Are affiliate programs worth it?

I've heard both sides to this argument.

Joel Spolsky said in another question that it was a complete waste of their time at FogCreek, but I've heard success stories as well. For example the Thesis Wordpress theme makes a bunch of money and is sold (from what I can tell) primarily through affiliates.

So when does it makes sense and when doesn't it?

I find it hard to believe that a properly managed affiliate program would be a waste of time. It is likely that the incentives provided to the affiliates (or existing users) were:

• not comparable within the industry;
• not easily implemented by the affiliate; or
• users were not given the proper incentive to refer peers, colleagues, etc..

In addition, it is critical to understand the important of tiers. Why are tiers important?

It may sound simple but having tiers shifts the incentive. The affiliates will now promote your program to other affiliates. This should dramatically increase your programs exposure across a wide range of verticals.

@Oli re: Use of Affiliates in Adult sites - while it may be true that Adult sites use affiliate programs, it is a gross exaggeration that affiliate programs are mainly FOR adult sites.

Amazon, Ebay, Paypal, zappos, Basecamp and many many many other reputable and public companies used (and continue to use) affiliate programs to grow their businesses. Some of the power eBay and Amazon affiliates have earned millions. Just because these programs are not easily found by Joe Web Surfer does not mean that they do not exist.

Right, I guess it pretty much depends on the product. BUT, the Avangate guys which recommended me several times to start using their affiliates network for my product, they also said that there are quite a few things that you can do to make sure that your product gets to the right market.

For instance, when a website, blog or whatever, requests you the right to become an affiliate, you get to choose if they are right or not for you.

I have also heard about good sales made through an affiliate but that was, indeed, for a large consumer market product. My product being a little bit of a niche one, I haven't been that compelled to jump into such a deal until now. But I will probably give a try as soon as I'm done with other marketing techniques. :-)

Looking at Joel's answer, it seems that he was bit against affiliate programs mainly because the hassle that comes with. A payment processor like Avangate takes this off your head so you don't have to worry about anything regarding affiliate payments and all. Of course, they take their share, too.

I would tend to believe it mostly makes sense when you're targeting a large consumer market. For instance, it was pioneered and is still largely used by the "adult" industry.