Zeta Global (NYSE: ZETA), the self-proclaimed “AI-Powered Marketing Cloud,” has been spinning like a politician in a scandal. Accusations of shady practices, a public data breach, and a stock price in freefall have the company in full-on damage control mode. To top it off, they’re now sparring with short-seller Culper Research over claims that could make any investor’s stomach churn.
Consent Farms: A Growth Strategy or a Smear Campaign?
Culper Research’s scathing report, “Shams, Scams, and Spam,” accused Zeta of using “consent farms”—fake websites tricking users into sharing data with promises of job applications, stimulus money, or other non-existent rewards. Culper claimed this dubious practice fueled over half of Zeta’s Adjusted EBITDA in the past two years. The fallout was immediate: Zeta’s stock cratered 37%, dropping from $28.22 to $17.76 in a single day.
But Zeta is fighting back. The company issued a sharp rebuttal, calling Culper’s claims “misleading and false.” They clarified that Deloitte, not E&Y, serves as their independent auditor—a detail Culper reportedly got wrong. Zeta also downplayed the role of Apptness and ArcaMax in their revenues, asserting these two vendors contribute less than 3% of revenue year-to-date through Q3 2024. And as for the consent farms? Zeta flatly denies their existence, reaffirming their commitment to data protection and privacy compliance.
Data Breach: The Door Wasn’t Just Left Open—it Was Never Locked
While Zeta fends off allegations of deceptive practices, they’ve got another glaring problem: a data breach so amateur it’s hard to believe it came from a company selling itself as a secure marketing platform.
The Zeta Live 2024 virtual conference, promoted heavily with Shaq as a keynote speaker, inadvertently exposed a treasure trove of attendee information. A publicly accessible portal allowed anyone to view names, job titles, and companies of all participants. No hacking required—just a few clicks on “Community” and “Attendees.” For Zeta’s customers, it’s like discovering your locksmith left his keys under the mat.
This isn’t just embarrassing; it’s damning. Clients who trusted Zeta with sensitive data are now questioning whether their information is as secure as the company’s PR promises.
AI: Intelligence or Illusion?
Zeta has long touted its “patented AI engine” as the cornerstone of its marketing prowess, but critics argue it’s more fluff than function. Culper alleges that Zeta’s AI-driven marketing is little more than a spam machine, powered by questionable data from platforms like Disqus. Disqus, acquired by Zeta in 2017, collects user comments and repurposes them for email marketing campaigns. “Opted-in” data? More like “opted-into-a-mess.”
The report also points to Zeta’s reliance on election-season data from extremist blogs and betting markets, raising concerns about the sustainability of its growth. Culper argues Zeta’s “Zeta 2025 Plan” is tied to short-term election cycle gains, with no clear strategy for the future.
Stock Buybacks: Confidence or Desperation?
Amid the chaos, Zeta announced a $100 million stock buyback, with CEO David Steinberg calling it a “unique opportunity” to repurchase shares. CFO Chris Greiner echoed the sentiment, emphasizing their confidence in Zeta’s valuation. But critics see this as a desperate attempt to stabilize a nosediving stock rather than a vote of confidence in their long-term vision.
Regulatory Scrutiny and Legal Woes
Adding to their troubles, leading securities law firms like Bleichmar Fonti & Auld LLP are investigating Zeta for potential violations of federal securities laws. Allegations include questionable accounting practices, deceptive data collection methods, and overstated growth metrics. With regulators circling, Zeta’s leadership faces an uphill battle to prove the company isn’t the house of cards Culper describes.
Damage Control: Will It Be Enough?
Zeta’s rebuttal of Culper’s report is a step toward damage control, but it doesn’t erase the broader concerns. Between a public data breach, questions about their AI’s real capabilities, and accusations of short-term thinking, Zeta is fighting battles on multiple fronts. The company’s denial of consent farms and insistence on their commitment to data protection might buy them some time, but the market—and regulators—will demand more than words.
The Bigger Picture: A Lesson in Overhype
Zeta Global’s trajectory highlights the dangers of leaning too heavily on buzzwords like “AI” while neglecting the basics, like securing your own customer data. Whether they can turn this mess around or will crumble under the weight of their missteps remains to be seen. One thing is clear: the trust they’ve lost won’t be easy to rebuild.
Stay bold, stay curious, and remember—always read the fine print. Especially if it’s written by Zeta.
