YouTube lubed with second-round funding

A correction was made to this story. Read below for details.

YouTube, a video-sharing site that has caught the attention of both youths and Internet executives, has received $8 million in funding from Sequoia Capital.

YouTube lets anyone upload and share original video clips. Since its birth in early 2005, the site has reaped recognition from teens and young adults. YouTube also set off a buzz at last month's Digital Hollywood Conference in California.

Artists who upload their works, which range from do-it-yourself reality shows to tell-all Webcam monologues, can constantly monitor their popularity via the number of hits their video has brought in.

Sequoia Capital's second-round funding is a sign of YouTube's potential. Sequoia has worked with the originators of Yahoo, Google, Cisco Systems and Oracle, among others.

YouTube was originally given $3.5 million in first-round funding from Sequoia in November. YouTube has an advertising revenue model and plans to augment its infrastructure, as well as develop sales and marketing, to expand the company globally.

Alhough YouTube took down unauthorized "Saturday Night Live" content from its site in February, the company is still determining how to monitor the content given the speed at which it is growing. According to YouTube's own estimates, people are viewing more than 35 million video clips on its site each day. YouTube's lack of monitoring capability, however, could lead to legal entanglements.

 

Correction: This report incorrectly stated that YouTube is without a revenue model. In the future, the company plans to sell advertising.

[Don_Dodge]

Legal issues with YouTube

YouTube can stay within the law by "taking down" any videos that infringe a copyright when they are notified by the copyright holder and served with a "take down" notice. They do not need to proactively search their site for infringing video. It is up to the copyright holder to notify YouTube and provide some evidence that they are the legal copyright holder. YouTube must then remove the infringing content within a reasonable time using "commercially reasonable efforts".

The other issue YouTube needs to be careful about is porn. Porn itself is not illegal..it is all over the web. However, YouTube must use "commercially reasonable efforts" to prevent minors from viewing potential pornographic material. All the major search engines have porn filters that work reasonably well. So, YouTube could solve this issue fairly easily.

If YouTube can manage these two issues they have a very bright future. Apparently Sequoia thinks so...and they have been right many times before.

I was a VP at the original Napster so I am somewhat familiar with the legal issues. I wrote a blog on this subject today
http://dondodge.typepad.com/the_next_big_thing/2006/04/the_legal_issue.html