Recently, Swedish media group MTG, which earlier acquired Zoomin, announced the next round of the virtually complete wrote down of the value of the Amsterdam based company: “MTG also reported a non-cash cost of SEK 164m [16 million Euros, $ 19 million] related to Zoomin.tv arising from the writing down of assets after a thorough review of the balance sheet following MTG’s acquisition of the remaining shares in the company in May 2018.”

In 2015, at the time of the acquisition, Zoomin had been valued at 88 million Euros, but by the end of May 2018, the Swedes acquired the remaining 49 percent for 6 million Euros (plus a debt of 11 million Euros). (You can watch the Zoomin-party video after the acquisition of 2015)

This is the story of the rise and fall of an ambitious Dutch online video company. A story filled with lawsuits, allegations of mismanagement and a boycott by YouTube that lasted for months. Zoomin's story not only illustrates the wider difficulties of the online video market, but also goes down in history as one of MTG’s more spectacular failures, which everyone in top management tried very hard to keep quiet.

Boxing grandmothers

It all began in 2000, when Dutch internet entrepreneurs Jan Riemens (photo above) and Bram Bloemberg (photo under) set up a video company that quickly became an international producer and distributor of short videos which were produced by thousands of freelancers. Zoomin responded to the rise of broadband internet by focusing on entertainment for the younger generation, with topics ranging from boxing grandmothers to games, sports, and e-shows, and even political and social news.

Zoomin quickly achieved success with large media companies eager to reach out to the younger generations with video. The short productions found their way onto major media outlets such as Yahoo, AOL, and MSN in the US, as well as European newspaper sites such as El País and Bild Zeitung. These publishers and Zoomin then shared the revenue from advertising placed around the videos.

When YouTube became the main distributor for video around 2006, Zoomin found itself having both a potential competitor and a new distribution channel. Zoomin went on to increase distribution on YouTube as revenues from the other partners started to decline due to increased competition. Zoomin also began distributing content via Facebook and Tencent in China. There was, however, one big difference: the tech giants determined the rules and revenues.

Zoomin grew rapidly, at least according to its owners. They claimed that turnover was increasing 36 percent annually as of 2010 and by as much as 70 percent four years later. During this period of time, however, actual numbers were never mentioned and according to sources, the company brought in less than 25 million Euros in 2014.

Around this time Zoomin managed to get the attention of MTG. The Swedish media giant, like so many other traditional media companies, was looking to strengthen their online presence. In the fall of 2015, they acquired a 51 percent stake in Adversa Media Groep BV in Amsterdam for 45 million Euros, which was controlled by Zoomin's CEO Riemens, CFO Bloemberg and German investor eValue. Zoomin was valued at 88 million Euros with MTG even referring to it as 'Europe's largest MCN (Multi-Channel Network – an operator of online video channels) with more than 2.2 billion monthly views'.

Broken expectations

They had been pioneering online video for twenty years with financial news sites and their Dutch press agency Novum, but the acquisition was the crowning achievement of both Riemens’ and Bloemberg’s career.

“Zoomin is a diamond in the rough”, said MTG at the time of the acquisition in 2015. In interviews, founder Jan Riemens promised a turnover of 100 million Euros by 2018, and stated ambitions to set up a global network of studios and begin TV productions.

Reality turned out otherwise. Only a year after the acquisition, in its 2016 annual report, MTG stated that its interest in Zoomin was worth 10 million Euros less than the 45 million the Swedes had paid a year earlier. This was supposedly due to 'disappointing advertising revenue'. It continued to get worse. A year later MTG wrote down a further 30 million Euros and, around the middle of 2018, unexpectedly acquired the remaining 49% at a valuation much lower than anyone would have expected.

There had been signs of impending doom. The Benelux department had already been shut down in February of 2018, following the brief seven month tenure of Country Manager Lucas van der Eerde. His sentiment upon leaving:  “I'm glad I left. Zoomin is a weird company.”  Staff members in other departments were also leaving.

Fraud and distrust

All the while, as the disarray at Zoomin continued unabated, the online advertising market was suffering a credibility problem. Advertisers were beginning to distrust the numbers provided by publishers. The ‘Adpocalypse Scandal’ reared its head in the spring of 2017, where advertisers boycotted YouTube because advertisements from major clients had been found on pages with sexual and/or violent content.

Zoomin, it turns out, was one of the worse transgressors. Despite positioning itself as a publisher of premium content that would be seen on premium publishers such as El País, Der Spiegel, USA Today, Daily Mail and other top tier publication, an important part of the advertising campaigns ran on relatively unknown websites with questionable content. As a matter of fact, a significant amount of Zoomin’s advertising inventory consisted of slots on networks where Zoomin was not able to determine where its clients’ ads would be seen.

When shown internal Excel documents demonstrating the discrepancies, Zoomin CEO Riemens acknowledged their authenticity, but in our interview with him explicitly denied the existence of fraud. According to Riemens, the media agencies were responsible and aware of the fact that their advertising ran on these lower quality websites.

YouTube suspension concealed

According to Riemens, Zoomin did not seek to emulate the “sick and fraudulent” strategy of YouTube. Riemens maintained that, to succeed on YouTube, fraudulent producers simply needed to cut up a (copyright-protected or illegal) version of a popular film, publish these fragments in separate videos, have 'robots' generate false visits, and based on (artificially) high popularity on YouTube, pocket the advertising income.

During the course of 2015, however, Zoomin came into conflict with YouTube after being accused of exactly that which Riemens had criticized. Zoomin was suspended by YouTube for nine months, which meant that the Dutch company was no longer allowed to open new YouTube video channels (thematic bundles of films). YouTube accused Zoomin of setting up ‘rogue channels’ with videos that did not contain appropriate/expected content, but rather cut-up films.

This suspension took place immediately after MTG had taken over, but neither Zoomin nor the publicly listed Swedish Parent Company reported this major event. Riemens denied any and all responsibility. According to him, the ‘fraud’ was committed by a British sub-contractor called Music Nations, a YouTube MCN and Zoomin partner. What Riemens failed to mention was the fact that Zoomin was a major shareholder of Music Nations and also a supplier of software to administer distribution of the fraudulent channels on YouTube.

Many lawsuits

During the past three years, Zoomin and Music Nations, which was owned by a then 18 year old boy in Sheffield, England, have been in a protracted legal battle, with a total of more than 10 lawsuits having been filed in the Netherlands, England, and Ireland.  Each side has accused the other of fraud with many of these cases still pending.  MTG has taken a ‘it’s none of our business’ stance during the proceedings.

The battle with Music Nations is not the only legal procedure in which Zoomin has been involved.  In 2016, Zoomin was also engaged in a legal dispute with Illuminata, another YouTube channel. Both sides were accusing the other of fraud, breach of contract, and other transgressions. After Zoomin lost several cases, they decided that the best strategy would be to simply buy Illuminata (much to everyone’s surprise) for 1 million Euros. Jennifer Feaster, the Director of Illuminata, commented, “We were overwhelmed by the brutality of Zoomin.” Shareholders and lawyers signed mutual non-disparagement clauses.

Similar problems had even been visible years earlier with a joint venture between Zoomin and TMG (Telegraaf Media Groep – one of the largest Dutch publishing houses) for joint video production and distribution. The deal, which was consummated in 2014, fell apart after only fourteen months. Six ex-TMG managers involved referred in interviews to Zoomin as unreliable, overpromising and unprofessional. Riemens, in return, claimed that TMG did not understand the online video market, that the editors were arrogant, and that the collaboration suffered from issues on the TMG board.

Payment conflicts everywhere

In addition to questionable advertising and business practices, Zoomin also had continual operational and management problems. Dozens of former – often very young - employees, suppliers, customers, and joint venture partners complained about misconduct and payment conflicts. Many commented that non-payment was a regular order of business for Riemens and Bloemberg, i.e. don’t pay every invoice, not all debtors won’t bother to fight or sue and pocket the gains.

Zoomin’s conflict with Microsoft is a salient example. In 2012, the company placed Zoomin on an internal international list of defaulters after ongoing conflicts over the settlement of advertising claims for videos on MSN. Former MSN director Jeroen Verkroost: “Zoomin systematically failed to honor their agreements. An employee from my team was once completely insulted on the phone, and that was the final straw. Microsoft was done with Zoomin.”

Zoomin distribution partners in Finland, Germany, France, Spain, and the US reported to us payment problems with Zoomin as well. Alan Sim, Executive Producer of Epic TV (a daughter of Finnish telecommunications company Elisa) confirms that he encountered considerable problems with an invoice for video production: ”I know that the invoice was for around 65,000 Euros and that it was outstanding for over 10 months the last time I checked. It was sent to a collection agency, everybody we talked to at Zoomin wanted to wash their hands of it and all staff were extremely reluctant to talk to us.”

Riemens’ claimed that all these complaining partners did not deliver as agreed, which stands in  contradiction with e-mails from international Zoomin managers to HQ complaining about unpaid invoices and asking why they weren’t being paid. Riemens’ response to some of the issues:  “Many of the problems were due to the fact that doing business internationally is administratively complex.”

Frugal by DNA

Approximately thirty former – most young - employees, who do not want to have their names published because of draconian penalty clauses in their work contracts, reveal a nightmarish work environment. Team members in tears as Riemens screamed, yelled, and insulted individuals in front of others, unpaid bonuses and commissions, no right job descriptions or personnel department, and acquisitions of habitual lying on the part of Riemens and Bloemberg. According to most individual, “It's all about the destructive stinginess of Riemens and Bloemberg.”

According to Riemens, frugality is not only necessary for survival, but also the result of his nature: ‘‘Yes, I am frugal. If the toilet is clogged, you can call a plumber to come and repair it for 120 Euros, or you can unclog it yourself. You have to explain that to people. Am I observed as stingy? Fine with me.”

The case of Aric Austin (ex-Yahoo) was yet another typical example. Arnd Benninghoff, responsible for MTGx (the digital division of MTG which also contained Zoomin) asked the American executive to strengthen the Zoomin management team at the end of 2015. Within eight months Austin had left after conflicts with Riemens and Bloemberg. Benninghoff and other MTG executives then proved to be powerless and even tried to silence the dispute.

After a recent court case in Amsterdam, Austin received several months of remuneration in arrears.  Austin commented after the case: “I’ve been around the block a few times in my life, but I’ve never seen an organization as poorly run and managed as Zoomin under the management of Jan Riemens and Bram Bloemberg. There’s no question in my mind that Zoomin saw non-payment and breach of contracts as simply ‘business as usual’ in order to gain advantage. The organization lacked a moral compass.”

Conflicts also frequently occurred with senior executives of large multi-nationals such as RTL, SBS, Sanoma and others who started working for Zoomin, which lasted for only short periods. Several executives said they found it incomprehensible that an international company functioned so amateurically. According to Riemens, these leaders of traditional media companies simply had too little knowledge of Zoomin's fast-moving online video market.

Final buy Out

Following a major re-organization at MTG in March of 2018, the Swedish company quickly acted on the ‘Zoomin problem’ as well. On May 23 it was announced that the Zoomin founders would be leaving with immediate effect and MTG would be taking full operational control of the company.  In the words of MTG Chairman Jørgen Madsen Lindemann, “…we will work more closely with Zoomin.TV to reach even more of the world’s most passionate audiences”.

Riemens and Bloemberg were immediately replaced by Dutchman Roger Lodewick, an internationally experienced sports marketer specializing in football and boxing, and the German Andreas Walker, who has been active internationally for eight years with MTG and before that for television group RTL.

Roger Lodewick, visited by us in his office, said he would not comment on matters of the past on Zoomin. He first wants to work out a new strategy for the company, restore a good relationship with MTG and move Zoomin from the little, old office to a more suitable space.

When asked why MTG completed the acquisition a year earlier than planned, the press speaker for MTG responded, “We see so much potential in Zoomin.TV and want to be a bigger part of the journey.”

 The numbers, however, tell a different story.  In 2015 MTG bought 51% of the company for roughly 44 million Euros and, in under three years, they bought the remaining 50% for cash consideration of 6 million + 11 million in debt.

 Could it be that MTG’s hand was forced by all of the scandals, lawsuits, and other bad press? Taking over the remaining 49% would be one way to sweep all of the embarrassing problems under the rug.

It remains to be seen whether Zoomin will ever be able to recover from the caustic influence of the founders. In the press release, MTG proudly reported that Zoomin is still ‘one of the world’s largest online video publishers’.

Only time will tell whether this continues to be the case. Meanwhile pockets are filled and still no one is prosecuted...

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Accountability

*) This article was written by Dutch investigative journalist Peter Olsthoorn, after following Zoomin's lawsuits for more than two years, and talking to more than forty people who were or are involved with Zoomin as employees, customers and suppliers in video production, distribution and advertising, and in some cases their lawyers. A Dutch version of the article was earlier published In Dutch quality newspaper NRC

Jørgen Madsen Lindemann refused a meeting to talk about Zoomin after a presentation about MTG in The Netherlands in July, 2017. MTG then promised but cancelled an appointment for an interview with MTG EVP Jette Nygaard-Andersen, 'Chairperson of the Board of Zoomin.tv' in the last instant, after receiving questions about the Zoomin operations. Facts,  and opinions where then very intensively discussed and checked with Jan Riemens and some staff members of Zoomin in October 2017, recorded by both parties.

Earlier published columns (in Dutch) on the Zoomin disputes and the struggle to publish, also discussed in the Dutch parliament:

February 4, 2018: Volkskrant and the chilling effect of Jan Riemens and Bram Bloemberg of Zoomin

March 11, 2018:  “Jan Riemens, according to me, really lies everything together”