YouTubeTwo geeks toiling away on the web’s Next Big Thing is a decade-old cliché, but it still produces gems, as YouTube founder Steve Chen tells Drew Turney.

You’ve got to start somewhere. Few businesses start out big, and nowhere is this more obvious than in technology. The engineers and geeks toiling away in their millions in garages came to be the new feted heroes of the modern economy, the Rockefellers and Warburgs of the idea.

Jobs, Wozniak, Gates and Ballmer are the patron saints of the movement – all having started Apple and Microsoft in such hallowed domestic surrounds, and in the late 1990s venture capitalists were considering garages the new railways and gold mines, throwing millions of dollars at anyone who had an idea that ended with the words ‘dot com’.

By 2005, the bubble had long burst and the garage was no longer the sexy cutting edge of online capitalism. It seemed only two businesses were making money off the Internet – eBay and Google (both of which were started in the mythical if not literal garage, as it happens).

But that didn’t stop two former Paypal employees unwittingly sparking another revolution. “We’d have these monthly dinners at PayPal people’s homes and in January of 2005 I was hosting the dinner in my place in San Francisco,” remembers Steve Chen, in Sydney recently to talk up YouTube’s success.

YouTube was born out of Internet success. With friend and co-owner Chad Hurley, Chen is one of the dotcom heroes long after the market had written such figures off. Rather than work all night and spend all day wearing ill-fitting suits in front of corporate boards, Chen and Hurley financed YouTube themselves thanks to the financial success they’d enjoyed with Paypal.

The way he explains YouTube’s genesis is a business application in the purest sense of the word; they saw a problem and came up with a solution. Hurley and Chen simply had no idea it would solve millions of other Internet users’ problems too. “People brought cameras with them, they brought out their phones and everyone was taking pictures and videos of the event,” he remembers. “It was very easy to share the pictures with one another, but when we wanted to try and share the videos it proved to be a lot more challenging.”

Chen’s party was typical of the global marketplace for imaging devices. It’s hard to believe cameras only became standard in phones in around 2003/2004, and around the same time, prices of digital cameras were crashing through the floor and saturating the market. Everyone in one way or another had a camera, which meant photos and videos were now everywhere, the global labour pool of content producers now eager consumers just waiting for the right platform.

The hurdle was that while there’s really one still imaging standard (jpeg), there are literally hundreds of audio and video codecs. YouTube’s challenge was how to work around them. Chen and Hurley didn’t strictly invent the answer (the Flash format), but they refashioned it for their purposes. Every video upload to YouTube is reformatted as a low-quality, minimum-bandwidth Flash file. That means if you have an Internet connection you can view it, regardless of your browser or operating system.

So while there was a garage involved – for face to face meetings – most of YouTube’s four or five month full-time development took place in Hurley and Chen’s respective home bases, the two keeping in touch video online chat as they perfected a workflow that now seems obvious but at the time was pretty radical.

They also followed one of the early business mantras of the web; give it away free and people will come back. Allowing users to grab a snippet of code and transpose a YouTube video to any other web page further cemented YouTube as the de facto standard.

As a result, YouTube is now one of the most watched websites in the world, much more so than all the early dotcom success stories like Amazon, eBay and Yahoo! Did Chen expect or want it to end up so big? “It’s always been fun to do it, that’s the beauty of creating websites,” says. “There’s not a huge barrier to entry for two people on computers to actually get something out there. But if you could rewind the clock two and a half years and say I’d be in Australia talking about the success of YouTube, I would have laughed.

“It was really just to create a site to share personal videos and it continued to grow. By the end of 2005 we were already seeing three million videos per day. It was already the biggest video site online, and at that stage I realised YouTube was going to stick around and that we’d achieved our goal of using the Internet as a distribution vehicle for video content. That was sort of a foreign idea at the time.”

With the dotcom boom by then far behind, not many companies were investing in websites. One did however, and Google’s acquisition of YouTube for US$1.65b in stock was one of the highest profile online buyouts of 2006.

It’s not immediately evident what the by-then monstrous search engine saw in the online video upstart, apart from a lot more eyeballs on web pages. If you believe the press release, both Google CEO Eric Schmidt and Chad Hurley – in the position of YouTube CEO – talked up the two companies being a natural fit because of ‘[organising] the world’s information and [making] it universally accessible and useful’ and ‘[benefitting from Google’s] global reach and technology leadership to deliver a more comprehensive entertainment experience for our users’.

In less PR-friendly terms however, Google’s in the business of online advertising, and that means it wants to own any slice of the Internet lots of people are looking at. And with the equivalent of 10 hours of video being uploaded to YouTube each minute, that’s a lot of people watching.

So where can YouTube go from here? The standard refrain of Internet companies is their intention of being synonymous with their particular service or functions, to be a new verb in our language the way ‘Google’ and ‘Googling’ is the last word on online search. YouTube is unquestionably online video, what else is there for Chen and Hurley to do but enjoy private islands and personal jets?

Firstly, it’s evolving more business-oriented aspects. In April, YouTube Australia announced a partner program for prolific and popular uploaders. If your content is getting a lot of page views, signing your whole catalogue or even certain clips up to the program means you’ll get a cut of any ad revenue YouTube earns from pages that feature them.

The partner program is a way of expanding and further popularising YouTube, and also reveals something of YouTube’s intentions to expand way beyond the ‘sharing videos with your friends’ model. By the company’s own admission in the official announcement, the partner program of identifying and capitalising on popular videos will create erstwhile ‘channels’ of content that will attract advertisers.

But it’s not all business. Chen explains that they’re tweaking the way YouTube works, including unshackling it from the web altogether. Mobile and TV divisions are hard at work signing partnerships that let you upload or view YouTube content away from a traditional web browser, and there’s a lot more third party involvement on the way.

“A lot of the development is in laying down infrastructure,” he explains. “One thing I’m excited about is the launch of our APIs. The big thing there is the ability for the first time to have a third party able to upload videos to YouTube without having to go through the YouTube website.

“There’s always been a lot of clean-up services, ways for third party integration partners to browse and find more stuff about certain videos, find the most popular videos, etc, but that’s been through an API on the backend. This is the first time we’ve allowed third parties to upload directly to the site. So partners can actually build an entire video YouTube.com site that doesn’t live on YouTube.com

Chen says YouTube is still very much its own identity and while it enjoys Google’s resources and backing, the company maintains everything from its own brand to it’s own separate premises in San Bruno, California. It seems an ideal position to be in, and even though it’s already conquered the world in online video, the sky’s apparently still the limit for YouTube.