The American company wanted to reinvent journalism and revolutionize the media industry. But Ozy Media was only a mock-up of a business model.
It's certain to become a “case study” at the business schools of US elite universities one day – an example that can teach young managers how not to do things. The story of the rise and fall of the digital media company Ozy Media, a prime example of deepfake business, might even become the most glamorous case of the decade.
Ozy Media set out to reinvent journalism, and grew within a few years to become a showcase for how digital journalism can work, primarily through YouTube videos. This summer the company was valued at $450 million. The charismatic founder, Carlos Watson, was playing in the big leagues, issuing a steady stream of newsletters and moderating one show after the other. His guests included many stars from politics, business and the start-up scene. The widow of Steve Jobs invested in the company, as did Google's former chief legal officer and the Springer publishing house.
But Ozy Media's business model was sham, a mere illusion of growth. One laid-off employee called Watson's and Ozy's much-touted success a “Potemkin Village.” The curtain was lifted last winter, when Ozy was in discussion with Goldman Sachs about another 40-million-dollar round of financing. All that was missing was the confirmation of the incredible success of Ozy's shows on YouTube.
A YouTube executive was scheduled to address the final session of talks, to confirm live and in person that Ozy's videos had millions of views. After a few problems blamed on Zoom, the conference continued on the telephone. The guest executive delivered the planned buzz, but something seemed strange to the investment bankers at Goldman Sachs. So they checked back with YouTube later, and encountered a puzzled person who had never spoken to them before. It turned out that the co-founder of Ozy had posed as a YouTube manager on the call. As they say in Silicon Valley, “Fake it til you make it.”
That saying comes not from Carlos Watson but from Tesla-founder Elon Musk, who is forgiven everything as long as he manages to actually deliver the promised performance, the promised technological breakthrough. Others who fail to do so, such as Theranos-founder Elizabeth Holmes, can hope for less reputational grace. She is currently on trial for fraud.
Rumors of embellished metrics arose as early as 2017
Ozy Media is a particularly interesting case. Firstly, because it's simply outrageous to replace external experts with your own employees in an investor meeting just to bolster the house of cards you have set up. And secondly, because technology is now available that makes it quite easy to do. Back in 2019, an AI-generated voice persuaded the managing director of a British energy company to transfer €220,000 to a bank account in Hungary. Allegedly, the CEO of the German parent company had instructed him to do so over the phone. But that was just a run-of-the-mill fraudster who used AI-technology to make his voice sound like that of the real executive. With a little more time and technical effort, it's possible to produce fake videos that achieve the same effect by combining AI-generated voice and body language in deceptive ways. In the era of digital media, one must ask oneself before making any decision, “Who is this really, and if so, how many?”
After all, Ozy Media grew up at the center of an industry that is particularly affected by the opportunities for fraudulent manipulation. “Click fraud” is widespread in the digital media and advertising sector. Advertising revenue, search machine rankings and user data can all be easily manipulated through the use of bots that repeatedly activate certain links. As early as 2017 there were rumors that Ozy Media was using questionable methods to drive up its own metrics. It would be another four years before the company was exposed and went under.
Delusion is a topos of human and corporate history. And it affects not only those who perpetrate the deceit, but also all those who are led astray. In the past, all it took was a good story that could be easily debunked. Today, in the deepfake business, technology can pump up stories using false numbers and metrics that make it impossible to believe they could be anything but real.
For all those who still want to understand the fine line between real and fake business, it's enough to answer a simple question: Am I creating value beyond the capitalization of the company?