If you choose to build your own website, one of the available ways to develop a customer base is through an affiliate program setup. Having advertisers send you traffic and paying the advertisers only on sales. This is a very valid business model on the web and can work well.

There unfortunately can be drawbacks with the affiliate model. These include the following possible problems.

• Typically you get quite a few advertisers to sign-up, but only a very few will turn out to be capable of consistently sending sales.
  
  
• Not all advertisers play by the rules. Bad advertisers can and engage in spam campaigns. This naturally reflects poorly on your website.
  
  
• Again scrupulous advertisers sometimes use invalid information (products/price) to get sales. This creates the problem where a supplier may well take exception to this and cancel a supplier arrangement, hurting both the online and off-line business.
  
  
• Because of the above problems managing affiliate programs can become an expensive item in itself.
  
  
• Your advertising partners will often rank better in the search engines for your business name than your own website will.
  
  
• If you do manage to start ranking your own website in the search engines, you often find yourself competing against your own advertising partners for search engine positions.
  
  
• The last item is the cost involved in setting up an affiliate program. You can do this through a third party or by yourself. By yourself and you have less ability to reach advertising partners. If you go through a third party, there is a setup cost involved and another party in the supply chain.

These are not the only considerations with affiliate programs, but they do highlight some of the problems for the managing of an affiliate program. Now it is not only the affiliate program owner that faces problems, advertisers also face certain problems.

The reverse side of the coin...Advertisers Problems.

• Small commissions are offered (maybe due to cost of running the affiliate)
  
  
• The conversion rates are much lower for sites compared to the base sites. This means the advertiser typically needs to get many more visitors per sale than the base site.
  
  
• Often there is not help or very limited help from the affiliate program managers. (Some are good, some are atrocious)
  
  
• Repeat business usually repeats at the base site, hence the advertiser cannot build a customer base.
  
  
• Quite often the advertiser does not know, what items they have sold. They can know which adverts are being clicked on, but not the items that are being sold. This makes it harder to target in advertising campaigns
  
  
• The problems for the advertiser do restrict heavily what is possible. (ie cannot engage in pay per click campaigns, harder to build email order business, no control over web usability etc.)

The problems for both the advertiser and affiliate program owners are very real. It is possible for these situations to eventuate in win-win situations, but by the same account win-loose and loose-loose situations are quite frequent as well. The affiliate program approach is no silver bullet in ensuring a successful e-commerce outcome.