Denver’s once-vaunted Factory Design Labs is losing its luster.
The 20-year-old ad agency with super-posh offices in Cherry Creek once boasted The North Face, Aspen Skiing Co., Sports Authority, Oakley and Callaway Golf as clients. The big names are gone, and now the agency has left several magazines with unpaid bills and raised the ire of media outlets and at least one company that paid Factory to place ads.
“They have burned a lot of people in the industry,” said Marc Peruzzi, whose Boulder-based Mountain Magazine lost $25,000 when Factory said it was unable to pay for ads that ran in the magazine touting Colorado ski areas and a season pass program.
After 90 days without a payment, Peruzzi started making calls. He called the ski resorts whose ads he had run. They told him they paid Factory for those ads as part of Factory’s media placement service. He called Factory. Often.
“Never got a return call. Eventually we reached some kid in accounting, and he offered us 22 cents on the dollar,” Peruzzi said. “It took a bite out of our business.”
Factory Design Labs executive Bob Reimer declined to speak on the record, citing confidentiality and non-defamation agreements with clients. Many of those same clients requested anonymity because of the fear of legal retaliation by Factory or blacklisting in an insular industry.
Other magazines that carried ads placed by Factory report similar scenarios to Peruzzi’s.
Barb Sanders took 8 cents on the dollar for ads she ran in her Aspen-based Snow Magazine. She’s too small of an operation to sue Factory, she said, so she took the lowball offer. She said she lost less than Peruzzi did.
It’s the buzz in the outdoor magazine world, Sanders said.
“But no one is talking about it in public. It’s like it didn’t happen,” Sanders said. “Someone has an incident in a bar or gets a DUI, you read about it in the newspaper. But this white-collar crime happens — when a company takes everyone’s money — and no one says a word.”
Many high-profile magazines took hits from Factory’s woes as well. Representatives from those magazines declined to speak on the record, citing agreements when they accepted the pennies-on-the-dollar payments for ads they ran.
“They have a lot of outstanding balances and delinquent payments with us for all my clients that had media managed through Factory,” said an ad sales executive with a national magazine chain. “I was flabbergasted when (a client) shared with me that they had indeed paid Factory and Factory was not paying us for those bills. I bet the amount might be even more than $100,000 that Factory has outstanding across our different properties.”
Another executive with a high-profile stable of magazines said the business lost $51,000 when it accepted the lowball settlement offer from Factory for ads it ran promoting Colorado ski areas.
“What a selfish and unprofessional way to handle this,” said the executive, who asked to remain unnamed. “Where did the money go? What, did they hang their hat on one account? It’s just Ponzi-esque. And it’s really sad. All of us industry veterans watched this agency grow in Denver, and we were all proud in a way of this really solid, hip agency that was calling Denver home.”
Factory Design Labs founder Jonas Tempel serves as the company’s chairman. He was a founding partner in Beatport, which he ran in Denver from 2002 to 2010, establishing a pioneering online store that delivered electronic dance music to DJs in a pre-streaming world. In 2010, he told The Denver Post that Beatport and Factory would generate $85 million in revenue that year, up from $2.2 million in 2004.
Factory’s woes began last year when it lost its account with The North Face, which had named Factory as its agency of record in 2007. Oakley and Callaway Golf had left earlier, and Sports Authority, which is dissolving in bankruptcy, doesn’t need an ad agency anymore. The company’s clients now include Eddie Bauer, MapQuest and the local restaurant chain Punch Bowl Social.
Factory last year announced it was setting up an office in San Francisco — near The North Face headquarters — but closed that office within a few months.
“We were told the primary issue was related to loss of business from The North Face that started the downward spiral,” said an executive with a ski resort company in Colorado who said he could not speak on the record. “Whatever the case, it’s a total cluster … that left us, and our media partners, in a terrible position. This definitely deserves to be exposed.”