Goldman Sachs, Ozy Media and a $40 Million Conference Call Gone Wrong

This past winter, Goldman Sachs was closing in on a $40 million investment in Ozy, a digital media company founded in 2013, and there seemed to be a lot of reasons to do the deal. Ozy boasted of a large audience for its general interest website, its newsletters and its videos, and the company had a charismatic chief executive, Carlos Watson, a onetime cable news anchor who had worked at Goldman Sachs early in his career. And, crucially, Ozy said it had a great relationship with YouTube, where many of its videos attracted more than a million views.

That’s what the Zoom videoconference on Feb. 2 that Ozy arranged between the Goldman Sachs asset management division and YouTube was supposed to be about. The scheduled participants included Alex Piper, the head of unscripted programming for YouTube Originals. He was running late and apologized to the Goldman Sachs team, saying he’d had trouble logging onto Zoom, and he suggested that the meeting be moved to a conference call, according to four people who were briefed on the meeting, all of whom spoke on the condition of anonymity to reveal details of a private discussion.

Once everyone had made the switch to an old-fashioned conference call, the guest told the bankers what they had been wanting to hear: that Ozy was a great success on YouTube, racking up significant views and ad dollars, and that Mr. Watson was as good a leader as he seemed to be. As he spoke, however, the man’s voice began to sound strange to the Goldman Sachs team, as though it might have been digitally altered, the four people said.

After the meeting, someone on the Goldman Sachs side reached out to Mr. Piper, not through the Gmail address that Mr. Watson had provided before the meeting, but through Mr. Piper’s assistant at YouTube. That’s when things got weird.

A confused Mr. Piper told the Goldman Sachs banker that he had never spoken with her before. Someone else, it seemed, had been playing the part of Mr. Piper on the call with Ozy.

When YouTube learned that someone had apparently impersonated one of their executives at a business meeting, its security team started an investigation, the company confirmed to me. The inquiry didn’t get far before a name emerged: Within days, Mr. Watson had apologized profusely to Goldman Sachs, saying the voice on the call belonged to Samir Rao, the co-founder and chief operating officer of Ozy, according to the four people.

In his apology to Goldman Sachs and in an email to me on Friday, Mr. Watson attributed the incident to a mental health crisis and shared what he said were details of Mr. Rao’s diagnosis.

“Samir is a valued colleague and a close friend,” Mr. Watson said. “I’m proud that we stood by him while he struggled, and we’re all glad to see him now thriving again.”

He added that Mr. Rao took time off from work after the call and is now back at Ozy. Mr. Rao did not reply to requests for comment.

Marc Lasry, a hedge fund manager, a co-owner of the Milwaukee Bucks basketball team and chairman of the Ozy board, said in a statement: “The board was made aware of the incident, and we fully support the way it was handled. The incident was an unfortunate one-time event, and Carlos and his team showed the kind of compassion we would all want if any of us faced a difficult situation in our own lives.”

While the explanation satisfied the company’s board, which did not formally investigate, it did not answer all the questions the incident raised. Even in an industry known for smoke and mirrors, Ozy has for years raised eyebrows over its claims about its audience size. And one nagging question in this era of spectacular booms and busts is where, exactly, the line is drawn between fake-it-til-you-make-it hype (Tesla!) and possible fraud (Theranos!). That line is often blurry and comes into focus only in retrospect. Early fluffery can be excused by later success. And since, unlike Theranos, nobody is drawing literal blood in the media business, high-profile investors may not be expected to do all that much homework.

One thing is evident, though: Trying to fool the world’s most famous bank, even by the hype-ridden standards of the media business, is way over the line.

A Gen X Media Dream

Ozy was born in 2013 as a Gen X dream of what millennial media ought to be: earnest, policy-focused, inclusive, slickly sans-serif. Other ventures of the same era, Mic and Fusion, projected similar images.

Ozy’s public face was Mr. Watson, the son of a working-class Jamaican family in Miami and a graduate of Harvard University and Stanford Law School. In addition to his early-career stop at Goldman Sachs, he worked at McKinsey & Company and was an anchor on MSNBC for part of 2009. His co-founder, Mr. Rao, also came from Goldman Sachs, via Harvard.

Carlos Watson, Ozy’s chief executive, at a panel discussion in Nashville sponsored by the company in 2018.Credit…Jason Kempin/Getty Images

Mr. Watson raised the money to start Ozy from a list of blue-chip friends. Laurene Powell Jobs, who had co-founded a college prep nonprofit with Mr. Watson in 1997, invested and joined the Ozy board. The Silicon Valley venture capitalist Ron Conway also invested, as did David Drummond, who was then Google’s chief legal officer.

In 2014, Axel Springer, the Berlin publishing giant, invested an undisclosed amount. In 2019, Ozy also raised $35 million from a group led by Mr. Lasry, a boon that included money from the media-focused investment bank LionTree and the radio and podcast company iHeart Media. The Ford Foundation, seeking to support a minority-led company, also backed it with grants, its president, Darren Walker, said. The data service PitchBook reports that Ozy had raised more than $83 million by April 2020 and valued itself at $159 million.

Ozy spent some of that money to hire journalists and produce a raft of newsletters, feature stories and videos, as well as sponsored articles promoting a range of companies, from its offices in Mountain View, Calif. Its top editors included Jonathan Dahl, who had led Smart Money magazine and The Wall Street Journal’s weekend section, and Fay Schlesinger, a star journalist at The Times of London, both of whom left Ozy after relatively short tenures.

The site generated some buzz, and Mr. Watson said it had the traffic to match. In a 2019 news release, the company said it had 50 million monthly unique users.

Eugene Robinson, an early Ozy hire whose title was editor-at-large, said that, after he heard Mr. Watson boast of the company’s traffic numbers sometime around 2015, he thought they “seemed high” and started comparing the claims to public sources of audience data. Mr. Robinson, who said in an interview that he was fired earlier this year, concluded that the site was a “Potemkin village.”

In 2017, BuzzFeed News reported that Ozy had been among the publishers buying web traffic from “low-quality sources,” companies using systems that caused articles to pop open under a reader’s browser without the reader’s knowledge. Ozy said it had been buying the traffic to build its email lists and had not billed advertisers for those views. (I was editor in chief of BuzzFeed News at the time of that article. Later, I met Mr. Watson when I was peripherally involved in acquisition talks between the companies. Mr. Watson told The Times he believed that it was unethical for me to write this column. Under New York Times policy, I can’t write about BuzzFeed extensively until I divest stock options in the company, which I left last year.)

Marc Lasry, a hedge fund manager and a co-owner of the Milwaukee Bucks basketball team, is a member of the Ozy board.Credit…Thibault Camus)/Associated Press

Ozy doesn’t rely on standard measurements of traffic, but the best known service, Comscore, shows nothing close to the company’s public claims. According to Comscore, Ozy reached nearly 2.5 million people during some months in 2018, but only 230,000 people in June 2021 and 479,000 in July. Mr. Watson called the Comscore numbers “incomplete,” noting they don’t include impressions on platforms ranging from social media to television and podcasts.

Other figures seem off, but are harder to verify. Ozy told Axios in January that the company’s newsletters had “more than 20 million subscribers.” By comparison, the Morning Brew, a successful newsletter-based business media company, says it has three million subscribers.

“I’ve never heard an explanation of Ozy that made sense to me,” said Brian Morrissey, the former editor in chief of Digiday, a publication covering digital media and the tech industry. He said he was struck by the company’s claims, adding, “then you do the gut check, and never once in my life has a piece of content from Ozy crossed into my world organically.”

Mr. Watson said in the email that he understood the skepticism but that Ozy’s growth “has been completely real.”

“It’s the result of our team acting pretty fearlessly to launch and grow five newsletters, 12 TV shows, six podcasts, now four annual festivals starting next year, and the Ozy Genius Awards,” he said. “Each of our verticals is thriving, and we stand completely behind our numbers and performance.”

But the company has overstated its success on big platforms, as well as the strength of its relationship with them. Billboards in Los Angeles, for instance, say that “The Carlos Watson Show” is “Amazon Prime’s First Talk Show.” In fact, Ozy has been uploading the show to the platform through a service called “video direct,” which many YouTube channels use to pick up extra views on Amazon’s video platform but which receive no promotion from Amazon Prime Video itself. Last week, Amazon complained that Ozy’s use of its brand name on the billboards violated promotion guidelines; Ozy apologized and promised to take down the signs, an Amazon Prime Video spokesman said.

Mr. Watson said the billboards’ claim was “accurate,” but confirmed that the company would stop making that claim at Amazon’s request.

Ozy also markets Mr. Watson’s show as “the fastest-growing talk show in YouTube history,” a quote that appears to be drawn from a question posed by a host of ABC’s “Good Morning America” during Mr. Watson’s appearance last year. Asked about the claim, Mr. Watson said that his show had more views than any other “premium daily talk show we’ve been able to identify that was launched on YouTube.”

Jason Urgo, the head of the analytics firm Social Blade, said Ozy’s YouTube effort “doesn’t really stand out as a breakout channel.” On the channel, many videos have more than a million views but fewer than a hundred comments, an unusual ratio for YouTube that suggests the views aren’t coming from regular YouTube watchers, Mr. Urgo said. Other videos on the channel have fewer than a thousand views.

Even as it has struggled to build a digital audience, however, Ozy also has had success offline, with events including OzyFest, a semiregular festival of comedy, music and talks. And thanks to Mr. Watson’s ceaseless drive and his network of relationships, Ozy has closed a series of production deals of the kind that other new media companies crave. Those include “Third Rail With Ozy,” a PBS discussion series in 2017 hosted by Mr. Watson, and “Defining Moments,” a 2020 interview series on Hulu that has profiled the musician John Legend, the investor Mark Cuban and the actress Jameela Jamil. “OWN Spotlight: Black Women OWN the Conversation,” an Ozy show hosted by Mr. Watson, on the Oprah Winfrey Network, won an Emmy last year in the category of news discussion and analysis.

Mr. Watson, at Carnegie Hall in 2020. He has been Ozy’s public face.Credit…Noam Galai/Getty Images For History

While Mr. Watson often disavowed an interest in turning the company into a vehicle for his own broadcast talent, his genial style of interviewing has carried most of the shows, including a podcast Ozy started last year with the BBC, featuring its anchor Katty Kay, called “When Katty Met Carlos.” (Ms. Kay left the BBC for Ozy this year.)

The company has more recently invested in a wave of marketing for “The Carlos Watson Show,” which has featured interviews with Dr. Anthony Fauci and the filmmaker Ava DuVernay (as well as lower-profile figures, including me). In addition to the billboards, promotions of the show have included a magazine-style advertising supplement, with Mr. Watson’s face on the cover, inside the weekend print edition of The New York Times. The headline: “Meet Carlos Watson.”

After the Call

Goldman Sachs took no further action after the call with the Ozy executive who had apparently impersonated the YouTube executive. But the security team at Google, which owns YouTube, determined a crime might have been committed.

Google has alerted the Federal Bureau of Investigation, two people with knowledge of the matter said. Goldman Sachs then received an inquiry from federal law enforcement officials, one person with knowledge of that inquiry said. Mr. Watson said on Friday that Ozy had not been contacted by investigators. Mr. Piper declined, through a YouTube official, to comment.

The legal risk is real, said John C. Coffee Jr., law professor at Columbia University, to whom I described the case. Tricking potential investors while raising capital would be grounds for criminal charges of wire fraud and securities fraud, he said, as well as a potential civil suit from the Securities and Exchange Commission. He added, though, that a prosecutor might not proceed with the case because the deal never went through.

The F.B.I.’s San Francisco field office said in an email that it would not confirm or deny the existence of an investigation.

Ozy’s high-profile backers are reacting to the situation differently. A spokeswoman for Ms. Powell Jobs’s Emerson Collective, Robin Reck, distanced her company from Ozy in a statement: “Emerson Collective was one of Ozy’s first investors in 2013. Emerson did not participate in Ozy’s latest investment round and has not served on its board since 2019.”

The president of the Ford Foundation, Mr. Walker, said in an email that he had confidence in Ozy. “We need new media companies to challenge the status quo, shake things up, and go deep on the issues that matter most,” he said. “In an increasingly diverse world, it’s no coincidence that a company with co-founders of Black and Indian descent would be so successful.”

And Ozy did not allow the episode to curb its fund-raising efforts. In April, two months after Goldman Sachs walked away, the company raised another round of financing, two people familiar with the transaction said.

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