Epic Fails: Who is Next?

Last week Epic (fka Azoogle) confirmed with Performance Marketing Insider that they were indeed closing down, unable to pay their publishers and affiliates. This would be the biggest failure of an affiliate network since COPEAC’s demise, leaving many people in the industry wondering what network would be next. Many affiliates are rightly concerned that these developments signal that other networks may be about to fail.

The stories about Epic are disconcerting: the staff of Epic including Matt Mirman, who basically ran the network, was completely left in the dark about the company’s future. The board of Epic never told them anything, but at the same time many of the top executives including Don Mathis, the former CEO, separated parts of the company to form a new entity called Kinetic Social, leaving many to believe they knew the time was near for Epic’s complete failure.

The same problems that plagued COPEAC eventually caught up Epic: they were owed tens of millions by non-paying advertisers and faced significant cash flow problems.  As soon as publishers started talking about the issues, it was probably only time that they would be unable to survive. Without the cash flow from the other side of the business: the display and social, it was hard to save the company.

This comes only a few weeks after the announcement that Adteractive was going under, leaving many CPA networks with major unpaid bills.

Affiliates should be very concerned. Many networks are paying out before they are paid, have little cash reserves and worse, do not have a long-term business plan on how to make money besides brokering offers.

This is obviously part of the CPA game, but it’s a very dangerous game for those companies that have a few core advertisers and affiliates that support them.

What are the major  issues plaguing the industry that will cause problems?

1)   Enforcement Actions
The FTC has made it clear that networks will be held accountable for more and more things, including the actions of their affiliates. Combine this with more and more various State Attorney General actions, legal costs are going up.

2)   New Credit Card Rules
Hundreds of offers have been pulled because of new rules about re-billing that go beyond weight-loss offers. Membership based sites that bill the credit card monthly, are facing strict new rules and many card processors will not give merchant accounts to these companies. This is one of the issues that caused Neverblue’s parent company to go bankrupt.

3)   Education Offers Dying
The EDU industry was huge for almost a decade. New regulations by both the US Department of Education and the schools themselves, have made it almost impossible to promote EDU offers like they used to be. Several EDU companies have already bankrupted, and expect more.

4)   Desperation
Too many networks are desperate for unique offers without checking credit worthiness or doing basic background checks on companies. This means that they are working with companies that may not pay them, and then not be able to pay affiliates.

Who do you think will go out of business next?



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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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  1. Wow, I didn’t know there were so many problems in this industry. This is very interesting.

    As I mentioned before, I have always kind of wondered about whether I was getting paid properly or not.

  2. Pace, very nice article and great analysis. I am lucky that I am accepted in top affiliate networks and therefore am always paid on time! 🙂

  3. I guess EWA is next in line.The reason is 98% of the offers they run are brokered from other networks.when most of the BIG networks fail/have cashflow problems ,it will have a ripple effect on the networks which broker the offers(Like EWA).The effect has already started.I have the experience in the recent months how EWA is missing payments and failing to send payments on time (Most of those promoting EWA offers will agree with me)

    Already Neverblue (parent co filed for Bankruptcy),Clickbooth (with yahoo lawsuit),CX Digital are in deep trouble ,may follow the suit soon

      1. How many pubs are behind at EWA? you have to figure with the spam, rebrokering and working direct with shady advertisers like true who doesnt pay their last few invoices that EWA is hanging on by a string. If they got hit with a big lawsuit they will go belly up too.

        Most CPA networks are a big pnzi scheme. networks float with pubs money to give terms to advertiser who have loose business models and questionable practices, eventually those weekly paying networks cant keep up with the cash flow and start to slowly not pay one or two guys, as word gets out people jump ship and the networks expenses stay the same or go higher with legal issues.

  4. I vote that Neverblue will be next to fail. Their parent company can’t bail them out anymore when people don’t pay.

  5. This is what ends up happening. Definitely not for everyone. I wonder if the CEO received a golden parachute when he departed.

    The FTC is cracking down on these guys but what are they going to do to make to the other guys pay up. It seems like they being impartial by not persuading both parties to hold up their end of the deal.

  6. Don Mathis will pay for the mess he has created.

    Quit talking about EPIC. Talk about Don Mathis. He is the crook behind all this.

  7. At first I really don’t get the main point in this article but as I have read it briefly it shows that there are many problems we don’t know about the industry,I really admire your courage in sharing this for me to know.

  8. Here is a press release from the Owners of EPIC.


    A Kinetic Social press release from Jan. 4, 2012:

    “The privately-held social media integrated marketing solutions provider to brands and agencies, today announced strong 4th quarter and 2011 results, achieving a 244% growth rate over 2010 results. Moreover, the company also announced that it achieved profitability for the first time in early Q3 2011, almost five months ahead of plan. Management attributes its success in 2011 to outstanding execution by its expanding team…Kinetic Social was founded in early 2010 by a group of experienced internet advertising professionals to solve the challenges of attribution and effective data-rich analytics in a social milieu.”

  9. I was very interested in reading your post. This is obviously part of the CPA game, but it’s a very dangerous game for those companies that have a few core advertisers and affiliates that support them. I really liked it. Thanks you for sharing it with us!

  10. “the staff of Epic including Matt Mirman, who basically ran the network, was completely left in the dark about the company’s future. The board of Epic never told them anything” Matt Mirman, those who have nothing to hide don’t ask to be publicised proclaiming no involvement – he was in on it for months – he needs to be careful who he talks to because people are capable of leaking private IMs of him knowing EXACTLY what has been going on. What a cheap way to save face, Pace you should know better than to glorify scammers as protagonists. Although Don and Charlie Nowaczek are the real villains here. Karma is a bitch.

  11. Interesting read and great comments. I’m an internal media buyer for a large CPA advertiser and the main thing keeping us from direct partnerships with pubs and working through affiliate networks is payment terms. Seems like a cycle of fast money perpetuates all this. Which is unfortunate because there are a lot of talent individuals out there doing all they can to promote our offers and they get burned by the middleman… and they could have had a higher CPA in the first place.

  12. Don & Charlie are unprofessional scumbags – somebody should do an Epic audit and see how much money these two pocketed throughout this process. There were some good people in that organization, it’s just too bad none were at the top.

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