Photo Credit: Outbrain
Because of the great size and resource disparity between Nubai Ventures, Inc. and Outbrain Inc., we have to at least attempt to reach parity through unconventional communication channels to reach who we think may be the right people. Outbrain’s information asymmetry as it relates to ad fraud and fraudulent bots unequivocally harmed Nubai’s small business and must be held accountable. Outbrain’s chosen strategic legal delay will be tested.
Either through negligence or outright fraud tolerance, we are sure Outbrain has hurt other small businesses, at scale. However, those entities probably do not know about it due to information asymmetry related to the complexity of how the ad fraud ecosystem works. Outbrain’s Board is ultimately responsible for Outbrain’s business practices, so this letter is written in the name of transparency.
If not activated already, Nubai formally requests that the Board of Outbrain investigate our lawsuit and the company’s business practices. (Nubai Ventures Sues Outbrain, Claiming Its Traffic Is Riddled With BotsI) If Outbrain has systemic blind spots, negligence, or fraudulent practices, it will fail to address critical issues under the current regime. We believe Outbrain is systematically harming small businesses like Nubai at scale with information asymmetry related to bot fraud.
Due to the recent and sudden resignation of Outbrain’s founder and Co-CEO, two weeks before our lawsuit filing against Outbrain and the lack of response to Nubai’s voluntarily evidence sharing and memos from the Head of Legal Affairs for Outbrain, Alexia Rosenberg, and a disproportionate resource disparity between a small business verifiably harmed by systemic bot fraud at Outbrain, Nubai Ventures reaches out to the Board of Directors in the name of transparency and governance responsibility.
We interpret the hiring of Nithya B. Das and her seasoned background in corporate governance as a need for Outbrain to have more robust governance, particularly in light of the prior Department of Justice criminal investigation of Outbrain, the sudden CFO resignation of Elise Garofalo in 2022, and the recent founder and Co-CEO resignation, after 17 years.
Yale University Professor Jim Chanos’ “Black Box Theory”
The most critical question raised in this letter is whether anyone outside the insider leadership at Outbrain knows who is purchasing over $600 million worth of clicks from Outbrain, particularly from foreign jurisdictions, and whose websites predominantly have masked domain registrations and obscured identities. The weight of evidence points to elevated risks associated with global ad fraud and illicit “fake click money” (SIVT) mostly goes from American clicks to foreign “click laundering” entities.
The “premium publisher” rented widgets are flaunted in the front, the fraud tolerance money goes into foreign jurisdictions, with masked identity, in the back.
The so-called premium websites, such as CNN or Foxnews.com, are only rented web real estate, but who is actually buying or fraudulently generating these clicks? Considering the size of the ad fraud industry ($143 Billion a year), this is an essential question for the Outbrain Board, regulators, clients, and small businesses, such as Nubai Ventures.
See THE HIGH COST OF FAKE TRAFFIC: $143 BILLION GONE
Outbrain should provide more transparency in revenue generation, particularly from outside of United States legal jurisdiction. For example, how much revenue is from search arbitrageurs, MFA, performance marketers, and other segments? We cannot find any evidence that the true character of Outbrain’s click buyers or click generators is transparent. One of the critical insights from Yale Professor and legendary short seller Jim Chanos, who helped spark Enron-related questions, was the “Black Box.” We do not see evidence that the public, Wall Street analysts, and investors understand Outbrain’s true business character beyond what “premium” widgets Outbrain rents with high TAC or traffic acquisition costs, such as CNN.com.
Who Are the Foreign Buyers Buying or Fraudulently Generating Hundreds of Millions of of Dollars Worth of Clicks from Foreign Jurisdictions with Masked Domain Identities?
Because no one can understand Outbrain’s true business character without understanding the majority foreign click to money/entity flow, trying to trace the American “click to foreign entity money flows” could be similar to a money laundering investigation, but we would call that a “click laundering” investigation.
The American “premium publishers” only mask the integrity of the revenue coming from foreign countries. So, under the Jim Chanos framework, it’s a BLACK BOX until disclosures or there is materially more information on these entities outside of United States legal jurisdiction, that are verifiably masking ownership. It’s logical to consider if Outbrain’s true business is materially based on search and MFA arbitrage, we need to consider regulatory and fraud risk arbitrage, exploiting non-obvious vulnerabilities.
Here is Outbrain Founder and Co- CEO Golai (who recently resigned) in Adexchanger (this top ad industry publication does a great job at surfacing insider knowledge and details that can help keep advertisers safe and smart):
The “click to revenue” flows are marked to mystery, at scale. This has massive implications on whether fraud risk is being transferred downstream, to small businesses without fraud or SIVT detection software or broader, American advertisers who are defrauded on the website page of MFA’s, once the fraud click arrives.
The Outbrain revenue from entities located in the United States is only 30%!
With a 80-90% private domain registrations or masked identity rate of Outbrain’s “Mo clicks, Mo money” partners, this is a severe problem. Additionally, many of Outbrain’s partners choose to mask the legal entity really behind them, in the privacy and terms of conditions sections of the marketers website.
Jim Chanos teaches a class on fraud based on Arizona State University Professor Marianne Jennings’ book The Seven Signs Of Ethical Collapse. She presents a 7-point checklist:
Jim Chanos only thought the problems at Enron were as deep as they were when Jeffrey Skilling resigned. Then, he said, “he knew it.”
The final point on the Chanos framework was were insiders and executives buying the stock. Chanos identified as a factor for red flagging Enron. Chanos flagged executives talking positive and bullish on conference calls to investors but the SEC insider buying/selling filings suggest a bearish orientation, something opposite. When a stock’s market cap is trading below cash on balance sheet, you would expect insiders to prove bullishness and optimism, by buying at $4 a share.
“Malware Dropper Website” when clicking on Outbrain ad on Daily Mail: Outbrain Publisher ID # publisher_id=00acf1331e98772b0cd7a4e3c61509b423
Outbrain cannot generate profits at a $1 billion revenue scale because of poor traffic quality and elevated fraud tolerance, which is materially relevant to revenue quality. Fraud does not perform sufficiently for the honest, good-faith spender to return (high-quality clients). It is illogical that two independent fraud security firms, Escalated.io and DoubleVerify, identified high levels of Sophisticated Invalid Traffic (SIVT) on Nubai’s Moguldom website, yet Outbrain, with its $1 billion in annual revenue, failed to detect any discrepancies. How is it possible that a small business owner, investing only $600 a month in bot fraud prevention, can identify this fraud when Outbrain cannot?
Uber vs. Phunware (2020)
Outbrain has attempted to falsely smear the character of a small business that has been verifiably objectionable and severely harmed by the systemic bot fraud tolerance at Outbrain. In Uber vs Phunware (2020), Phunware sued Uber for its refusal to pay for ad fraud or fraudulent downloads. There is existing legal precedence of a company accused of systemic ad fraud and selling fraudulent downloads or clicks losing in court. Uber became suspicious of systemic ad fraud and billing, and the greater morality of their fight against Phunware prevailed. See “Reed Smith wins multi-million dollar advertising fraud suit for Uber.”
Transparency vs Systemic Obfuscation
We do not have as deep pockets as the wallet of Outbrain, but our company has the truth, morality, facts, and the law on our side. We point to our lawsuit filing to do most of the communication here, and we hope the Outbrain Board members have read it. There are fundamental facts to this case that are unambiguous, no matter how Outbrain uses its size, resource advantage, and strategic delay tactics as leverage against Nubai.
After damaging Nubai Ventures Inc., Outrain seeks to leverage its gross size and resource disparity as a one-two punch–the first punch being severe damage to our advertising partners, reputation, traffic, and revenue. Based on patterns of behavior and governance orientation we have observed from Outbrain, we cannot be sure the Board of Directors have complete, unconflicted information.
First, we want to note two memos and evidence shared with Alexia Rosenberg, head of Legal Affairs, on November 30, 2023, Systemic Risks and Financial Implications in Nubai Ventures Inc. vs. Outbrain Inc. Lawsuit and on December 13, 2023, Constructive Evidence Sharing to Avoid Court and Media/Public Relations Confrontation.
We cannot guarantee that the Board has access to these memos, so we are sharing them here. Evidence was shared that significant advertising campaigns from Amazon, Target, and AT&T were removed from Nubai due to fraudulent bots from Outbrain, but proactive communications and evidence sharing were ignored. Outbrain claims to be so passionate about DEI but can’t even proactively embrace accountability related to unambiguous fraudulent harm to a Black American business?
Second, we want to share the report from Escalated.io, showing that over 92,000 fraudulent bots came from Outbrain over 45 days. The focus of the Board of Directors should be on whether this fraud came from Outbrain and how much harm the fraud caused, not whether a small business paid for clicks that are of suspicious integrity.
How much of Outbrain’s nearly $1 billion of revenue could be related to fraud? What is the aggregate fraud rate and how could small businesses be disproportionately, hurt? If the fraud came from Outbrain, why didn’t Outbrain’s catch the fraud before the client? If Outbrain can’t catch the fraud, what are the implications of Outbrain’s massive scale and mostly foreign-based revenue? (70%)
Outbrain has sought to mask its fraud tolerance and vetting of its partners. Over 12 months after not using Outbrain’s platform, we are still getting bots from Outbrain as the most prevalent type of bot fraud, which can linger on a website for months or years after the initial infestation.
Third, we want to share evidence of fraudulent bots from Outbrain causing material harm with our strategic advertising partner.
Open Source MFA and Ad Fraud Investigation Research
Finally, we are performing our own MFA and ad-fraud security research, open-sourcing, and unmasking Outbrain partners to provide more transparency to the media and advertising industry. So far, the research does not match up with Outbrain’s representations of MFA exposure from the earnings call on November 7, 2023 (MFA is only 5% of Revenue Ex-TAC).
We also want to point ad fraud researchers to a native advertising study by Changeadvertising.org that was taken offline but we have uploaded it to our server. One of the key findings from this report was to investigate potential conflicts of interest on who owns the partner websites since most of their identities are masked. The recommendation is as follows: Regulators should scrutinize and require financial disclosure of the financial relationships existing between these entities.
How Outbrain vets its partners is material to our lawsuit and the broader media and advertising industry. We will forensically unmask ownership of the click-buying or click-generating entities. This document will continuously update to provide greater transparency on Outbrain’s partner quality. Partner quality is not about the rented widgets on so-called premium websites; it is more about the click buyer or generator, mainly in foreign jurisdictions, with masked website identities.
Our lawsuit is not just about Nubai Ventures and the unambiguous harm Outbrain has caused from its fraudulent and negligent practices. We do not want other small businesses and advertisers to suffer the harm, business devastation, and disruption caused by Outbrain’s obfuscations and deceptive business practices.
We are confident that transparency, morality, and facts ( (and what our lawsuit in New York Supreme Court sets forth) will overpower Outbrain’s deceptions and deceptive practices.
Transparency, evidence, and facts will win this legal fight, not strategic delays and legal misrepresentations by Outbrain.
As of April 16, 2024 and a year after ceasing to use Outbrain, Contextly analytics shows fraudulent bots are still being sent to Moguldom.com, from Outbrain. We were informed by the bot security firm we hired that the most severe bot fraud, can be infested on a website for several months. It has been over a year. Outbrain’s strange corporate behavior on this matter is suggestive of a risk orientation that has something to hide.
After we are David vs Goliath-victorious over Outbrain’s weak strategic delay tactics and shameful “blame the small business victim” motion to dismiss filing, we will be celebrating.
Is Outbrain’s legal orientation and business practices doing the work of the Devil or is Outbrain a good corporate actor, with good governance and a Strong, independent Board of Directors?
The Research Scientists, Nubai Ventures Inc.
Freedom, Justice, and Equality
