Ready for Its Close-Up

By Sara Kehaulani Goo
Washington Post Staff Writer
Saturday, October 7, 2006

SAN MATEO, Calif. -- There's no sign outside the office of Internet video sensation YouTube Inc., located in a second-story loft along the main retail strip of this small Silicon Valley town. Two glass doors, sandwiched between a pizza place and a Japanese restaurant, lead to a clunky elevator, which chugs up one floor and deposits visitors inside YouTube's one-room suite, where 60 young employees are crammed elbow-to-elbow, staring into computer screens.

The receptionist, Shannon Hermes, who doubles as office manager and human resources assistant, talks fast and warns staff members to escape through the back exit to avoid the uninvited TV news truck out front. YouTube cannot keep up with the 400 weekly requests pouring in from the media, she explained, nor field the 230 hourly incoming phone calls.

"We're under siege," she said.

YouTube, a free Web site created last year to help people share homemade videos, has become a hit with users worldwide, drawing 34 million monthly visitors who watch an average of 100 million video clips a day. Now the young Internet star is at a critical point as it attempts to morph from quirky start-up into major-league media company.

YouTube is rolling out new video ad formats, cutting deals with movie and music studios to promote their wares and preparing to move into upscale digs. At the same time, reports are circulating that it may be close to a deal to be acquired by Google.

Both firms declined to comment yesterday on what they called rumors, including a report in the Wall Street Journal that they were close to a $1.6 billion deal. YouTube has been in talks with dozens of other media companies in recent months, some involving business partnerships and others flirting with outright acquisition.

The trick, analysts say, will be whether YouTube can retain its popularity as it becomes a real business.

On a recent afternoon, co-founder Chad Hurley, 29, and his business partner and friend Steve Chen, 27, reflected on the company's challenges as they sat in a tiny, windowless room filled with red beanbag chairs.

"We're definitely in transition," said Hurley, clad in jeans, white shirt and black blazer. "We've received a lot of attention, but we've also got a lot of work to do and a long way to go."

YouTube became a hit by letting people post their homemade videos online as easily as they do their digital photos. Every week, it seems, a new YouTube star is born as the world cottons to the often off-beat fare. One week, it's a 77-year-old British grandfather reflecting on his life and youth. Another, it's two Chinese teenagers lip-synching to the Backstreet Boys from their dorm room. Violently graphic images of American soldiers in Iraq also have made their way to YouTube.

It's unclear how well this amateur fare will mix with the professional and commercial videos that the site is adding as it seeks to generate revenue. In the past several months, YouTube has scored deals with NBC Universal, Paris Hilton and Warner Music to add professionally made video advertisements on the site. YouTube offers these advertisers prime real estate to showcase their videos on the right-hand side of its home page.

While some users have posted comments accusing the site of selling out to corporate interests, Hurley maintains the onus is on advertisers to create compelling video.

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