Dear Bloggers, Don't Hold Your Breath Waiting for Your Mode Media Money

Just a few months ago it seems like a good chunk of the American-based internet imploded when Mode Media shocked the blogging community by collapsing on itself, leaving a mountain of debt and unkept promises.

It was the kind of shut down that gave people Enron-like jitters — no severance or Cobra health plans, no time to collect your belongings and build resumes — just get out and leave your laptops in the office, because those would eventually be sold for pennies on the dollar to help make up for what some industry insiders have said is likely close to $50 million. Millions of that is owed to the thousands of bloggers, contributors, and social media talent Mode peddled to get rich —rich enough to buy a company house in the Hamptons and write it off as a company expense— and those bloggers are small, independent female business owners more often than not. The company's CEO, Samir Arora, was said to have okayed company dinners costing upward of $40,000 (champagne doesn't come cheap, does it?), jet expenditures, and over the top luxuries that would eventually help tip the company beyond a financial breaking point. Mode didn't screw over corporate America, they screwed over every girl next door just trying to turn a buck on her earned work.

Giant numbers that seem nearly impossible to pay off with some secondhand laptops and office furniture, but if you've ever wondered what happens to Silicon Valley monsters who go under in a flash, the answer is simply that technology doesn't vanish. Email lists don't disappear. Contacts, agreements, and concepts don't just run off into the sunset.

“I was with Mode for about three years," shared blogger Misti Schindele of mistimichelle.com. “I used them as my exclusive advertising network, used them to get sponsored posts, and was a contributor for MODE.com. They owed me $1,200 when they shut down — so not nearly as much as other bloggers but when you count on that money every month, its a blow."

While $1,200 may seem like a lot of money, it pales in comparison to other bloggers who had entire networks of writers under their belt who are claiming losses as great as $200,000 when factoring in unpaid invoices for email lists, social media promotion, and other content distribution.

“They stiffed me for five months of advertising revenue including banners, pushdowns, full takeover ads, and a sponsored post with Target I was never paid for," said blogger Amber Murray of BeautyJunkiesUnite.com. “After I found out of the closure, I had to do investigative work and contact Sherwood Partners myself to ask about the status of my money. I was given the run around for months, and honestly just gave up after filling out their physical forms and online forms, stating exactly how much money I was out. I was told I would be paid after March when the assets were allocated to their creditors, etc. I honestly don't believe I will ever see a penny. To this day, Sherwood Partners has made no attempt to contact me or explain what is going on."

Samir Arora by Amy Sussman/Invision for Mode Media/AP Images

There's a reason for that — almost every blogger and content producer who was ever associated with Mode signed a TOS agreement that outlined them as a contractor, service provider — never as an employee or secured debt holder.

That means that in the hierarchy of debt satisfaction, the bloggers who made Mode a giant money machine will never see even a few coins from their losses unless there's an absolute miracle of unicorn proportions.

Mode has actually already generated some income — they've been selling off their assets in piecemeal versus the entire company to further escape the possibility of satisfying this debt. Selling individual assets (technology, email lists, etc) helps the company escape their overall liability, which no new company will ever want to take on. Any funds generated from these sales will go to satisfying secured and unsecured debts first (so literally, the company credit cards come way before the bloggers ever would). They've already sold millions in assets to companies based in Japan and depending on who you ask, those assets fetched anywhere from $20-50 million USD — more than enough to at least pay the “missing" salaries of disgruntled, debt-ridden former employees. But that's unlikely, because Mode is busy selling off as many American assets as possible now, and is more focused on repaying mortgages and other liens.

Mode Media as it once was

Industry insiders have reported Mode selling off their banner generation technology to another American media distribution group for $6 million USD (the deal is not yet closed), with additional assets seeing price tags of $100,000 and up. Theoretically, that's a lot of small mom and pop entrepreneurs who could have enough cash to keep their lights on, but the banks and more formal creditors will come first.

If you're wondering what this means to the paycheck you're missing from last fall, it means chasing it is probably a wasted lot of energy, but you'll take this as a lesson to never sign another agreement that outlines you as a mere “vendor."