Epic & Kinetic Social Explains Why They Screwed Over Affiliates
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Epic & Kinetic Social Explains Why They Screwed Over Affiliates

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Remember Epic Media Group and Don Mathis, the guys who just a few months ago, in my humble opinion, basically sabotaged their own company in order to spin off another company and not pay any affiliates? Well, the original article became a viral sensation in the industry and thousands of affiliates spread the word about not being paid by Epic, and worse what seems to be scheme to start a new company before crashing their business.

Since the whole industry was talking about it, in part based to the columns written here, more and more people started to send Kinetic Social their bills for Epic, asking why they weren’t getting paid. On top of that more and more people started to wonder about if they should really work with Kinetic Media and their founders, in light of what seemed to be a complete lack of ethics. Do you want to really work with a company that has basically tried to build itself out of the ashes of a failed company that owes people millions? Do you want to take that legal risk? I personally think not.

We have never received any response from Don Mathis about this, let alone an apology for screwing affiliates out of millions of dollars. Instead, he has basically wiped his hands of his company’s failure, is wooing new clients under the guise of this new company, hoping that people will ignore that he was involved in what I believe to be of the worst failures in online advertising and marketing history in the last ten years.

In response, Kinetic Social has been nice enough to make up a history for anyone who wants to read it. I believe that the purpose of this letter is simple: we do not have to pay your bills, you are completely on your own, we took your money and made a new company, so tough fucking shit. It seems to me that they admit they are screwing affiliates and publishers hard, but take no responsibility for their actions to pay publishers who have not been paid.

Here’s some point that they make, and some they fail to mention:

1)   The company was founded at EMG, from the same people
2)   They took the company away from EMG right before they knew EMG was going to crash and burn, taking the “valuable” assets and leaving crap at EMG
3)   They used the same investors as EMG to launch this “new” company.
4)   They have the identical management staff as EMG.
5)   They fail to mention they are in the same offices, using the same computers, the same electricity, the same telephones as EMG.
6)   They admit they were a part of EMG.

What they ignore is that their actually history is well documented and while Epic was failing other publications were noting that Kinetic Social was being created, siphoning off assetts from Epic Media Group. This was not a “buyout” but an inside deal that allowed the founders and investors of the company to take the profitable assets of Epic Media Group, so that when Epic failed, that they would not be part of any collections process.

Kinetic was originally conceived in Mid-2010. Co-founder Don Mathis had just sold (merged) his prior company Epic Advertising to Connexus Corporation, now renamed Epic Media Group (“EMG”). After the transaction, he and Kinetic co-founder Rick Okin – formerly Epic’s CIO – were serving the new holding company in interim/transition roles, reporting to the EMG/Connexus CEO. And it was during this time that they made two crucial observations about developments occurring in the digital media world

  1. Social media was on the rise as an advertising vehicle, and it represented an opportunity for consumer engagement like nothing else in digital marketing. This seems obvious in retrospect, but in mid-2010, it was not clear when or even if social media would become a major ad vehicle for top brands.
  2. There was a high likelihood that social advertising optimization efforts could be substantially enriched with data gathered from outside the social ecosystem, using advanced statistical techniques … and no one was working on this “Big Data” opportunity with regards to social media in particular.

For Don and Rick, these trends were significant. Seizing the opportunity, they began an effort – initially under the EMG umbrella – that would ultimately yield Kinetic as it exists today. In the beginning, a new social media proof-of-concept subsidiary was stood up, and Don experimented with several combinations of people, processes and partners before the right business and strategic approach was determined. Rick, meanwhile, explored ways to marry advanced statistical analysis, predictive modeling and data with social optimization efforts. Along the way, Kinetic achieved notable milestones, for example, becoming one of the charter members of the Facebook Preferred Marketing Developer Program (PDM)®, and becoming one of the original four companies selected to participate in the Facebook® Credits program.

In the meantime, EMG was in the process of divesting assets to focus on its core ad network competencies. In late 2010, Don held preliminary discussions with the EMG/Connexus CEO and with investors regarding the opportunity to spin-out Kinetic as a Management Buyout. This led to the spin-out of Kinetic in 2011, backed principally by TA Associates, and with an equity capital contribution to fund operations and development of the independent enterprise.

As Kinetic prepared for its emergence as an independent company, Don and Rick were joined by other critical founding team members and executives, notably Carree Syrek from WPP and Mindshare and GroupM, where she headed that agency’s social media business, and Chris D’Orazio from Traffic Marketplace, where he ran premium brand sales. Altogether, 19 people (out of the original EMG/Connexus employee base of 310 personnel) came over from EMG to Kinetic at the time of the spin-out. By July of 2012, Kinetic had more than doubled its employee base since it was spun-out and independently capitalized.

While its subsidiary-predecessor first transacted business in 2010, it wasn’t until Q4 2011 when Kinetic – now independent of EMG – adopted the business model that characterizes the company today. Formally, Kinetic tracks its launch to the inception of the social media subsidiary at EMG. But to its team, Kinetic was really born when it was spun out of EMG in 2011, and much of the most important progress of the company has occurred year-to-date in 2012.

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Written by Pace Lattin

Pace Lattin is one of the top experts in interactive advertising, affiliate marketing. Pace Lattin is known for his dedication to ethics in marketing, and focus on compliance and fraud in the industry, and has written numerous articles for publications from MediaPost, ClickZ, ADOTAS and his own blogs.

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12 Comments

  • I think Don should post some pictures of his cars. Best bet for him is to claim everyone who is talking about payment issues is a liar who works for their competitor. Maybe he should consider dismissing all critics as haters. If he used this strategy maybe Pace would not be so hard on him.

  • Kinetic Social Scam says:

    I hope Kinetic Social can explain their press releases that say they were open in business in 2010, when Don was still the CEO of Epic? Oh, wait.. there was no Kinetic Social until October 2011.

    Scam.

  • James says:

    Just got an email from Epic VIA Accord Associates. Looks like they plan to pay 50% by March 2013… Plan looks somewhat dubious. 2% paid one month, then 1% paid another month, then the rest paid in March? Am I missing something?

    I’m owed just under 10k, anyone else in the same boat?

    I’ll let my lawyer know about this and see what he says. Thanks for keeping on this Pace…

    • James says:

      By the terms of the agreement, they are only paying $4.35 million of $8.7 million owed. Of that, they are paying a tiny $350,000 between now and March 15, 2013. Makes you wonder why they can’t pay more between now and then and how they will come up with the $4 million balance on March 15.
      Personally,I think they’re buying time for something. I also wonder why they don’t just file bankruptcy. I have known several prominent businesses that have closed shop, filed bankruptcy and reopened under a different name doing the same business within days. It seems to make better economic sense for them to do that. There must be a legal reason they haven’t.
      All in all, seems like a scam to me.

    • MdM says:

      Ya, I got the email too, What a piece of shit!!

  • Kenneth says:

    What a piece of work Don Mathis is! Do they really think that people want to give away 50% of what they earned while Don Mathis and Rick Okin hide all of EPIC’s assets within the new company.

    According to the Vito Lella “You are free to take whatever steps you wish but we are already getting numerous acceptances from creditors owed hundreds of times more than you. That should tell you something. I would strongly encourage you to speak to your attorney about it.”

    It is amazing how businesses get away with screwing people over so they can keep all the money.

    So the question is…. is this deal worth it or should we take a different approach to getting what is owed to us all?

    Kenneth

  • Jeff says:

    I hope they are at ASE!

  • Duh... says:

    Worst part is ex epic employees hunting for new business.

    Legal efforts wont get you far.

    Calling the police will get you further.

  • Gossip Girl says:

    Guys,

    Who wants a home address for any of the Kinetic/Epic guys? Don, Charlie, Rick or David? Might be useful to correspond with them at home?

    Let me know.

    Gossip Girl

  • TBone says:

    Man they have a pair of brass ball’s ! I can not believe that they are getting away with that . I know about 10 people that that owe money to. So not cool. Who on earth would be stupid enough to work for them?
    Great post as usual but upsetting..

  • Wow says:

    It seems that Don is, once again, trying to polish the turd that is his public persona: http://dhmathis.com/author/

  • Don says:

    A year has gone by and nothing has changed, Don is up to his old tricks telling the world that Kinetic didn’t spin out from Epic. Here are the facts, the VCs from EPIC are all shareholders of Kinetic. Look up the company on cruchbase, how the did Kinetic raise $48mm in 2005 if the company didn’t start until 2010? Also research the VCs from Epic and they now claim Kinetic as a portfolio company. Smoking Gun, Don is a CROOK!

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