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June 26, 2023, 11:35 a.m.
Audience & Social
LINK: www.theinformation.com  ➚   |   Posted by: Joshua Benton   |   June 26, 2023

Remember Ozy? The digital media site that claimed it had “50 million monthly unique users” and “25 million subscribers,” when it had, ahem, many fewer than that? The one allegedly comfortable enough with fraudulent behavior to invent a fake Google exec to talk to investors? The one whose founder and public face, Carlos Watson, currently faces federal fraud charges?

Ozy was an extreme case, but there is a looooong tradition of media companies stretching the numerical truth to make their success seem grander than reality allows. “We have 100,000 paying subscribers!” (But 95,000 of them paid 1¢ each — and 90,000 of them don’t realize that they have.) “We have 30 million monthly uniques!” (Though we had to count every theoretical person who might have seen one of our tweets to get there.) “Our clickthru rate is an astonishing 70%!” (We click on all our ads, all day long.)

It appears the social media world has now given us another extreme, Ozy-like case. A second-tier app named IRL — as in In Real Life — appears to have been faking nearly all of its users with an army of bots. As Mark Matousek reported Friday afternoon for The Information:

Last year, the CEO of messaging app IRL repeatedly said it had 20 million monthly active users, who chatted about shared interests and planned real-world events together. Today, a spokesperson for the startup said an investigation by the board of directors concluded 95% of those users were “automated or from bots.”

As a result of the probe, the spokesperson said the company would shut down and return capital to shareholders, two months after it suspended the founder and CEO, Abraham Shafi, for alleged misconduct. IRL raised $200 million from SoftBank’s Vision Fund, Founders Fund and others, before coming under scrutiny in a series of articles in The Information, which questioned its user number claims.

A social app is only as valuable as its userbase. If, in fact, 95% of IRL’s users were imaginary, we could be talking about a billion dollars worth of fraud, given that IRL was valued at $1.2 billion at its last round of investment in 2021.

Matousek has been on IRL’s case for more than a year, and he’s reported that, even beyond the bots, there was a question of definitions:

The issue seems to stem from Shafi’s use of a more expansive definition of active users than that of established social apps like Facebook, as well as emerging ones. These people told The Information they felt the company may have used an unconventional definition to make the app appear bigger than it is. Meanwhile, measurement firms such as Sensor Tower, which estimate app usage by tracking groups of mobile app users and other methods, show IRL has between 1 million and 2 million active users of its mobile app on a monthly basis.

And 20 million wasn’t enough: “IRL leaders have told some staff they aim to grow monthly active users to 50 million this year.” Whether that “growth” would involve more users or more creative accounting is unclear.

Look, this one social app doesn’t mean much in the grand scheme of things — just as Ozy was never more than a blip within the larger media universe. But IRL is another reminder to question the self-promotional stats that young media/tech companies offer — especially when they differ radically from publicly available data and especially when they’re unwilling to talk definitions or share any proof. (Does that daily email newsletter really have an 90% open rate? Reader, it does not.) Perhaps it’s just the news cycle, but extraordinary claims should demand extraordinary evidence — or else risk implosion.

I leave you with a few stray quotes from a January 2022 Business Insider piece headlined: “Abraham Shafi is the millennial cofounder of IRL, an app less than 3 years old that’s worth $1.1 billion. Here are his 3 strategies for scaling and leading.”

“I don’t believe in outsourcing your messaging,” he said. “People feel authenticity — you can’t manufacture it”…

…he’s put much thought into what it means to lead a billion-dollar company, saying this is why he went into tech — it’s “the closest to freedom. It’s the closest to a meritocracy.”

Running a business just requires discipline, he said. “That discipline creates freedom,” Shafi added. “If you build something amazing, you can get the audience of anyone.”

Photo of a badly missed dartboard by Mike Burns used under a Creative Commons license.

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