Ozy Media Bought Web Traffic Then Failed To Pay, Suit Claims
(Bloomberg) -- As Ozy Media’s business practices attract scrutiny, the embattled startup has faced multiple legal challenges over allegedly failing to pay its bills, including a claim from a firm it hired to boost its online audience.
In a lawsuit filed in 2018, a company called Boredom Therapy said it was hired by Ozy between August 2016 and February 2018 for “creating and driving traffic” to what it called an “internet mini-site.” Ozy didn’t pay for the services, which amounted to about $80,000, the suit claimed. The parties agreed to end the case in August, and no terms were disclosed.
The lawsuit shines a light on the secretive methods that some digital media companies use to juice their online metrics, which can help attract advertisers and investors. In 2017, BuzzFeed News reported that Ozy and other websites bought internet traffic that wasn’t being viewed by real people. A recent New York Times article also raised doubts about Ozy’s claims about its online readership.
On its website, Boredom Therapy describes itself as a media startup “with the goal of fighting boredom worldwide by engaging our readers with incredibly shareable content.”
Ozy and Boredom Therapy didn’t respond to a request for comment about the lawsuit.
It’s not the only legal claim against Ozy for allegedly not paying its bills. In a lawsuit filed last year, a firm called Regis Capital Group said Ozy defaulted on a merchant cash advance, a type of costly loan for small businesses.
“Daily debits from defendant’s bank account have failed or been rejected,” the suit said, adding that Ozy co-founder Carlos Watson personally guaranteed all obligations under the agreement. In the suit, Regis claims that Ozy owes it $506,250. Regis ultimately dropped the suit without giving further details.
A business called Urban Airship sued Ozy in 2019, saying the media company failed to pay about $3,300 for tech services, including helping send app push notifications. In December of that year, a court ordered Ozy to pay the amount that Urban Airship demanded plus interest, attorneys’ fees and others costs. Ozy paid it off by the end of February 2020.
In June 2019, Ozy was ordered by a New York state judge to pay more than $62,442 to Taboola Inc. that it allegedly failed to pay for part of a digital advertising agreement. Ozy had paid off the debt by late August 2019.
Ozy, which bills itself as a “modern media company,” has been in turmoil since the New York Times reported that co-founder Samir Rao impersonated a YouTube executive on a conference call with potential investors.
The fallout has been swift. On Friday, Watson resigned from the board of NPR. On Thursday, Marc Lasry, chief executive officer of the investment firm Avenue Capital Group and co-owner of the Milwaukee Bucks, resigned from Ozy’s board. Several big advertisers have suspended their spending with Ozy.
Ozy has also suspended Rao, who served as chief operating officer, and hired the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP to review its business activities. One early Ozy investor, SV Angel, led by venture capitalist Ron Conway, told the company it no longer wants the stock it acquired, according to Axios.
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