Japanese television, Argentine newspapers, a bunch of French journalists and what seems like every news outlet in the U.S. Friends you haven't heard from in a long time send e-mails. Hey, how's it going? Long time no see! BTW I have this great business idea...

And so even though you've just left a photo shoot with an imperious, name-dropping L.A. photographer and ride to the airport in a jet-black Escalade, when you arrive at LAX, you have to stand in the United Economy line because you're still flying coach. Having removed your shoes to get through security—an indignity you'll never again endure if one day you spend an inconsequential few million on a jet—you walk past a newsstand to see your company on the cover of Wired and GQ.

"Oh, and have you seen Fortune?... Yeah, we're in there too."

And there they are: Steve Chen, 28, and Chad Hurley, 29, two of the three founders of YouTube (the other, Jawed Karim, went to grad school last year), a couple of boy-men looking out from a magazine and up at themselves in real life. Then they board the plane, Steve way in the back and Chad closer to the front after paying an extra $24 for an "Economy Plus" seat.

Such is life these days for Chad and Steve—and because they are still young enough to get the occasional pimple, I don't mind calling them Chad and Steve. They are premoguls, near magnates. They foreshadow but don't quite yet embody the wealth and power that accompany their role as the new demiurges of the online world. At a GQ party in West Hollywood, Calif., a few weeks ago, Al Gore tapped Steve on the shoulder outside the bathroom to congratulate him on the success of YouTube. Chad chatted with Leonardo DiCaprio, handsome and taller than you think and ashing his cigarette on the floor. But at the end of the night, the YouTube boys were hanging with the B crowd, Steve eating a burger (despite a disapproving glare from his girlfriend Julie) and Chad drinking until 2:30 a.m. with a guy who was in the Jackass movies—not even the main guy. Guys, you gotta know when to leave the party. (When Leo does.)

But of course the party is just starting for Chad and Steve, whose omnium-gatherum of online videos has captivated the Web for the past year, at least since a Saturday Night Live digital short called Lazy Sunday was forwarded millions of times last December, increasing visits to youtube.com 83%. (If you don't know Lazy Sunday, don't tell anyone, particularly anyone under 30. Just quietly YouTube it now.)

YouTube became a phenomenon in 2006 for many reasons, but one in particular: it was both easy and edgy, a rare combination. You can watch videos on the site without downloading any software or even registering. YouTube is to video browsing what a Wal-Mart Supercenter is to shopping: everything is there, and all you have to do is walk in the door. Want to see Mikhail Baryshnikov performing in Giselle in 1977? A user named "goldenidol" uploaded a clip in August. Want to see a sure-to-make-you-queasy video of a girl snorting a strand of cooked spaghetti and then choking it out her mouth? You're in luck: "asemoknyo" put that clip on YouTube last month. All it costs is a few moments away from whatever you're supposed to be doing on your computer—and who doesn't have 30 sec. to watch that priceless clip of Faith Hill mouthing "WHAT?" when she lost a Country Music Association Award this year? (That video has been viewed at least 6 million times.)

YouTube is a new kind of medium, but it's still mass. Your grandmother could use it (a search for "grandmother" on YouTube yields more than 1,800 videos). But because the site doesn't prescreen uploads—which is a lot cheaper for Chad and Steve than hiring a bunch of editors to police millions of users—it ends up hosting a lot of out-there stuff as well: obscure bands, tear-jerking video diaries, "dead dog tricks" (don't ask), a "German toilet" (please don't ask)... The unmediated free-for-all encouraged the valuable notion that the site was grass-roots, community-run and—to use an overworked term—"viral." These are partial fictions, of course. YouTube controls the "Featured Videos" on its home page, which can dramatically popularize a posting that otherwise might fade. Also, the video in the top-right section of the home page is an advertisement, even though it doesn't always look like one. There's no porn on the site—overtly sexual material is flagged by users and removed by YouTube, usually very quickly. But there is an endless supply of kinda weird, kinda cool, kinda inspiring stuff there, which means you can waste hours on Chad and Steve's site.

That, in turn, means advertisers want to be on YouTube, which is why Google paid so much for it. If even, say, 10% of the $54 billion spent on TV advertising annually migrates to video sites like YouTube in the next few years, we will pity Chad and Steve for selling for a mere $1.65 billion. But for now, with YouTube still unproven—it has never made much money, and it could be crushed by lawsuits from content creators whose material shows up on the site without permission—the blockbuster acquisition price carries a whiff of the late-'90s Silicon Valley gold rush. It now falls to Chad, the CEO, and Steve, who runs the tech side, to prove that what they created with Karim will not become the next broadcast.com, the video provider Yahoo! bought for $5.7 billion in 1999—and which now doesn't exist.

Turning YouTube from a sensational rumpus to a profitable corporation will require Chad and Steve to thread the company through legal disputes, hire at least 100% more employees than they have now, negotiate with the biggest ad and media companies in the world, maintain their unique identity without getting swallowed up by Google, please shareholders, manage p.r. and flawlessly execute a thousand other tasks that far more experienced executives have flubbed. All while Chad has to make time for his wife and two small children, Steve needs to buy a car to replace his crappy Jeep Wrangler, and the broadband in the YouTube office is so slow, it takes forever to watch their own site. Can a couple of kids who grew up nowhere near Silicon Valley handle all this?