Mixed Signals: What digital media’s most notorious scandal says about the business

Nayeema Raza: Ben, are you nervous about this episode?

Ben Smith:
It’s something I want to be really careful talking about, which is not always my approach. I’m Ben Smith.

Nayeema Raza:
I’m Nayeema Raza.

Ben Smith:
And this is Mixed Signals from Semafor Media.

Nayeema Raza:
Today we’re going to talk about one of the biggest scandals in the history of digital media. This is OZY Media, its founder Carlos Watson, has been sentenced to almost 10 years in prison for defrauding investors. It’s a story that’s very revealing about the business of traffic, advertising and investing, and it’s also a story that Ben, you broke in 2021.

Ben Smith:
Yeah, it’s a remarkable, tragic end to the whole thing.

Nayeema Raza:
And today we have Brian Weiser joining us to discuss all this. Explain who Brian Weiser has been.

Ben Smith:
Yeah, Brian’s one of the leading analysts of the media business and really the business of the business. He was at GroupM, the media buying firm for a long time, and now he is out on his own at Madison and Wall.

Nayeema Raza:
Yeah, excited to see what he has to say. We’ll be back after the break. So Ben, maybe before Brian joins us, let’s give a bit of background on what happened at OZY Media. This is a company that had been around for a long time. Carlos Watson had been an operator in the media world, anchored a show on MSNBC. Give us a layout of the story.

Ben Smith:
Yeah. Carlos was this ambitious, charismatic lawyer, banker who turned his attention to media and used relationships in Silicon Valley to raise money fast. Lorraine Powell Jobs was the key investor, and basically Lorraine Powell Jobs invests in something and people who want to get close to Lorraine Powell Kobs happily invest in it, which was an interesting insight into media. And what it initially presented itself as was the thing investors most wanted, which was a millennial-focused youth media company that wasn’t about silly catalysts, that wasn’t about worrying economic populism, but was about a diverse coalition of people who were basically pro-capitalism and pro-billionaire. Carlos, I think was identified at times as a Republican, but it was the kind of nonpartisan, optimistic, future-oriented politics that if you were a Silicon Valley investor in 2012 seemed great.

Nayeema Raza:
And in fact, one of the things that they wanted to do was write about stories that no one else was talking about. That was one of the key editorial imperatives driven by Carlos Watson, who himself had obviously never run a newsroom or a media business before, which is a bizarre mission orientation for a newsroom.

Ben Smith:
I mean, we all, I suppose, want to do news stories, but the thing about it, it was a pitch deck of a media company. They employed a lot of people, many who worked incredibly hard, but it was not a brand that you encountered in the wild. And so really for the next decade, people who were in the media business always thought, “Huh, that’s interesting. They’re clearly out there, they’re publishing a lot. They employ people that you might run into who seem to work really hard, but you never encounter their work in the wild, and it’s a little hard to figure out what they’re actually doing.” And it was a bit of a curiosity, but not something anybody spent a lot of time thinking about.

Nayeema Raza:
Yeah, because you didn’t come across it. And yet there were all these powerful people involved. JP Morgan was a big advertiser sponsor. Lauren Powell Jobs, who you mentioned, Axel Springer came in with I think 20 million at some point. Mark Lazarie, the hedge fund guy was on the board. There was some kind of relationship with Oprah Winfrey. So this is a story of power and influence in media, and a lot of people were pulled in. In some ways. It’s a little bit the Theranos of media, though I think as you wrote in your 2021 piece, no one’s drawing actual blood in the media business.

Ben Smith:
And it’s probably worth keeping in mind here. Most of the people and the people who are legally the victims in court here are ultra, ultra rich people who really should have known better. And so I think the question of how dire was this crime, is a reasonable one to ask.

Nayeema Raza:
So let’s talk about the crime in particular and the story that you broke in 2021, which really is about the pinnacle of this fraud, and involves a phone call, a Google executive who is not on the phone call, but is thought to be. Explain to us how you got the story and what the story was.

Ben Smith:
It’s one of those ones that came from somebody who had learned of it not as a central character and just thought it was the craziest thing they’d ever heard and wanted to tell a journalist. And so I was just the reporter who got the tip, and I initially honestly didn’t... It just sounded too outlandish that OZY, in trying to raise money from Goldman Sachs, they had impersonated somebody on the phone. The basics of the call was OZY wants to raise another round of financing, and they want to prove that they’re doing great on YouTube, which they’re not, with a interview show that Carlos hosts. And so they can’t put the real YouTube executives on the phone because they’ll be like, “Well, we don’t really have a relationship with those guys,” so they impersonate this YouTube executive named Alex Piper and Samir Rao, Carlos’ junior partner in the business is the one doing the impersonation as Watson tells him what to say, coaching him.
And that turned out, as I reported, just to be the most extreme instance of a series of lies they told investors, mostly around, “Oprah is going to lead this round. Google’s going to lead this round. We made $40 million this year,” I mean, just all sorts of inflated numbers and claims that they were using to extract money from investors. And honestly, there’s this famous thing about securities fraud that’s actually, that everything is securities fraud, nothing is securities fraud, really hard to get indicted for securities fraud. But as Matt Levine from Bloomberg wrote at the time, this is securities fraud.

Nayeema Raza:
This is securities fraud. Well, and now the court has ruled on that and found that it is in fact fraud. But it was a series of lies, this is the pinnacle of it, impersonated this YouTube executive, Alex Piper. For years, Carlos Watson had in advertisements quoted himself like the fact that, “Oh, it’s Amazon’s first talk show, the Carlos Watson Show,” when in fact, it was just a YouTube show that was uploaded to Amazon.

Ben Smith:
They were buying advertisements for themselves and say to the Los Angeles Times, and then they’d quote, “As the Los Angeles Times said,” when it was their own advertisement in the LA Times, and it ranged from scammy stuff that was on the edge of what a lot of media companies were doing in that era to very, very extreme fraud, which is what he wound up getting convicted for.

Nayeema Raza:
So we should note that as soon as you broke this story on OZY Media in 2021 in the Times, that was many months after the phone call actually happened?

Ben Smith:
Yeah. Several months after.

Nayeema Raza:
As soon as that happened, Carlos Watson started attacking you on Twitter saying, “Oh, Ben Smith has a conflict of interest. Buzzfeed actually met with OZY Media to try to buy the company in the late 2010s,” I believe, and he made this claim that you were not well-placed to cover the story. And then also, we should note that OZY sued you personally and Semafor during the trial alleging that you stole the idea for Semafor from OZY. The Columbia Journalism Review said this didn’t make much sense. They said they don’t think that Semafor resembles OZY in any way, shape or form, but do you care to respond to that?

Ben Smith:
Yeah. In our view, there wasn’t any truth to the lawsuit and to its claims, and they withdrew it. And as I disclosed in the first story, I had been at Buzzfeed and had actually introduced Carlos to Jonah Paredi, the CEO of Buzzfeed, on my way out the door. I wasn’t a big part of their conversations, but I did. I have actually basically not talked or written about this at all, partly because we were in a lawsuit, partly because I felt that Carlos had mistakenly, I think, thought that I had some agenda here, really. And ultimately, I was the reporter who got a tip about this phone call when I was at the Times. Yeah, I don’t know, and actually it’s a story that I feel really sad about in a lot of ways I think. When I saw him get 10 years, I think that’s a lot of time for a guy who was not a threat to anyone. And obviously I think the government is punishing him for not pleading guilty when he was obviously guilty and for showing no remorse in court, but it’s a tragic outcome.

Nayeema Raza:
So one of the things about this story that I think is so interesting is that it’s not just a story about OZY Media, it’s a story about digital media, and it’s a story about the powerful bubble of investors, of advertisers, of media operators in this world, right?

Ben Smith:
Yeah. I mean, the thing about scams and the reason that scams always captivate us and are so interesting isn’t necessarily because the scammers themselves are such colorful people. It’s because of the way they hold up a mirror to their victims. And these things are always ultimately about their victims. And I think the thing that is so interesting and revealing about this is what it says ultimately about the business we’re in about media and about what people wanted to be true and why they were drawn investors, advertisers, journalists who went to work for it, why they were drawn to this story and this idea, and to this person, when if you stepped back, it was pretty clear that the emperor had no votes.

Nayeema Raza:
Yeah. Well, to discuss that, to discuss what it reveals, we’re going to be joined by Brian Weiser. He was the global President for Business Intelligence at GroupM, which is a key media buying agency. That business did have a partnership with OZY, but Brian had no involvement with that. He is though one of the best regarded media business analysts in the world and currently runs a consultancy, Madison and Wall, so is a perfect person to break down this story with. So let’s have Brian join us.

Ben Smith:
Brian, thank you so much for joining us.

Nayeema Raza:
Hi, Brian.

Brian Weiser:
Thanks for having me.

Ben Smith:
Yeah, I don’t think we’ve ever actually talked about this story, although I think we lived through it a bit in parallel.

Brian Weiser:
Indeed we did, because I was watching it unfold in real time and was not terribly surprised when your article came out.

Ben Smith:
When did you first become aware of OZY? Were they on your radar?

Brian Weiser:
I mean, in a very general sense, but not in a very specific sense. They’re one of thousands of companies out there.

Ben Smith:
And how were you, let’s say in the early 2010s period, before the meltdown of OZY and of that whole sector of the industry, how were advertisers looking at Buzzfeed, Vice, Vox, the set of which OZY was a member?

Brian Weiser:
Yeah. I don’t know. It really didn’t come up. Buzzfeed, of course, did, but OZY would, I mean, frankly, I would’ve thought what you’re talking about Wicked or something, I don’t know. It just wasn’t something that came up. So I don’t think, I mean, yes, there was this association with Oprah that you were vaguely aware of, but nothing specific. I don’t think they ever had the scale of inventory to really do a lot with. That doesn’t mean they couldn’t sell it. And now let’s also keep in mind, there were a lot of shenanigans in digital advertising in general through the 2010s.

Ben Smith:
Yeah. Tell us a little about that.

Brian Weiser:
Well, I mean, the best example of shenanigan might be an audience extension buy where the client doesn’t understand that it’s an audience extension buy. So the three of us right now, without too much difficulty in about a week, we could create ourselves a little a hundred million dollars media business.

Ben Smith:
Let’s do this.

Nayeema Raza:
That sounds great.

Brian Weiser:
Yeah, yeah. All right.

Ben Smith:
Explain. How do we do this?

Brian Weiser:
The best way to make a hundred million dollars is to start with $101 million.

Ben Smith:
Okay.

Nayeema Raza:
Oh, okay.

Brian Weiser:
No, but the reality is that we could go in, get our own seat on an exchange, which is this thing that’s used to buy access to inventory programmatically using tools like DSPs, demand side platforms. And so basically you can put up a tent somewhere on Madison avenue and say you’re an ad network, it’s not that hard. And you could have some special branding like say, a logo of a friendly robot. I’m thinking of Rocket Fuel, which is maybe the most extreme. There is nothing wrong, illegal at all, to be clear. I’m not saying Rocket Fuel did anything wrong or bad, but they were maybe the most extreme early player. They had lots of great tchotchkes. They promoted themselves really well, they branded really well, but at the end of the day, they’re an ad network, they’re just buying other inventory then repackaging it. So you could do that in ways that clients don’t fully understand. And basically you could present yourself as selling a lot of inventory that targets this super narrow niche and maybe left out of the terms and conditions explicitly saying that you are going to go and buy other inventory from other publishers. If the client didn’t understand that that’s how this was working, there’s nothing prohibiting you from doing it, there’s nothing illegal. But shenanigans.

Ben Smith:
And that’s where OZY actually, I mean specifically had gotten into trouble, and Buzzfeed wrote about this a few years before they went down where they had a big ad deal with, I believe it was JPMorganChase. And I think, again, the tent that they had set up was reach influential young, well-educated millennials who were the decision makers of the future in this shining context. But of course, they didn’t have that many people reading them and so they instead were paying to have the ads display on pop-unders, not even pop-ups, but the pop-unders that are like, you close all your tabs and you realize there’s a bunch of weird ads.

Brian Weiser:
That’s a whole other level of shenanigan. Yeah.

Ben Smith:
So it was a high level of shenanigans. I mean, did you at the time think, you know what all of these companies... Because I was at Buzzfeed at the time, and I think we had a lot of readers, people loved our stuff. I think we were actually, maybe in retrospect, maybe we should have done more shenanigans. But was your view and the view of the wizened ad business types who were looking at all these companies, super skeptical of all of them, and it was almost hard to know which one was a scam and not, or did you think, “Oh, some of this is real and this is the future, just some scams around the edges”?

Brian Weiser:
I worked in agencies from 2003 to 2011 before going back in 19 to 23. And that means I learned this, you’re either a cynic or you’re not paying attention. I still remember so clearly a 2015 investor call that Procter & Gamble had for one of the quarterly earnings, AG Lafley had come back, and I remember he was talking about digital advertising, how it’s so cheap, it’s so inexpensive to get all this reach. It’s like, do they not realize that the only way they’re getting cheap inventory like this is because they’re getting a bunch of crap? And obviously they learned the next year that, yeah, that’s what it was.

Nayeema Raza:
But all of this stuff, I mean, these shenanigans, for example, another one, and we should note that pop-under scandal was not just OZY, but places like Bustle, etc, were also engaging in this.

Brian Weiser:
Widespread.

Nayeema Raza:
It was widespread. And then Ben’s lamenting his failure to apply those shenanigans to Buzzfeed, that was doing well.

Ben Smith:
We were doing it for real.

Nayeema Raza:
We were doing it for real. But even on YouTube, the Carlos Watson show, I believe, was buying advertising on YouTube that would allow the show to play as an ad, and then that would result in a YouTube view, even though it was an ad view, if that makes sense. And you can skip over it, et cetera, so you could skip it in five or 15 seconds. So I’m so surprised, I mean, it’s a dumb question maybe, but why do these advertising units exist? Why is there not greater sophistication in the ad buying market to prevent against these things or in the distribution market to know what a view is versus isn’t?

Brian Weiser:
Yeah. Well, it’s gotten better to be clear, but I think you go back to then the 2000s and early 2010s, digital was held on a pedestal as something different and perfect, and it was targeted and it was a holy grail, and it was like... No, it was only for those who didn’t understand or didn’t get into the weeds on this stuff. So I think though, that sophistication improved dramatically starting around 2016. Certainly there was an investigation that the A&A, the Trade Association of Marketers, put forward around rebates and non-transparent trading practices. And although it was maybe a little overstated in terms of what it meant for agencies, it really caused marketers to realize that they needed to pay a lot more attention. And those of us who might have been yelling and screaming saying, “Hey guys, y’all might want to invest some more time in this,” they were ignoring it. And then they realized, “Oh yeah, we really better not be sponsoring any more beheading videos on YouTube. That might be bad.”

Ben Smith:
It was actually great because after the advertisers stopped sponsoring them, the beheadings totally stopped.

Brian Weiser:
Well, I think though, and we’re still seeing ramifications of this stuff playing out with the whole GARM issue in the US House Judiciary Committee. So these issues are still playing out today that are consequences, GARM was founded in fact, in part because of marketers realizing the shenanigans that were going on specifically around brand safety, and they’re really interrelated issues in terms of fraud and lack of transparency and brand safety.

Nayeema Raza:
Were marketers really unaware of it? I mean, they have an incentive to be unaware of it though in some ways?

Brian Weiser:
Yes and yes.

Nayeema Raza:
Okay. Can you talk about the second part of that?

Brian Weiser:
Well, I mean, back to the whole point that if you could claim to your boss that you managed to save a lot of money and reach the same audience, you’re a hero. And when it comes out after like, “Oh, we actually didn’t really reach people,” I mean, you could say, “Well, who knew? Nobody knew, couldn’t have possibly known.” At the top of companies, they typically wouldn’t have known any more either. So I think it was something where you could get a pass.

Nayeema Raza:
Let’s take a quick break and we’ll be back with Brian after this

Ben Smith:
This week on our branded segment from Think with Google, I spoke with Google’s VP of marketing, Josh Spanier, about their new quantum computing chip and the practical uses of state-of-the-art innovations for marketing. There was some major news about Google cracking quantum computing with something called the Willow Chip. What does that mean for marketing?

Josh Spanier:
Quantum computing is incredibly exciting. It’s a little bit complicated. So the simplest way I would say this is the Willow Chip that you referenced enables Google’s new computers to crack a mathematical problem that would take a supercomputer billions of years to solve in less than five minutes. That’s pretty remarkable, and about as much as I want to say about quantum technology, because I truly don’t understand it whatsoever. But what I can speak to is how Google as a company has always put innovation at its core and is investing in new technologies which flows through to marketers. So just in the AI space, there are new real tools that marketers can use right now. Two I really, really like are Veo, which is our text to video generation tool. It’s available, it’s real, you can use it right now as well as Imogen, which you can do text to just images. The amount of time that we are saving ourselves, the amount of creativity that we are unleashing by using these tools, which came from original investments in data science, machine learning, architecture, chip invention that Google has been doing is really, really exciting. And marketers can rest assured that those technologies are going to get better and richer from quantum on down.

Ben Smith:
And are people using these tools now for creating ads?

Josh Spanier:
Marketers absolutely are. They’re using Google’s technology built on our Gemini large language model, but adapted with Veo and Gemini Gems and Imogen, as I referenced, to actually create ads right now. We’re using them in our campaigns. Some of the pixel ads you see around the web were created using our own Gemini products.

Ben Smith:
And where can people find out more about the chip and about the impact of GenAI on marketing?

Josh Spanier:
Head on over to thinkwithgoogle.com, and when you are there, search for an article called Google Lighthouse. This will give you a whole load of information about how we’re using generative AI within Google’s tools to make ads right now. And for quantum computing, you can just search on Google for quantum computing or Willow Chip Gemini.

Ben Smith:
Thanks, Josh.

Nayeema Raza:
You said you weren’t surprised by Ben’s story. Explain why you weren’t surprised, Brian.

Brian Weiser:
In the wake of the murder of George Floyd, we saw the world’s largest agency, advertising agency holding companies rush to announce commitments to spend money in support of minority owned and Black owned in particular, media. And it was a rush. Numbers were put out without... And this is across the industry, it’s not any one place, and it was independent of whether or not any of it made sense. And more to point, I kept arguing that if the point is economic inequality, this isn’t the way to do it. There’s all sorts of ways to game the system if you’re going to do it just a straight spend number, and you’re going to lead to a lot of inefficient spending because there’s just not that much inventory based on the definitions everyone was using. Because most media inventory lives with conglomerates or with a handful of large technology companies that are publicly held who would never qualify under any definition. And so I certainly was wondering, why is no one focusing on the economic beneficiaries of spend, which would require much more complicated calculations, but it’s totally doable, and they’ve actually created a little framework for how one would do that. But anyways, we saw a lot of shenanigans that followed and well, OZY was one of them.

Nayeema Raza:
You’re talking about the period after the George Floyd murder, et cetera, but I mean, Carlos Watson had been raising money since the mid 2010s, right? I mean, I know the GroupM spend that you were not involved in happens in 2021, but actually I think there was something captivating about him beyond, I mean, maybe it was also appealing to him that he was a minority, but there was a lot of money going into this business well before that fact. And Lauren Powell Jobs steps down from the board in 2019, so maybe there’s a resuscitation of the business, but certainly Carlos Watson has claimed that the reason he was prosecuted when so many others aren’t for their scams, et cetera, his argument was that he was quote, too Black for business. He launched a website around this. So I’m just curious how you explain the interest and shininess of Carlos Watson before George Floyd.

Brian Weiser:
Oh, and that’s a really good point, and he was different. He played the game more aggressively I think, that every early stage startup plays, and I think you could draw more connections to Theranos than anything else.

Nayeema Raza:
Right.

Ben Smith:
Yeah, it’s interesting. One of the things about the story that I often think is it was in many ways a crime without particularly sympathetic victims. Like your friends at GroupM wasted some money, and I’m sure many people will weep for the holding companies and some of the richest people in the world who should have known better got defrauded of tiny fractions of their personal wealth. But the only people who I felt were really angry and had reason to be angry were other Black media operators, Roland Martin, first of all, and most in my ear on it, who felt like, wait a second, there was this moment when places like GroupM, which is an agency which is directing spending, had seen in Carlos, they had seen something that they liked better than Roland, who among other things, was serving a more working class audience, at least that was Roland’s view.
And that in some sense, I think he felt himself and he runs a media company whose audience really aimed at Black people mostly on YouTube, I think he felt like he, and I don’t think wrongly, that he was really the victim of the whole thing, and to the extent that somebody was getting hurt, it was that media companies were so eager to invest in Black owned media that they... And Carlos had somehow positioned himself as the recipient of that. Were you in on those conversations at GroupM when that was going on?

Brian Weiser:
Well, I was not part of the US investment team. I had a global role inside of GroupM, and this was very much a US issue. But I would say this, and your way of framing who the victims are, I don’t disagree with, but I’d argue again, let’s take it back a step. The purpose was not to spend money for the sake of spending money, the purpose was to attempt to address centuries of economic injustice, right? Let’s go high level here. And so is the solution just spend money with Black owned media? No. Let’s be thoughtful about this, was my thinking. And so I would argue that if you have a dollar of spending to support the advertising industry, would you rather see it go to Jerry Bruckheimer or Shonda Rhimes? All else equal, you’d rather go to Shonda Rhimes in this world, nothing against Jerry Bruckheimer

Ben Smith:
And as a consumer, frankly, but okay.

Brian Weiser:
Maybe, but let me follow where this goes because you know that you’d end up with so many more economic participants who are diverse, who have been historically marginalized. Now go to this framework that everyone’s using of spending on Black owned media, or not Black owned media, it doesn’t apply because whether it’s Jerry Bruckheimer or Shonda Rhimes, they’re all working for conglomerates, but why should we care whether it’s going to the conglomerate or not? We care about the economic beneficiary of the spend. I thought the whole framing was wrong.

Ben Smith:
And then one of the things that struck me, and I was just to put this in context, there are almost three or four different misleading things OZY did. Early on, they told their investors they were going to get scaled. They weren’t. Then they were doing these run of the mail ad scams in the mid 2010s. And then as you say, they pivoted very, very hard to being a social justice company when that was where the revenue was essentially. But I wonder if just to put all of that stuff in context, if this is in your experience, a permanent feature of the media business, this level of wishful thinking on the buy side or if we’ve just lived through a particularly insane period.

Brian Weiser:
I think that it’s a little bit of both. I think that there’s always going to be an opportunity for a bright, shiny object. I mean, think about the whole metaverse thing. That was ridiculous, but it’s not that there’s not a there there over a multi-decade period of time, but that brands thought this was something that was actionable in the near term was pretty ridiculous, and it was pretty obvious. Now, by contrast, it was also pretty obvious that AI and its application advertising is... No, that’s real, right? But I think that many marketers have a hard time separating fluff from reality. I think because at the end of the day, the people whose responsibilities are to allocate resources into the advertising industry and support entities, media vehicles that depend on that spending, their day jobs are fundamentally political. They have to create a bully pulpit, if you will, internally to attempt to persuade their colleagues around why they should do something for a best practice. These are political jobs more than anything else. They can’t get all the details down.

Ben Smith:
So honestly, when you’re in the news businesses, I’ve been so frustrating to realize that there are people who... And you’re saying, “No, we’re doing something real that you should want to advertise on and support this business, and there’s this scammy thing over here, and what are you doing that the decision is being made deep, deep in some company where you can never from the outside reach in and figure it out.” But there’s another feature of that that really I found across this story that there was a conspiracy of silence around first, I mean, it’s always true in scams, if you get scammed, you’re embarrassed. And the investors were embarrassed and did not want to talk to me about it when I was reporting on it. The people when OZY had basically scammed an advertiser in the mid 2010s and we reported on that, the people in the agency, the marketing agency, don’t want to talk about that because again, their boss is going to find out.
The CEO is going to find out, that’s embarrassing. And then when there was this fake call with Goldman and with YouTube, neither of those companies particularly wanted to talk about it. Goldman had gone way down the road. Goldman, the most sophisticated people in the world, had gone way, way, way down the road into investing in a company that was outrageously lying to them. They just barely caught it the last second. And so, I mean, everybody looks like an idiot and they’re embarrassed. And I’m curious the extent to which all of these shenanigans are happening because of these funny incentives to keep them a secret.

Brian Weiser:
I think that’s definitely real. I think that this came up a lot again on this issue around transparent or non-transparent trading practices with respect to the broader advertising agency and advertising industry. I call it complicit client syndrome. The incentives of the client might be very much in line with the agency, let alone the media owner, but maybe not with the rest of their internal stakeholders. And that becomes a bigger problem. So basically, the day-to-day client, the person spending the money, has to keep the secret even from their colleagues because they need to work their systems and they need to maintain this aura of whatever, because so many decisions that get made in this industry are subjective. And if you don’t have a veneer of not infallibility, but greatness, you can’t persuade other people to do things, you can’t attract people to come and work for you. You can’t secure resources.

Ben Smith:
This is a funny business we’ve chosen, Brian.

Nayeema Raza:
But I think it’s also, I mean if you think about it, like Carlos Watson obviously sentenced to almost 10 years in prison, so criminal, but also fabulous marketer. I mean, he was a fabulous marketer in the sense that he was really driving the value of his business. And it reminds me a lot of having spent time in Silicon Valley, a number of businesses that were spun up around marketing where their cost of consumer acquisition was even higher. At times, they were losing money on every sale, but they were able to just get really great earned media around their founders, around their... You see this all the time, companies that IPO’d and are now worth less in the money they raised, right?

Brian Weiser:
Well, I think about this a lot, but here’s the thing, I think there is a difference, and I would not put Carlos Watson in the realm of great marketer, given that it turns out he was actually lying. Truthful hyperbole, and obviously this is in the Trump era, is more than a thing, but truthful hyperbole has always been somewhat acceptable, and maybe Trump is the most extreme manifestation of it we’ve seen in many cases, not that he doesn’t lie, but it’s usually truthful hyperbole on any given topic. I think that there is a point where you go too far, it’s not defensible. And I think that that’s the difference between Watson and OZY and a lot of other startups.

Nayeema Raza:
Isn’t it also how much runway you get if you’re successful in the long run? Because a lot of these businesses, it’s like you lie, you lie, you lie until you make it. Some of them, they make it, some of them, they don’t.

Brian Weiser:
Fake it until you make it. Absolutely. But I think that’s the difference. If you’re actively lying, there’s spin, there’s truthful hyperbole, and there’s lying, and they’re different, I see. But I mean, you’re right, many people will lie. And that was, again, back to the Theranos point of view. They said, “No, this is normal.” It’s like, “No, no they were actually going way beyond,” and that’s why those were different situations.

Ben Smith:
But I would put a footnote on that. In both of these cases, Theranos, OZY, you could imagine a situation in which they do manage to sell the company before anybody catches on.

Brian Weiser:
Absolutely.

Ben Smith:
I think across the history of startup acquisitions, you have acquisitions where somebody buys them and then realizes what they bought is an empty vessel and write it down, and such is life. But you could totally have imagined somebody buys Theranos because ultimately, I don’t know, maybe you can get the little things out of the blood in smaller quantities. I mean, they were very small. It doesn’t seem crazy, and somebody will figure it out and they buy Theranos to do it, but maybe they develop it separately and Elizabeth Holmes looks like a genius and gets credit. And similarly, OZY, there’s actually a great CJR podcast on the OZY story Susie Bennett-Karam did, and she reported, and I think I won’t confirm this, but I was vaguely connected to it, that BuzzFeed’s main interest in OZY was really in a conversation with Lorraine Powell Jobs, that Watson appeared to be able to deliver. But so there’s a world where that happens where Lorraine Powell Jobs puts in money, Buzzfeed acquires OZY, and everybody looks like geniuses. And Carlos, who I think maybe not a great marketer, but maybe a great salesman.

Brian Weiser:
Yeah, that’s a better way to put it.

Ben Smith:
Could have gone on to a very successful career. I mean, I do find it an incredibly sad story actually. Like he’s going to jail for 10 years, that just seems very out of proportion with what he did to me.

Nayeema Raza:
Yeah. Do you think... We’re heading into this moment now, Brian, in media where everything’s around authenticity, right? Digital influencers have commanded this idea of authenticity. They have real followers who will follow them anywhere. In many cases, podcasts are the new Buzzfeed, Vox, Vice, it seems. How do you see the media business approaching that? And is there a growing sophistication around this market, or is it?

Brian Weiser:
No.

Nayeema Raza:
No?

Brian Weiser:
I don’t think so. I mean, you guys have a podcast. I’ve started a couple of podcasts. I can’t tell you with any accuracy how many people are listening?

Ben Smith:
A billion.

Brian Weiser:
There you go. No, you can say, here’s what... When it comes to the commercial side of it-

Ben Smith:
That was truthful hyperbole, right?

Brian Weiser:
There you go. Yeah.

Ben Smith:
Because it’s a number.

Nayeema Raza:
Sure.

Brian Weiser:
Maybe not, maybe not. I think that when it comes to the commercial side of it, first of all, I think that you can say, “Here’s what my reporting is telling me, and here’s what I think it means, you be your own judge.” I keep pointing out the idea, Machiavelli, the marketer, said it best that a prince who is not himself wise, cannot wisely be advised. So anyways, okay, so then from the content perspective, you could totally be making up who you are. You could claim to be authentically yourself and not be, so, I don’t know. I don’t think that there’s authenticity.

Ben Smith:
Now that’s a different podcast. That’s a very existential issue.

Brian Weiser:
But I don’t believe that we’re in an authentic world, is what I’m saying.

Nayeema Raza:
Is it just that there’s too much money to go around? And so those days, those glory days of network television ad spends are over and there’s just too much money to go around so people are just funneling money into whatever seems hot at the moment, whether it’s the Metaverse or podcasts or OZY, and it’s all ballooning through marketing spend?

Brian Weiser:
That’s one way to put it. I mean, but I think the money is out there independent of the inventory for the most part. And so yeah, then there’s new ways to create commercial assets. There’s new ways to sell, there’s different approaches, and everyone wants to compete for a piece of the money that’s out there.

Ben Smith:
So two questions. First, if you are looking at this brave new world in which podcasts are the new Buzzfeed, OZY, Vice, whatever, what are the smartest people doing? What is the actual way to not get ripped off and have a lot of influence in that world?

Brian Weiser:
So the best example I can think of is around 2010 or 2011, I actually covered Facebook as an analyst when they were about to go public, and the best thing I heard about a company that was using Facebook was how they explained how they justified using Facebook spending. And if you remember the 2000s, the metrics were terrible, reporting was terrible. They described using Facebook as a marketing vehicle as measuring a black hole. They said, “You can’t see the black hole, but you can create signals to identify things around the black hole to infer where the black hole is.” And so they created their own signals to identify those things. And this was a company that was spending hundreds of millions of dollars a year with Facebook, and they found ways to make it work in the mid 2000s such that it was one of those things that gave me some confidence. Oh yeah, marketers will figure out how to measure it.

Ben Smith:
And basically, are you ultimately selling this stuff? Is the black hole moving things around?

Brian Weiser:
Well, yeah, there you go. But I guess that’s the point. So media mix models or marketing mix models are tools that marketers can use and probably should use a lot more of. We’re in this world where there are so many black holes for spending. The marketer doesn’t really understand how to optimize across platforms if they don’t have these tools to begin with. Now, it gets really, really hard when you’re talking about podcasts with hundreds of listeners in my case, or billions in yours. But the point is that it could be really hard, and so it becomes a very subjective spend. I also argue that marketers will ultimately make choices based on lease battle alternatives. So they could spend X thousand dollars to sponsor my podcast or X million dollars to sponsor yours, and they could decide X number of units on mine and X number of units on yours, and they can choose between them, but it’s a subjective choice at the end of the day.

Ben Smith:
So you designed us a great scam for the mid 2010s where we spend a hundred million dollars to buy inventory and take a hundred million dollars to spread advertising around that industry and lose a million dollars on our genius business. Today, if you were to go hang out on the sidelines of an influencer conference and advise influencers on how to scam advertisers, what do you think the good scams are? Who’s the next? What is the form of the next OZY going to be?

Brian Weiser:
Well, that scam still works, by the way. I didn’t continue with how you play out that scam, which can still work right now. So you can basically say you have a hundred million dollars of revenue to your investors. It costs you a hundred when to get there, but the fact that you have investors, whoever cite a valuation metric on a multiple of revenue, that’s waiting for scams, that’s the entire venture industry. You should never, ever, ever, ever... Can I pound the table? You should never, ever value a company on a multiple of revenue because it’s always scammable.

Ben Smith:
Sounds to me like you’re blaming the victim here.

Nayeema Raza:
So it should be on a multiple of EBITDA or of profit or?

Brian Weiser:
And the problem is, when companies don’t have profit, it’s hard. You have to do DCF. There’s a whole process for evaluation.

Nayeema Raza:
Of course.

Brian Weiser:
And it becomes super subjective because it’s all theoretical, but I would argue that’s better than a multiple of revenue because the revenue is scammable.

Ben Smith:
Okay, but I want a more specific influencer scam. What is the... Do you think it’s just going to be they buy lots of scale basically?

Brian Weiser:
Yes, exactly.

Ben Smith:
Pretend, yeah.

Brian Weiser:
Exactly. I’m going to say I’m going to buy a bunch of followers.

Ben Smith:
And how do you guard against that? I mean, for me, it’s always just been, and this was the thing about OZY that always pinged, I think for a lot of people, was you would just never see it in the wild. And when you say that to someone running one of these companies, they say, “Well, it’s actually for people who are more sophisticated than you or younger and cooler than you or richer than you, whichever, you’re not in our target.” But I don’t know, how do you guard against that particular variety of long-standing? This has probably been true since they were... And I once worked for a company that got into trouble for, they would print a hundred thousand copies of the newspaper and throw 20,000 of them into vacant lots and then tell the advertisers. So I mean, this is an old form of scam in a way, but how do you know what’s real and what’s not in our weird, ethereal business?

Brian Weiser:
Independent measurement is the only way to do it. And so the likes of whether it’s Nielsen, Comscore, Video Amp, I mean any of these entities out there that are providing any kind of measurement, it could be survey work. You could, again, if you’re about to invest capital, again, say it was a small digital publisher, it’s not tracked well by anyone. All right, well, could you actually do, I don’t know, get Ipsos to do a survey for you or something? You can find it. It might cost you money, it might take you time, but there are ways to actually find these things independently with a third party.

Nayeema Raza:
Yeah, I love that. Instead of giving us a scam, you’re giving us a good media business to build, which is better metrics and measurement businesses.

Ben Smith:
I’m not qualified though.

Brian Weiser:
There is a huge opportunity. There’s a huge opportunity for that.

Nayeema Raza:
Excellent.

Ben Smith:
Venture investors who are listening, call Brian.

Nayeema Raza:
I think so too, by the way, and especially in podcasting where there are... I mean Apple has dramatically changed the reality of podcasting by turning off automatic downloads if you don’t listen in five episodes. That has gotten... I mean, everybody across the industry saw a five to 10% drop, but there is definitely a market for that. And also at the same time, not because everybody’s moving away from CPMs to sponsorships, and so measurement is becoming a thing of the past as well.

Brian Weiser:
And at the end of the day, I know my experience is that when I have sponsors, they say, “Well, people I talked to say they heard this or they say they saw it,” and that’s their score. Okay, fine, then there’s a going price for that.

Nayeema Raza:
That’s definitely Ben’s score for this podcast.

Ben Smith:
Yeah, no, it is. So thank you. Thank you all for listening, you extremely sophisticated and important people.

Nayeema Raza:
The billion of you.

Ben Smith:
All billion of you. Yeah.

Nayeema Raza:
The billion of you. Thank you so much, Brian, for doing this. It was great.

Ben Smith:
Thank you, Brian.

Brian Weiser:
Thanks. This was fun.

Nayeema Raza:
All right, we’re going to take a quick break and we’ll be back to Debrief with Max Tani after this. All right, let’s have this debrief. And Max Tani is here with us. Hi, Max. How are you?

Max Tani:
Hey, I’m good. How are you guys?

Ben Smith:
Pretty good.

Nayeema Raza:
Good. Ben tried to extract the best scandals that we could get to and he couldn’t get any scams for us to trial in 2025, unfortunately.

Ben Smith:
Yeah, I mean, I am obsessed with this way in which scams reveal things about the victims, about the business, and to me, OZY did three different eras of that, and Brian really, he’s a leading ad industry analyst, and I think just sees how clearly the ad industry in different moments for different reasons, spent a lot of money on OZY, although not as much money as OZY claimed.

Max Tani:
It does seem like the ad industry always has to learn the lessons the hard way because they throw money at pretty much anything that might give a competitive edge to, whether it’s an agency or a campaign or on behalf of a client. It’s fascinating that they’re constantly performing experiments live for all of us to see.

Nayeema Raza:
That’s true. I mean, Ben, you wrote the book on traffic and obviously we’re early at Buzzfeed and ran that news division for so long. Did the OZY story reveal something different to you or just crystallize everything at a scale of danger?

Ben Smith:
I mean, honestly, when we were at Buzzfeed, people often accused us of this traffic can’t be real, but it was. I mean, Facebook was just driving, in that period, enormous amounts of traffic. And at some point it became frustrating to realize that advertisers, investors, journalists covering it often, really couldn’t tell the difference between what was real and what was fake. And that was happening while there was a cross-cutting pressure, which was that real traffic became less and less valuable because basically Google and Facebook created so much of it. And you look back and I think we were all obsessed with scale, and now we’re in this era when we’re obsessed with different things, we’re obsessed with having really clear brands. We’re obsessed with having really clear connections to our audiences and knowing who we’re talking about and that whole, if somebody came to you and said, “Oh, I’ve got a hundred million views a month,” you would say, “A, I don’t believe you and B, I don’t really care.”
And I think that’s this head-snapping thing that has happened, at least in the news part of media where there’s just a totally different audience metric. So there are other parts of media that are much more about scale.

Max Tani:
Do you think that one of the issues around the time that OZY was raising money, building itself as a business, and you were swimming in all of this traffic that people were thinking about online web traffic the way they thought about, say, Nielsen television ratings, that they just thought that maybe one web view was as valuable as one person or individual, and that one of the lessons of that era was that traffic is really cheap and can flow in insane bizarre ways that can be easily manipulated or were not as clear as maybe as the numbers made it seem?

Ben Smith:
Yeah, I think that is still true. I mean, I think you see people, and I think you had a story recently talking about people who are comparing YouTube views to Nielsen ratings, and they’re just really different things. Most of these social video views represent a couple of seconds maybe. On Twitter, you could just scroll past in the feed, you see it for a couple of seconds. The Nielsen number is the average number of people who are watching concurrently at any given time, so they’re not directly comparable, but one Nielsen person is a lot more person than one digital person. And then a lot of the companies measure them differently. And there’s a big scandal years ago where Facebook had to totally say, “Oh, sorry, we got the video views. Those numbers we gave you were all wrong.”
And there became a kind of cynicism, I think, in the business of just all these numbers are garbage and so we’re going to stop paying attention to them. I don’t think digital media ever really solved that. To some degree, YouTube and Meta and the big platforms dominate the business in part because at least I think advertisers can feel, and publishers can feel like at least I may not know what these numbers mean, but I can compare them within the platform.

Max Tani:
I think it actually gets to something that you were saying earlier, Ben, which is basically just at the end of the day, people should trust their gut and think, “Have I actually seen this anywhere? Do I actually know what the... Can I feel the impact in my life? Or do people I know talk about this? Can I perceive that this is moving things anywhere?” Which gets at the problem that Brian was talking about, which is the difficulty of finding good metrics and knowing how to understand them on the web.

Nayeema Raza:
Yeah, I feel like that’s called the stroke ego metric. Does the person advertising on your platform hear from their friends that they sound good or their ads sound good on the platform as opposed to this? But I think there’s some part of it, which is like what is going to drive traffic if the content itself is not organically driving traffic? Now, we live in a world where news organizations are relying on games, for example, to bring in new subscribers, and is that less of a person?

Ben Smith:
That’s more of a person, I think. I’m a more fuller person when I’m playing Wordle or when I’m reading some article. I would rather reach me through that.

Max Tani:
You’re also spending a lot more time than you are on an article.

Ben Smith:
Yeah. Totally. But there’s another real shift, I think, which is that in the social era, distribution was free, and those of us who figured out how to produce things that people wanted to share, and that was really the core inside of Buzzfeed, got massive free distribution. And it used to be you pay for distribution, it was a huge arm of the media business. You had hire printers and hire drivers or build broadcast towers and have all these people, and these were big expensive operations and marketing and distribution in the 2010s stopped being part of what you did. You made good content and it marketed itself. That is obviously still true to some degree and always going to be true, but I do think a big shift in media is going to be, in particularly... I think across media, you’re seeing companies spend more money to market themselves and to reach consumers in a much more fragmented ecosystem where you can’t totally rely on platforms for distribution.

Nayeema Raza:
But marketer, we talked about this with Brian a little bit, the marketer driven organizations come with their own challenges of what that means.

Ben Smith:
No, And in some way, OZY was... The YouTube advertising thing you described was in a way from another era of media, and I think this is how Watson defended it. It was like, and this was not what he was indicted for by the way, it was like, “No, that was just marketing. The New York Times pays to deliver the newspaper. We pay to deliver our video by purchasing it as an ad inside another video.” I mean, I think it’s a complicated and changing story.

Nayeema Raza:
I think one of the things that’s most fascinating to me about the Brian conversation was how much the marketers have an incentive to keep these things going until they don’t, until it’s a beheading video. But until then, if the money is moving, your boss is happy with what you’re doing, there’s a real incentive to keep the gravy train running.

Ben Smith:
And if you get scammed, you might quietly go and demand the money back, but you don’t want the CEO of the company that bought the ad to know you got scammed. And that’s a real issue, I think. And honestly, in any scam, people are embarrassed, the victims cover up the scams. It’s an old story.

Nayeema Raza:
The last thing I want to say, by the way, is this whole story just shows the overvaluation of big names in media, like the fact that Carlos Watson was valuing a tweet from Oprah at multiple millions of dollars, a tweet that got a thousand likes, or.

Ben Smith:
Yeah. Can we just pause there? This is maybe the most amazing part of the trial, and Susie Benicarum’s podcast at CGR does an incredible job detailing it. But the prosecution spent quite a bit of time focusing on, I believe what they called barter revenue, which was the idea that, well, I would’ve paid $50 million, apparently, for Oprah to tweet something about me, and she did it for free. So I’m going to book $50 million of revenue and tell my investors that I have $50 million. I mean, it was a very, very creative accounting.

Nayeema Raza:
And yet.

Ben Smith:
I would pay an imaginary 20 to $30 for either of your tweets.

Nayeema Raza:
Oh, really?

Ben Smith:
But only imaginary money.

Nayeema Raza:
Hey, it’s worth a lot more than $30, I think, Max.

Max Tani:
I’d say it depends on what I’m tweeting on your blog.

Nayeema Raza:
I mean, when you’re tweeting about Bill de Blasio’s plain seats, it’s pretty good.

Max Tani:
It’s pretty good.

Nayeema Raza:
It’s pretty good.

Max Tani:
Honestly. Sometimes it’s negative value. Often negative value for some of these companies that I’m tweeting about.

Nayeema Raza:
That’s true. That’s true. I think the other thing is actually your definition of important people really changes with time, and I think a lot of the important names that big media is chasing are no longer crazy relevant in this day and age.

Ben Smith:
I know. I think you should go after the new and the next.

Nayeema Raza:
That’s what I’m going to do in my next show, Ben. That’s what I’m going to do. That’s it for us this week. Thanks for listening to Mixed Signals from Semafor Media. Our show is produced by Max Tani and Shina Ozaki. With special thanks to Max Tumi, Britta Galanis, Chad Lewis, Rachel Oppenheim, Anna Pezzino, Garrett Wiley, and Joel Zern. Today’s episode was mixed by Steve Bone. Our theme music is by Billy Libby. Our public editor is...

Ben Smith:
Roland Martin, who I’m assuming is going to give me a call after this to tell me what he thought about it. I think he’ll think we didn’t go hard enough, but I’ll wait to hear from him.

Nayeema Raza:
If you like Mixed Signals, please follow us wherever you get your podcasts, and feel free to review us. If you want to hear more about the OZY story, you should check out the CJR podcast, the kicker, which did a great three-part series on this story. And if you like Brian and want to hear more of him and add to the 200 people that are currently listening to his show, check out Madison and Wall podcast or the Agency Business podcast, both of which Brian hosts, and we have billions of listeners, or billion? I can’t remember, Ben.

Ben Smith:
So hard to keep track.

Nayeema Raza:
We can afford to send some over. So hard to keep track.

Max Tani:
And if you’ve enjoyed this podcast and listened this far, I’m assuming you love media and are obsessed with it and should subscribe to Semafor’s Media Newsletter, which publishes every Sunday evening.

Ben Smith:
You get better and better at that every time, Max.

Nayeema Raza:
Yes.

Max Tani:
We’re just trying to keep it fresh and interesting, but it is true, if they’ve listened this far, they should be subscribing to the newsletter.