Let’s talk about Zeta Global Holdings (NYSE: ZETA), a company that bills itself as a “leading omnichannel data-driven cloud platform.” Translation: they collect your data, analyze it, and sell it to businesses that want to know how to sell you more stuff. Sounds innocent enough, right? Well, not according to a new report from Culper Research, which suggests that Zeta’s data pipeline might be less “cloud platform” and more “smoke and mirrors.”
Here’s our reading of the report—and let’s just say, it’s not flattering.
Consent Farms: The Digital Age’s Snake Oil
Zeta allegedly runs a network of consent farms—websites with names like higherincomejobs.com and unclaimedmoneyinfo.com that promise everything from job applications to stimulus checks. Spoiler alert: those promises are about as real as a $3 bill. Instead of delivering on these offers, these sites reportedly harvest your personal data under false pretenses.
Culper says these operations were supercharged by Zeta’s acquisitions of Apptness and Arcamax. Both companies seem to specialize in luring users with shiny distractions, then funneling them into a labyrinth of pop-ups and data forms. One gem of an example? A supposed job listing that’s nothing more than a dummy page designed to siphon your personal info.
The scale is mind-boggling: these websites reportedly pulled in 158.7 million visits from nearly 86 million unique visitors over the past year. That’s a lot of duped job-seekers, folks.
Round-Tripping Revenue: A Financial Magic Trick
If the consent farm allegations weren’t enough, Zeta also faces accusations of engaging in “round-tripping” schemes. Imagine you buy a product from yourself, sell it back to yourself, and then call it revenue. Sound fishy? It should.
According to the report, Zeta has “two-way” contracts with third-party data brokers and partners—some of which are also consent farms. A bankruptcy filing from Digital Media Solutions (DMS) even lists Zeta as both a major customer and supplier. That’s like paying yourself to mow your own lawn and claiming it as income.
And here’s the kicker: Zeta disclosed a critical audit matter in 2023 related to contracts where it’s both vendor and customer. Its auditors at Ernst & Young said they only sampled some of these contracts, which implies there are a lot of them.
Regulatory Risks: Déjà Vu All Over Again
If this all sounds familiar, it’s because it is. The FTC has already gone after companies like Fluent and MediaAlpha for similar practices, and those didn’t end well. Fluent’s stock tanked 65% after the FTC got involved, leaving it worth about the same as a used Honda.
Zeta’s CEO, David Steinberg, also brings his own baggage. Back in the day, he was at the helm of InPhonic, which faced its own fraud charges for—you guessed it—round-tripping and misleading customers. That company went bankrupt in 2007, and Steinberg seems to have brought some of those greatest hits to Zeta.
Why It Matters
According to Culper, Zeta’s consent farming operations are now responsible for a whopping 56% of its EBITDA. That’s a pretty big chunk of the company’s earnings tied to practices that could attract regulatory scrutiny faster than you can say “FTC subpoena.”
Oh, and about that valuation: Zeta trades at 7.2x revenue, a number Culper calls “eye-watering.” For comparison, Fluent—after getting smacked down by the FTC—now trades at 0.2x revenue. If the allegations stick, Zeta’s stock could unravel in short order.
Final Thoughts
Zeta claims it’s all about helping businesses better engage with consumers. Culper paints a very different picture: a company propped up by shady consent farms, round-tripping deals, and a history of regulatory red flags.
Is Zeta the next big thing in data-driven marketing, or just a house of cards waiting for a regulatory gust of wind? If you’re an investor, this might be a good time to grab some popcorn—and maybe a parachute.
Remember, this is our reading of the Culper report, but the dots connect in ways that aren’t flattering for Zeta. For now, we’ll keep watching as this digital drama unfolds. Stay tuned.
