Further disturbing allegations have emerged about the trendy online media startup Ozy, which has been accused of deceiving investors with smoke-and-mirrors tactics about its partnerships and audience size.
In July 2019, Ozy was saved from mounting a two-day event in Central Park after New York Mayor Bill de Blasio canceled all outdoor events due to a heat wave that hit 100 degrees.
The cancellation was a windfall for the struggling company due to an insurance payout, according to a Forbes article citing former employees, including one who said the canceled event ‘was going to be a Fyre Festival.’
The employee’s claim comes days after a bombshell report in the New York Times alleged that Ozy COO Samir Rao had impersonated a YouTube executive on a call with Goldman Sachs as the startup was seeking a $40 million investment from the financial powerhouse.
Following the damaging allegations, veteran journalist Katty Kay, who left a lengthy career at the BBC to join Ozy just three months ago, quit in disgust on Wednesday, saying the claims were ‘serious’ and took her by surprise.
Ozy founder Carlos Watson, the former CNN and MSNBC personality, slammed the Times report as a ‘hit piece’ and said the company’s board of directors, including hedge fund billionaire Marc Lasry, were already aware of Rao’s actions.
Ozy, whose well-heeled investors include the Berlin-based media powerhouse Axel Springer and Laurene Powell Jobs’ Emerson Collective, did not immediately respond to an inquiry from DailyMail.com on Wednesday.
Ozy Founder Carlos Watson speaks onstage during Ozy Fest 2018 at Rumsey Playfield in Central Park on July 21, 2018. Company claimed to have sold 20,000 tickets to a venue with a capacity of 5,000
Katty Kay (left), who left a lengthy career at the BBC to join Ozy just three months ago, quit in disgust on Wednesday, following allegations that Ozy COO Samir Rao (right) impersonated a YouTube executive on a call with potential investors
Founded in 2013 by the telegenic Watson, Ozy pitched itself as a dynamic upstart news site, dedicated to serving diverse urban millennials with global mindsets.
The news site promised that it was the place to discover the ‘next big thing’ and ‘undiscovered rising stars’, vowing never to cover topics that other national sites had written about — a claim that a new investigation from NiemanLab has called into question.
The company moved aggressively into the lucrative realm of TV deals and live events, touting an online readership that it claimed was large and growing quickly.
In 2016, Watson launched the first Ozy Fest in Central Park’s Rumsey Playfield, drawing a crowd of just 2,000.
Watson vowed that the annual event was going to be ‘the new South-by-Southwest,’ but insiders say that the struggling festival was more akin to the infamous Fyre Festival.
By 2018, Ozy was raising eyebrows with the claim that it had sold 20,000 tickets to the event, although the Rumsey Playfield has a capacity of just 5,000.
‘We had never proven the ability to sell even 5,000 tickets,’ a former employee told Forbes. ‘When we were trying to sell 5,000 tickets we were begging people to buy them. We were putting them on discount, discount, discount, giving them away.’
Ozy claimed that it sold 20,000 tickets to its 2018 festival (above), which was held in Central Park’s Rumsey Playfield, a venue with a capacity of just 5,000
Featured speakers at OZY Fest 2018 included (from left) Christian Siriano, Isaac Mizrahi and Roxane Gay
The 2019 festival was cancelled at the last minute by Mayor de Blasio, who also called off the New York City Triathlon due to a searing heat wave
Then in 2019, Watson made an ambitious gamble by scheduling Ozy Fest for Central Park’s massive Great Lawn, vowing to sell 100,000 tickets and promising appearances from comedian Trevor Noah and billionaire entrepreneur Mark Cuban.
Planning for the event got off to a rocky start after the company was busted using an image of the much more popular Global Citizen Festival in ads for the festival – a bait-and-switch that Ozy execs blamed on a rogue team member.
Carlos Watson: The former MSNBC star turned entrepreneur who founded Ozy
Watson, 52, was born in Miami to a Jamaican father and a mother from Virginia, and went on to graduate from Harvard University and Stanford Law School.
A fast-rising star, his early career included stops at Goldman Sachs and McKinsey & Company.
His TV career launched in 2002 as a political analyst for Fox News and CourtTV. He was also a CNN commentator for two years.
By 2009, Watson had secured an anchor gig with MSNBC, where he co-hosted an afternoon segment with Contessa Brewer.
The show was short-lived, and Watson launched Ozy in 2013 with Samir Rao, his fellow Goldman Sachs alumn.
Ozy has garnered some $70 million in venture capital backing, but the latest allegations raise questions about the site’s business performance.
Meanwhile, behind the scenes, the promised lineup for the event was more sleight of hand, according to former employees.
‘The way they’d get guests on their TV shows and guests on their festivals is they’d lie and say they already had commitments from X, Y and Z,’ one employee who worked on Ozy Fest told Forbes.
‘And they were like, oh that person dropped out, oh that person can’t participate. But they never had those people to begin with.’
Watson’s vow to sell 100,000 tickets also seems dubious. Documents filed with the New York City Buildings Department showing the festival was only licensed to host 15,500 people per day of the two-day festival, according to Forbes.
Staging the event would have cost some $6 million, in addition to the millions Ozy likely spent on advertising, according to experts consulted by Forbes.
Thus, insiders say, it came as a relief when the festival was cancelled at the last minute by Mayor de Blasio, who also called off the New York City Triathlon due to a searing heatwave.
Likewise, Ozy’s 2020 festival was canceled due to the pandemic. But earlier this year, the company appeared to swing back into action with a virtual event, featuring Cuban, Malcolm Gladwell, Dr. Anthony Fauci and Condoleeza Rice.
Then Ozy announced plans for an in-person event to be held next month in Miami — though it appears to be postponed indefinitely, and the festival website does not list any scheduled lineup.
Miami officials told the Daily Beast on Tuesday evening that the Miami event, which was set to be held next month at Maurice A. Ferré Park, has been postponed.
Ozy claims that Chevrolet and American Family Insurance are sponsors of the Miami event. Neither company responded to inquiries from DailyMail.com after-hours on Wednesday.
Ozy CEO Carlos Watson, pictured speaking at a panel discussion in 2018, attributed Rao’s actions to a ‘mental health crisis,’ but did not elaborate further, the Times reported
Meanwhile, the company is facing a potential FBI probe over Rao’s alleged misrepresentations to potential investors.
Google, YouTube’s parent company alerted the FBI about what happened on the conference call when Rao allegedly pretended to be Alex Piper, YouTube’s head of unscripted programming, to vouch for Ozy.
Goldman Sachs believed that Alex Piper, pictured above, was speaking with them about Ozy’s success on YouTube
Federal investigators reached out to Goldman Sachs but Watson told The Times that Ozy has not been contacted by investigators. The FBI’s field office in San Francisco would not confirm nor deny the existence of an investigation to the Times.
Watson reached out to Goldman Sachs and also confirmed that Rao was the one on the call, apologizing profusely for his actions. Watson attributed Rao’s actions to a ‘mental health crisis,’ but did not elaborate further, the Times reported.
He added that Rao took time off work after the incident and is now back at Ozy.
‘[Rao] is a valued colleague and a close friend,’ Watson told the Times. ‘I’m proud that we stood by him while he struggled, and we’re all glad to see him now thriving again.’
Following the Times report, Ozy said that it had suspended Rao and engaged law firm Paul, Weiss, Rifkind, Wharton & Garrison to conduct a review of the company’s business activities.
It is not the first time that Ozy has been accused of deceptive representations regarding its online readership.
According to a 2017 BuzzFeed News report, Ozy was buying web traffic from ‘low-quality sources,’ meaning it had paid to have its content pop up on a reader’s browser without the reader’s knowledge,
Ozy responded by saying that it had been buying the traffic to build its email lists and had not billed advertisers for those views.
Despite boasting that its site had 50million monthly viewers in 2019, traffic measurement service Comscore found that Ozy only had 2.5 million people throughout some of 2018, but only 230,000 people in June 2021 and 479,000 in July of this year.
Watson said the Comscore numbers were ‘incomplete’ and didn’t include figures coming from platforms outside of the website.