The 'open secret' about Ozy Media has been laid bare
New York(CNN Business) A version of this article first appeared in the "Reliable Sources" newsletter. You can sign up for free right here.
This week's New York Times exposé about Carlos Watson's media company, Ozy, has onlookers asking all sorts of questions. Fraud accusations are piling up. Follow-up stories are in the works. And FBI agents may be investigating an Ozy executive's impersonation of a YouTube executive on a call with bankers, according to Times columnist Ben Smith's reporting.
So the Ozy story isn't over. In fact, it's only just beginning.
Beyond Ozy, this story is about digital media spin; business models that don't pass a simple smell test; and unbelievable web metrics that people pretend to believe until forced to face facts. Gawker's Jenny G. Zhang said it best: "It is generally safe to assume that most once-buzzy digital media upstarts are houses of cards built on shaky valuations and inflated audience numbers that no one should invest in expecting huge returns (not us, though, we're different)."
Smith's reporting suggests that Ozy is a mirage of a media company. "Even in an industry known for smoke and mirrors, Ozy has for years raised eyebrows over its claims about its audience size," he wrote.
In some ways, this has been the biggest open secret in digital media. And now it has been subjected to a harsh spotlight.
Watson, a very well-connected media personality who was once a political analyst on CNN, called the story a "ridiculous hitjob" and accused Smith of conflicts of interest. Smith does have many conflicts and many interests, but his reporting about Ozy was buttoned up. Watson's responses to the assertions about Ozy's inflated audience basically boiled down to "trust us, we're really popular." But all day long on Monday, reporters and other social media commenters said they never see Ozy content while surfing the web. The consensus was that it's exceedingly hard to believe that the startup has tens of millions of engaged customers.
Inflation?
Johan Moreno, who said he has been "tracking Ozy's questionable ad claims for YEARS," shared some of his favorites on Monday, like a "magazine-style ad supplement" for Ozy that called Watson the "best interviewer on TV" on the cover. That quote was attributed to Deadline, the Hollywood news website, but Deadline was merely quoting one of Watson's Ozy colleagues.
Moreno also pointed out that Ozy has 655,000 followers on Instagram but virtually no engagement, a clear red flag.
Krystal Ball highlighted the same dynamic on YouTube. "Look at the stats for this YouTube video" on Ozy's channel, she wrote. "90,000 views but only 12 likes and a single comment in which someone points out what an obvious scam it is."
A quick scroll through Twitter, too, shows lots of Ozy content being posted without any discernible engagement. Watson might say he's trying to produce positive, nutritious content as a counter to all the toxicity on social media, but if it's not being consumed, does it matter?
Watson's rebuttal to Smith's reporting was largely trashed by Twitter commenters. As far as I can tell, the only people who replied with positive things to say about Ozy were immediately identified as possible astroturf accounts.
Watson did not respond to a request for comment about the accusations of traffic inflation.
Legal jeopardy?
The details in Smith's story about Watson's co-founder Samir Rao impersonating a YouTube executive on a call with Goldman Sachs — in the midst of Goldman's due diligence during a fundraising round -— led Bloomberg Opinion columnist Matt Levine, a former Goldman banker, to opine, "You're just not going to get an easier securities fraud case than that." With astonishment, Levine noted that "nobody has been charged with anything, and Watson and Rao remain at Ozy and keep raising money." Watson said Rao was suffering a mental health crisis at the time it happened. Rao hasn't said a word about it.
More reactions
-- One of the only Ozy defenders I spotted on Monday was a writer for the site, Andy Hirschfeld, who said "I regularly get reader emails for my work there. There is an audience." He added, "Also, the editors I work with there are some of the best I've worked with anywhere in the business." Hirschfeld posted this Twitter thread with details.
-- A former Ozy reporter, Nicholas Fouriezos, tweeted: "Thinking of all the OZY journalists, some of the most hardworking, passionate and ethical people I know, whose talent was so often used and abused until they burnt out and left. If today's news is somehow held against them, it will be stacking one injustice upon another."
-- This Peter Sterne comment rang true to me: "For what it's worth, I always assumed that Ozy's aim was to create the appearance of a millennial digital media company in order to score TV development deals."
Watson's next appearance
Awkward timing: The Ozy CEO is slated to host the Documentary Emmy Awards ceremony this Wednesday. It will take place on a livestream at 8pm Eastern.
Smith's story noted that a Watson-led show on Oprah Winfrey's network "won an Emmy last year in the category of news discussion and analysis." When I checked in with Emmys organizers on Monday, thinking maybe Watson had backed out, I was told there had been no change in plans. "We've long featured past nominees and winners as presenters and hosts. He won last year, and was invited back this year," an Emmys representative said.
