The OZY Media Scandal Explained: What Really Happened?

Executive Summary:

OZY is an online media organization that creates audio, text, and video-based content across a variety of platforms.

OZY Media’s former COO Samir Rao was caught impersonating a YouTube executive, which led to a temporary unraveling of the firm and the loss of both revenue and investor confidence.

What Is OZY?

OZY is an online media organization that creates audio, text, and video-based content across a variety of platforms.

The company, whose name is inspired by Percy Bysshe Shelley’s poem Ozymandias, publishes stories focused on “the New and the Next.”

Those stories are then delivered across a variety of formats and platforms. For example, its founder hosts The Carlos Watson Show where he interviews a variety of influential people.

OZY also produces content for other media organizations, such as Breaking Big (available on Amazon Prime) or Defining Moments With OZY, which is available on Hulu.

Its slate of content also includes a multitude of podcasts (e.g., Future of X) and newsletters like The Presidential Daily Brief.

OZY, apart from producing content, hosts an in-person event called OZY Fest, which attracted headliners like Malcolm Gladwell, Dr. Anthony Fauci, Mark Cuban, and many others in the past.

Lastly, the firm also hands out the so-called OZY Genius Awards, which hands out a total of 10 grants to current college students in the United States.

Detailing the Founding Story of OZY Media

OZY, which is headquartered in Mountain View, California, was founded in 2012 by Carlos Watson, Samir Rao, and Louise Rogers.

The firm itself was actually managed and led by Watson and Rao who met each other during their respective stints at the investment bank Goldman Sachs.

They both previously earned degrees from Harvard University while Watson himself topped it up with a Law MD from Stanford.

He then went on to work for McKinsey and, in 1997, started his first company dubbed Achieva College Prep Service. Watson sold that company in 2002 after which he joined Goldman as its Global Head of Education Investment Banking.  

Simultaneously, he began appearing on television, first on Fox News and then regularly as a political commentator on CNN. In 2009, during the midst of the financial crisis, he finally got his own show on MSNBC together with Contessa Brewer.

the stimulist
Wayback Machine

Media-savvy as he is, Watson used his clout to launch and push a news site called The Stimulist, which curated positive and inspiring stories for readers. The website catered to what The Stimulist dubbed the “change generation” – a slogan that remains with OZY to this day.

Watson even managed to raise funding for his burgeoning media brand. The site even drew comparisons to Arianna Huffington’s The Huffington Post and The Daily Beast, which was started by former New Yorker and Vanity Fair editor Tina Brown with the backing of Barry Diller’s IAC.

But for whatever reason, the site never really took off. I would personally assume that the recession, which led to a huge slowdown in advertising spend, played a big part in the site’s closure.

Regardless, Watson not only remained on TV but was determined to establish his own media conglomerate. After reconnecting with Rao, whom he allegedly met at a Chipotle parking lot, and recruiting British-American private equity executive Louise Rogers, the trio set out to create yet another digital-first media brand.

At the time, the likes of Buzzfeed and Business Insider were raising tens of millions of dollars thanks to their focus on new-age social media platforms, various scoops, and sometimes slightly weird quizzes.

In September 2013, the trio finally unveiled OZY Media to the public as a publication that wanted to inform its audience about businesses, bands, and political stars as they emerge.

Not long after, they also managed to raise a first seed round of $5.3 million from the likes of Laurence Powell Jobs (Steve Jobs’ widow), Google Chief Legal Officer Dave Drummond, early-stage tech investor Ron Conway, and others.

Interestingly, Watson had known Powell Jobs for more than 15 years after the two started a non-profit called College Track back in 1997.

Over the course of the coming years, OZY continued to raise additional rounds of cash, namely $20 million led by Axel Springer in October 2014 and $10 million from GSV Capital in January 2017.

Some of that extra capital was used to branch out into other forms of media, for example by producing a TV show called The Contenders in partnership with PBS. Over a dozen others were also in development, the company claimed.

Unfortunately, cracks soon began to emerge. BuzzFeed, in December 2017, published a piece that detailed how OZY was using paid traffic to artificially prop up the views its content receives.

That in and of itself wouldn’t be a huge deal if it wasn’t for the fact that brands like JP Morgan paid actual money for those posts, expecting humans and not bots to access and consume them. However, nothing else came from that article apart from a little bit of outrage, with business continuing as usual.

Instead, OZY continued to expand its burgeoning media empire by focusing on its previously-mentioned in-person events (OZY Fest), creating even more TV shows and moving into podcasts.

By the end of 2019, OZY was attracting over 50 million readers and viewers each month. This prompted Marc Lasry, renowned hedge fund manager and co-owner of the Milwaukee Bucks, to pour another $35 million into the firm.

The Covid pandemic, even though it caused a shutdown of its in-person events, only accelerated the eyeballs OZY’s content attracted. As a result, CEO Watson proclaimed that OZY generated over $50 million in revenue during 2020 and hit profitability for the first time.

Its exponential growth, which led to a doubling of revenues for the previous four years, even prompted media veterans like BBC News anchor and correspondent Katty Kay, who started a podcast with Watson called When Katty met Carlos, to join for the ride.

 In the end, the party wouldn’t last forever. Watson and Rao would soon find themselves in hot waters over a scandal that shook the whole media world.

The OZY Media Scandal – What Exactly Happened?

On September 26th, 2021, the New York Times dropped a literal bombshell, which would change the perception of OZY Media almost beyond repair.

Months prior, in February, OZY Media was pitching Goldman Sachs to raise a new round of funding worth $40 million.

Representatives from YouTube where Watson uploaded his talk show were scheduled to be on the call alongside the main man himself as well as people from Goldman’s asset management division.

More precisely, Alex Piper, the head of unscripted programming for YouTube Originals, was the one talking on behalf of the video platform.

However, Piper was running late and faced some technical difficulties logging into Zoom, thus suggesting moving to a faceless conference call. During the call, Piper would rave about OZY’s importance to YouTube and how amazing of a leader Watson has been.  

Yet, something seemed off. His voice, as participants recalled, sounded strange as though it might have been digitally altered. Some of Goldman’s representatives felt that something fishy was going on.

Once the meeting commenced, they reached out to Piper’s assistant (and not to Piper’s Gmail address, which had been provided prior to the call).

What they were met with was a confused Alex Piper who told one of the Goldman investors who participated in the call that he never spoke with her.

YouTube, once it learned about the potential impersonation, immediately issued an investigation, which ultimately led to OZY Media co-founder and COO Samir Rao. Before long, Watson was on the phone with Goldman and apologized on behalf of Rao who had impersonated Piper without Watson’s apparent knowledge.

“Samir is a valued colleague and a close friend,” Carlos Watson wrote in an email to the bank. “I’m proud that we stood by him while he struggled, and we’re all glad to see him now thriving again.”

He also added that Samir Rao took some time off to work on his mental health but ultimately returned to the firm a few weeks after the incident. That, though, was only the beginning of the end.

While Goldman did not take any further action, Google, which owns YouTube, actually notified the Federal Bureau of Investigation, which began investigating the matter.

For once, the New York Times piece also highlighted Watson’s past transgressions. For example, OZY was marketing The Carlos Watson Show as “the fastest-growing talk show in YouTube history.”

However, the actual quote came from a question posed by a host of ABC’s “Good Morning America” during Carlos Watson’s appearance the year prior.

After the NYT published the article, things only got worse from there. For instance, Forbes writer Johan Moreno pointed out how OZY’s social media followers were likely all purchased and thus fake given their lackluster engagement.

Even Watson’s alleged hit show would barely get any comments or likes on YouTube. Then, on the 28th, OZY’s board disclosed that it hired a law firm to investigate the matter while asking Rao to take a leave of absence.

A day later, on the 29th, SV Angel, one of the firm’s earliest investors, surrendered its shares, which is extremely rare among VCs. Then, on the 30th, Marc Lasry, who became the chairman of OZY’s board just weeks prior, relinquished his position.

Several major advertisers also paused their ongoing campaigns with the company, leading to $5 million+ in revenue losses.

Simultaneously, reports emerged, detailing the questionable work culture at the firm. Some employees even had to be hospitalized due to extensive workloads. To make matters worse, OZY’s HR department allegedly questioned their reasoning and essentially did not believe them.

Others, such as former BBC anchor Katty Kay and dozens of other employees, handed in their resignations.

The scandalous week ultimately ended with Watson disclosing that he would shut down the company he founded eight years ago. Meanwhile, even more damming information emerged.

Bloomberg reported that multiple companies had filed lawsuits against OZY Media for not paying for services the company had sourced. And some of those services actually entailed “creating and driving traffic” to what they called an “internet mini-site.”

Interestingly, this was not the last we’ve seen from either OZY Media or Carlos Watson. Being the savvy entrepreneur that he is, Watson was already plotting a comeback.

The Aftermath

OZY’s rebirth took all but a weekend. Three days after Watson first said that he would close down the company, he already reverted his stance.

“We were premature,” Watson said of the decision in a television interview on CNBC’s Squawk Box and added that they had “good conversations” with investors and advertisers.

“We have lots of things we have to do to improve, but I very genuinely feel like we have a meaningful, transformational voice,” he then added. “At our best, this will be our Lazarus moment.”

In the meantime, additional lawsuits against OZY Media, such LifeLine Legacy Holdings LLC, which invested $2 million into the firm back in 2020, kept piling on.

Interestingly, OZY Media did also not revise any of its claims or metrics. For example, it stated that its newsletters attracted over 26 million readers, a hardly-believable metric when compared to powerhouses like Morning Brew which boasted a fraction of that readership.

Instead, Watson went back to the booth and began filming his talk show. But OZY wouldn’t be OZY if it didn’t continue to attract scrutiny.

In February 2022, Vice detailed how a site called Tech Bullion had written a positive piece on the CEO dubbed ‘Ozy Media CEO Carlos Watson Says a Fun Redesign Is on the Horizon.’ However, the article of said post, named Hugh Grant, did actually not exist. Tech Bullion subsequently took the article down before even more damage would be done.

Interestingly, this did not stop OZY Media from going on an intense hiring spree and attracting talent from publications like Time Magazine. Plus, a California judge threw out the case that LifeLine Legacy Holdings had filed against the company.

Right now, OZY Media is allegedly plotting its comeback and has begun pitching advertisers and investors. It remains to be seen whether Watson can turn the sinking ship around…

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.