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How Ozy Media, a startup with $70 million in funding and a star-studded list of investors, collapsed in 6 days

October 7, 2021, 7:35 PM UTC

Minutes after CEO Carlos Watson told Ozy Media staffers that the board was shutting down the company on Oct. 1, all of its internal channels went dark. 

Reporters’ interview notes in Google Drive disappeared. Producers’ work was no longer accessible. The emails, notes, Slack messages, and documents from the upstart media company’s eight-year run were suddenly, and instantly, gone.

So it came as a shock when, three days later, an upbeat Watson emerged on the Today Show with an announcement: He was relaunching Ozy with its one remaining board member, Michael Moe of GSV Asset Management. Later that day, Watson sent an email to Ozy’s now-jobless employees’ personal inboxes with a rare apology and a five-part plan of action. 

At that moment Ozy was facing a litany of issues, including a possible investigation from the FBI; a lawsuit alleging “fraudulent, deceptive, and illegal conduct”; and an admission that one of its executives, Samir Rao, had impersonated a YouTube executive on a call with Goldman Sachs. The entire board save one member had quit, and the company was also facing allegations that data describing its subscriptions, events, and audience had been exaggerated.

Yet Watson had a simple ask: Come back. 

While it took some employees by surprise, the grand gesture wasn’t out of line with the Ozy founder’s obsessive drive. Though Ozy Media and Carlos Watson’s fall from grace played out in public over the course of mere days, eight employees and a contractor who spoke with Fortune (most on the condition of anonymity because of fear of legal or monetary retaliation), reveal what things were really like inside the company. By their telling, Ozy’s legacy includes a trail of skewed data, burned-out employees, broken partnerships, and stretched-beyond-belief claims about the media company’s audience dating back to a year after the company’s founding in 2013. While Watson has used the word “heartbreaking” in interviews and his email to employees this week to characterize Ozy’s rapid crumble beneath his grasp, the employees who spoke with Fortune chose a different set of words: “Lies,” “unethical,” “embarrassing,” “guilt.” Ozy Media, Watson, and Rao did not return requests for comment.

But in a sense, heartbreaking may be a good word choice. Ozy was a media company founded on all the buzzwords that its charismatic founder seemed to embody: It aimed to be inclusive and innovative, and tell the stories that other media outlets were ignoring across every conceivable media platform. Its reporters didn’t need Ivy League pedigrees—and “lived experience” was valued. Watson, who is Black, sold everyone from Laurene Powell Jobs to hedge fund titan Marc Lasry on his vision. Watson raised millions and promised Ozy would transform the media landscape. There was just one problem: When Watson and his execs were unable to deliver on their promises, the “truth” seemed to fall by the wayside. 

A six-day downward spiral

The chaos began on Sept. 26, when the New York Times ran a damning story revealing that approximately eight months prior, Rao had allegedly impersonated a YouTube executive on a phone call with Goldman Sachs investors, which was reportedly considering investing $40 million in Ozy Media.

Staffers were blindsided and taken aback by the revelation. Katty Kay, a former BBC anchor and correspondent, resigned. Charu Kasturi, a senior editor at Ozy, posted on Twitter that he had resigned the day after the news and said that no managers had been aware of the incident. Kasturi didn’t respond to a request for comment; no employee who spoke with Fortune had been told of the event prior to the New York Times story.

Employees received an email that same evening, labeled “**Important,**” in which Watson described the story as “salacious and profoundly inaccurate.” Watson has acknowledged that the impersonation did occur but has repeatedly attributed it to Rao having undergone mental health issues at the time, in statements to both staffers and the press. Watson insists he had no prior knowledge of the impersonation until YouTube and Goldman brought it to his attention. Rao went on a leave of absence on Sept. 28 after the story broke and was later asked to step down.

But the deceptive conference call was the tip of the iceberg. The publicity triggered a flood of new revelations: Traffic data and audience reach figures had allegedly been stretched for years; partnerships had been fudged. Employees began speaking out on brutal working conditions. Investors began to resign from the board and advertisers distanced themselves from the company. “It felt embarrassing to be an Ozy employee last week, for sure, and I know many people felt that way,” one staffer tells Fortune.

Meanwhile, Ozy employees kept on working and waited to see whether they would get their next paycheck, or still have a job. Ozy set up meetings with each department on Sept. 27 and 28. During those meetings, Watson tried to explain the article and defend himself and the company, according to employees who were present. Watson insisted that all staffers have their cameras on during these virtual meetings, three employees told Fortune. It was a “try to sweep it under the rug type of thing,” one of them says.

Then, early Wednesday morning, Sept. 29, Watson hosted a companywide call that addressed many of the same topics, according to employees. After that—absolute silence from Watson until the afternoon of Friday, Oct. 1, when he announced that the board had decided to shutter the company (he was visibly upset as he spoke, according to one employee). Almost immediately after the call, employees lost access to their accounts, staffers told Fortune.

But on Monday, Oct. 4, several hours after his announcement on the Today show, an email arrived in employees’ personal accounts in which Watson said that he would relaunch Ozy and wanted their help. (Staffers shared the email with Fortune.) Watson vaguely apologized for making mistakes “that hurt our team, our investors, and our partners” and how it had played out over the past week. He went on to say that he had determined that closing the company had been “premature” and that he would restart the company’s daily newsletters and planned to relaunch a TV show and podcast season before the end of the year, as well as one Ozy Fest next year.

Watson said he would arrange a follow-up conversation with employees interested in returning later this week and wanted to address their concerns and for them to “feel heard.” All other staffers would receive a final paycheck on Friday, Oct. 8, including personal time off, and they would discuss severance and health care with appropriate employees. Watson also said that the company would hire an “external partner” to verify its audience data, and that it would publish this data every month. He mentioned that he hoped to improve the company culture, although he said that much of the press reports had been “neither accurate nor fair.”

“Here’s to better days ahead,” he closed the letter.

All the current employees who spoke with Fortune said they had no interest in returning or had already moved on to new opportunities. “At this point, it’s kind of a joke,” says one staffer. “I don’t know that more than two or three people have a ton of faith in the company,” they add.

An investor in Ozy Media, who asked not to be identified, told Fortune that there had been no contact from Watson or any members of Ozy over the weekend and that the firm was unaware he planned to reopen the company until his public statements Monday morning.

“House of cards”

To an outsider, Ozy’s very public collapse may have seemed abrupt—but many of its employees and contractors say things had been unraveling almost since the start.

“I’m honestly surprised it took this long for this all to come to light,” says a representative of a PR agency that once worked with Ozy Media, who spoke on condition of anonymity.

For one, there was the matter of misleading—and arguably deceptive—marketing and practices, which people familiar with the matter told Fortune had been going on for years.

In late 2017, Buzzfeed News revealed that traffic on some of Ozy Media’s sponsored content had been both purchased and fraudulent. (Ozy, at the time, confirmed that it had purchased page views, but said it had believed them to be valid.) A person familiar with the matter confirmed the accuracy of the Buzzfeed report and said Ozy had been purchasing traffic for its content since at least 2014. “Any sane person would have looked at that [traffic data] and said this doesn’t make sense,” the person says, later adding: “I’m guessing that nobody was asking those questions or talking to the employees.”

Former Ozy deputy editor Kate Crane recalls a conversation in 2015 with Ozy’s then-head of audience in which she learned that the traffic data being presented to investors and staff “didn’t line up” with company data.  

Newsletters had been going out to individuals who had never subscribed—sometimes more than once a day, according to people familiar with the matter. 

The PR agency representative recalls pushing Watson for data and proof to back up Ozy’s claims of traffic and engagement on its content; the rep had felt they were outsize. The rep says the firm was asked to issue press releases about joint collaborations with other organizations without confirming information with the partner first, to which the PR person declined. “This is bonkers,” the rep recalls thinking. “This is not normal corporate behavior.” The rep said the agency terminated its relationship with Ozy, as it was not willing to risk its reputation for Watson’s “house of cards.”

Playing fast and loose with norms was something that seemed to happen with some regularity, at least when it came to marketing Ozy itself. As a New York Times story alleged, Ozy placed advertisements in another outlet, then later attributed quotes to that publication. In another instance, Ozy ran a picture of Carlos Watson on the cover of its magazine, attributing to Deadline that he was “the best interviewer on TV,” when that was, in fact, a quote from Rao in the story. Two people familiar with the matter confirmed with Fortune that these sorts of practices had taken place.

Then there were assurances from Watson and Rao that A&E Network was running an Ozy show during one of its primetime slots, when it was not, according to the New York Times—which led to the resignation of TV producer Brad Bessey. Sharon Osbourne refuted Watson’s previous claims that she and Ozzy Osbourne were “friends” and investors in Ozy Media.

Some employees, particularly on the editorial side, say they weren’t aware of what was going on in terms of the misleading figures and statements. Joshua Eferighe, a former writer at Ozy who was discharged in July in what was deemed a mutual separation, claims he never had access to the raw audience data and newsletter subscription statistics. Instead, the editorial team was sent an email on Mondays from an internal team. “I knew that there was cutting corners and biting off more than they could chew, and that they had shoddy business practices. But did I know that they were lying out their mouths about everything? No,” Eferighe says. 

Nearly everyone who spoke with Fortune agreed on one thing: to say working at Ozy was difficult was an understatement.

“People said you push too hard”

While complaints of burnout are not unusual at a startup, Ozy employees describe a workplace culture that went far beyond routine long hours or high expectations. 

Former editor Eugene Robinson recently wrote at length about his experience at the company on Substack, in one instance describing one of the many times Watson fired him: “‘I can see you’re not committed to this.’ [Watson’s] hand was pounding the table in front of him. He pushed back and regarded me. ‘So we’re done.’ It was the end of October 2012 and I had been fired. A few days before Thanksgiving 2012 I got a call from him. The chat was convivial…I was rehired immediately after the holidays and so began a pattern of slaps and kisses that most grown adults only have to deal with when explaining to a judge that they need an order of protection.”

Others reported panic attacks and a culture of burnout.

Watson addressed some of the criticism of his management style and workplace culture in an interview on a morning radio show on Oct. 5. “I heard people say we work long hours. Yeah, you have to do that as a startup. I wish I could say that it was otherwise, but you do. People said you push too hard. I’m sure that there were times where I have pushed too hard. I think there are people who said that you bully. I’d say that’s definitely not true.”

On top of the challenging work conditions, Crane and another employee described a chaotic management style: Watson and Rao would set expectations or deadlines, only to drop them for another company imperative shortly thereafter.

Fueling this fire, say employees, was a stream of young and early-career employees and journalists—sometimes as replacements for higher-cost, experienced staffers Watson and Rao had cut ties with. “Someone who is guileless, malleable, fresh to the world with little to no work experience: They had more of a runway,” Crane says, adding that younger employees were less prone to push back against Watson or Rao’s demands. “They were less likely to ask hard questions, in part because they had less life and career experience. They were less cynical,” she says. 

If you look back at the history of a lot of the media organizations that started and eventually stumbled, including ones like Ozy and others, employees tend to be quite young and lack experience, with many of them coming directly from school or freelance careers, says Jeremy Caplan, director of teaching and learning at CUNY’s Newmark Graduate School of Journalism. “That vacuum, in terms of veteran leadership and experienced journalism leadership, sometimes comes back to haunt the organizations.”

Some of these Ozy employees had been motivated particularly by the company’s commitment to a diverse staff and news coverage, which three employees told Fortune were key reasons they had joined the company. Many of these staffers were people of color themselves. They also came from varying backgrounds. To Watson and Rao’s credit, said one former editor, who asked to remain anonymous, management wasn’t focused on hiring from Ivy League schools or on recruits with prestigious internships, but on writing backgrounds, hard work, and lived experiences.

But staffers’ commitment to that vision was exploited, according to Crane. “That’s part of the ugliness of what Carlos and Samir did, because the people working there came for a really honorable reason, and that’s part of what drove people to work so hard—because they wanted that [diverse] environment and they wanted that vision and they wanted that value system,” Crane says.

Despite the pressure, Ozy employees and reporters have produced some rigorous and innovative journalism, including investigations into a loophole in Facebook’s transparency rules and corruption in India’s health care system, and a yearlong project of reporting on life and the state of politics in each state for a week, to name a few. One of Ozy’s projects, Black Women OWN the Conversation, made in partnership with the Oprah Winfrey Network, won an Emmy in 2020. Ozy employees tell Fortune they were proud of much of the work that went up on its site and worked hard to adhere to ethical journalism standards. 

But over the years the company had lost a slew of senior editorial staff and had begun to shift more of its resources toward its branded and sponsored content, rather than its independent journalism—and also put more of the emphasis on its founder. Several employees and the contractor describe a company where its CEO craved to be the star of the show in all respects. 

Indeed, some staffers see a perverse kind of resolution to Watson’s scandal-fueled turn in the media spotlight. “It’s not hard to just see the irony of how everything in the past week has gone down,” one employee says. Watson’s face has emerged in all the major publications. That’s “what he always wanted.”

—Additional reporting by Megan Leonhardt

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