YouTube: Then, now, and what's next

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YouTube's come a long way.

When Google bought it for $1.65 billion in 2006, people wondered how it would make money. Advertisers were wary of its homemade videos, many of which violated copyrights. Viacom even sued the company for $1 billion in 2007 in a case that was just settled out of court this year.

Now, YouTube is turning out to be a cash cow. It will generate $7.2 billion in advertising revenue this year, eMarketer said. And its scale is unprecedented: It has over 1 billion monthly views, about 40 percent on mobile devices.

YouTube won't reveal exact advertiser numbers, but the company says it has 200 times more video advertisers than the average U.S. television network. The company also cites Nielsen statistics saying it reaches more U.S. adults age 18-34 than any cable network.

In a turnaround from when it was media companies' adversary, now it's their partner. More than 5,000 content companies use its media I.D. tools, which scan over 400 years worth of video daily. When they find content owned by the media companies, they can add advertising or pull down copyright infringement.

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The company's partner program has over 1 million creators in 30 countries earning money from YouTube channels. Thousands of them bring in six figures annually.

It's spawned an ecosystem of what's called "multi-channel networks," like Maker Studios, which Disney bought for $1 billion, or AwesomenessTV, which DreamWorks Animation snapped up for $33 million. These media giants value YouTube's young stars and devoted fan base, which is increasingly hard to reach through traditional advertising.

So what's next?

The challenge for CEO Susan Wojicki, who started in February, is growing viewership and revenue. YouTube has been working to place its app on more TVs and set-top boxes to make it a more enjoyable "lean back" experience, to grow the amount of time people spent watching YouTube from 10 or 15 minutes a day, to match the hours people spend with the TV on.

The more people watch, the more the company can capture part of the $212 billion global TV ad marketplace.

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To get people to watch more, it needs to make sure it remains the destination for all sorts of content, especially the higher quality professional and semi-professional variety.

A number of YouTube's biggest stars are being lured to other platforms to release new content, like Vimeo's on-demand platform, or Maker.TV. They offer higher ad rates and a greater share of ad revenue. But no matter what, YouTube has something they don't: The biggest audience on the market.

-By CNBC's Julia Boorstin