I decided to write up something on this topic because lately I've had quite a few people ask me questions, such as "how can I start my own CPA/affiliate network" and "why don't you guys run your own network already?".
If you thought that the thread actually gives you "4 steps to start your own CPA network" then you were wrong. What I am going to give you though is 4 reasons why most of us shouldn't even CONSIDER opening a new network.
1. As with any business, you need a specific (and good) USP to succeed. While there's definitely some people who do have a USP, can differentiate themselves from their competitors and actually offer something new and attractive, the sad truth is that the vast majority of people looking to launch their network are exactly the opposite - and simply want to replicate the other 500+ networks out there. This does NOT work.
2. Even worse than the point above, many people (especially those that are active in black hat communities) tend to come up with the WRONG kind of USPs. I've already heard from at least 5 people how they see the need for a "tolerant" CPA network, i.e. one that would accept most affiliates and would be happy with blackhat traffic - because after all there's a lot of demand and almost no networks around that do it. But there's a very good reason why networks don't do it - there's been a ton of "blackhat-friendly" networks around, and almost all of them have died in a matter of months, simply because the fact that the network is happy with this kind of (fraudulent) traffic doesn't mean that the advertisers are - and what happens a few months down the line is that the network simply won't have any offers left, and will get a ton of negative feedback because they can't pay their affiliates (due to their advertisers not paying them). So simply seeing demand for something doesn't automatically make a business idea feasible.
3. Contrary to popular belief, running a CPA network takes A LOT of cash. Most wannabie network owners out there think that they can easily start their networks with a few grand of upfront cash by only paying their affiliates once they get paid from their advertisers. However, this is very far from the reality. Even if you leave marketing expenses aside (let's say you're a marketing wiz and can get all the publishers you need through word-of-mouth marketing), most CPA networks out there, even the small ones, float MILLIONS of dollars. This is because, while the small guys are perfectly happy getting paid NET-30, I can guarantee that you won't find a single superaffiliate who would be happy with anything longer than weekly NET-3 payments. And this means that YOU will need to pay them weekly, while your advertisers still pay you monthly. By the way - there's another popular myth out there about advertisers favouring networks to publishers and giving them better payout terms. This is entirely wrong as well - networks often get paid even NET-60 (!), literally meaning that they will have to float whatever their affiliates make for 2 months. Do you have this kind of cash lying around?
4. Perhaps one of the most important things is providing your affiliates with offers that they can promote. Most new networks that start these days (and go tits up in a matter of months of course) tend to broker offers from other networks - and this is another thing that simply doesn't work, unless you're already big or have some other competitive edge. Not only will you not get any serious affiliates (because serious affiliates would go directly to the network you're "borrowing" offers from), but often enough even medium affiliates don't want anything to do with you, simply because they can get better payouts for the same offers than those that you can provide. To clarify - NO network will give you a considerable pay bump based on projections - they want to see traffic first - but in order for you (your affiliates) to generate traffic, you will already have to offer better rates. And needless to say, approaching advertisers directly and getting actual, exclusive offers, takes a whole lot more than a few days of work and a few hundred bucks.
To sum it up, the fact that you can get a Hasoffers network up and running for $500 does not mean that you can get your network started (let alone generating revenue) for this amount. If you're actually interested in starting a CPA network then you will have to understand that it's a business that takes months of planning and a lot of upfront cash.
What do you guys think about it? As usual, I'm interested in all opinions