Ranking 4th behind Direct to site (35%), Paid search (20%), and SEO (18%), affiliate marketing is one of the more complex marketing initiatives to get involved with. Due to the complexities in sourcing your own program, or working with an affiliate management company, many smaller web businesses are having a hard time getting started with affiliate marketing.

The great allure to affiliate marketing is that you only pay for those sales that are made on your site. Unlike PPC, SEO and email marketing, your overall expense in using affiliate marketing will be directly coorilated to your sales. In PPC, you are paying for clicks not sales; SEO, your paying for higher rankings; and in email marketing, your paying for emails sent/opened. Affiliate marketing is really the only system that you pay out after the sale is made.

Many of the product/service review, informational, coupon, directory, and blog websites out there are linked in with affiliate programs. This is why affiliate marketing is such a powerful tool.  However, the FTC recently enacted a rule that requires affiliate publishers to disclose their connection with the product/company they are endorsing. The long-term implication of this rule will remain to be seen.

The benefits of the program are many:

• Fixed costs – you set the commission amount for each sale.
• Performance based – only pay affiliates when purchases are made from your site.
• Gain exposure from new mediums (coupon and shopping comparison websites).
• Increase your online visibility and branding with added advertising avenues (in addition to your own marketing initiatives).
• Increase visitors (at low cost) - as affiliates send customers your way, many of them are not going to make a purchase, however, they might sign up for your email newsletter or post your website/products to their social marketing profiles.

Affiliate marketing offers a truly unique approach to increasing sales on your websites.

Some of the challenges with affiliate marketing include:

• Cost of entry – unlike other mediums, the setup costs are much higher.
• Finding quality affiliates – even using an affiliate management company, it is sometimes difficult to find affiliates who will sell your product.
• Affiliate attrition - if your competition is offering higher commissions, or has more appeal to the publisher, you may lose your affiliate partners.
• Maintenance – you will have to allocate time to review affiliates, watch for fraud, monitor affiliate methods, and ensure non-compliant affiliates are removed from your program.

While affiliate marketing has many benefits, it is also a challenging medium to setup and maintain: due to the myriad of options in working with your affiliates. For example, you could use a combination of product feeds, promotions, banner ads, contests, and other such mechanisms to help your affiliates drive more sales for you.

There are basically two methods to start an affiliate program; by managing it yourself, or partnering with a management company. For smaller web businesses, trying to manage a program on your own will prove to be very difficult, if not counter-productive. But it also becomes costly to partner with an affiliate management company.

Top Affiliate Management Companies
As per Internet Retailer; Cj.com (62%), Linkshare.com (24%), and The Google Affiliate Network (13%), are the top 3 providers used by the 500 retailers in thier survey. Below are the topline details of each of these companies. Sign up as a publisher for each of these, and look through their system to see what other advertisers/publishers are using them, as how well their systems function.

Commisions Junction (Cj.com)

 LinkShare (LinkShare.com)

 Google Affiliate Network (http://www.google.com/ads/affiliatenetwork/)