YouTube goes from zero to $1.65bn in two years

The twenty-something founders of YouTube have become millionaires hundreds of times over, after their video-sharing website, one of the fastest-growing phenomena on the internet, was sold to Google with a $1.65bn (£880m) price tag.

Less than two years ago, Chad Hurley and Steve Chen began work in Mr Hurley's Silicon Valley garage on a way to allow them to share footage of a dinner party with friends.

But today, visitors watch more than 100 million video clips on the site every day, from television clips, sporting highlights, and millions of home-made videos from webcam users across the world.

Depending on who you ask, YouTube is responsible for turning the internet into the most powerful entertainment medium since television, or for creating a never-ending episode of You've Been Framed. Both sides accept the YouTube phenomenon is set to keep on growing.

Google's executives said YouTube represents "the next step in the evolution of the internet" and that Messrs Hurley and Chen reminded them of the young Larry Page and Sergey Brin, who created the search engine pioneer in a garage of their own less than a decade ago. Eric Schmidt, the chief executive of Google, said: "Chad and Steve have created a team that has been innovative and visionary and successful, exactly the kind of people we love to work with."

Mr Brin said YouTube "reminds me of Google just a few short years ago". He said having revolutionised the way people search for content on the internet, Google would now be able to shape the way in which video is delivered to viewers.

YouTube's valuation of $1.65bn took away the breath of some on Wall Street who fear it is too much for a company with absolutely no profits and very little revenue. Google declined to discuss yesterday how it had arrived at the figure, saying only that as long as YouTube was focused on giving its community of users what they wanted, profits would follow.

The deal is of a piece with other acquisitions in the fast-growing area of networking sites. The $580m Rupert Murdoch's News Corp paid for MySpace last year is now widely regarded as a steal because the business is expected to generate billions of dollars from advertising revenue.

As YouTube's popularity has mushroomed, it has been assailed by legal threats from media companies furious that music videos and whole television shows are being uploaded to the internet by users without a thought to copyright infringement. YouTube says it takes down such content when a complaint is made.

Last month Warner Music said it would put all its music videos on YouTube, in return for a cut from the advertising that will appear alongside them. YouTube signed deals yesterday with the music companies Sony BMG and Universal Music, and with CBS, which will allow news and sport footage on the site - as it groped towards legal legitimacy, and a way of turning an eventual profit.