A few years ago, if your site wasn’t listed in Yahoo you might as well have given up. Yahoo was practically the only game in town, being the search engine of choice 75 percent of the time. There were all sorts of secret ways to get a better listing, and you had to know these and implement them or your site was invisible. Then, along came a little company called GoTo.com with its cheeky idea to let sites bid on better positioning in search results. A revolution was started.

GoTo.com morphed into the king of pay-per-click search engine marketing, Overture.com., which was just purchased by Yahoo. When you couple that with the near-psychic accuracy of search results returned by Google through its Google Ad Words, you had better know how to tame these behemoths or once again you’ll be invisible. Once you have mastered the strategies, your top-placed search results will send anxious buyers streaming to your site. Within 48 hours, your return on investment on specific keywords can be analyzed, judged and tweaked to improve your bottom line.

This is where affiliate marketing gets interesting. For as long as people have been commissioned to sell other people’s products, cleverness and innovation have produced the top sellers. I remember years ago a charismatic salesman came to my family’s house with an array of shiny new pots and pans. He proceeded to make a delicious meal, accompanied by never-ending sales patter. Before he left that night my dad had parted with a significant portion of his hard-earned cash for these magical pots. A very clever marketing tactic indeed.

Affiliates have grasped this concept from the get-go. These days, good money can be made by going beyond banners and cleverly investing in and managing a pay-per-click search strategy. But what if both the merchant and the affiliates are both doing PPC marketing? That’s the big question every company that operates an affiliate program ought to be asking itself these days. In fact, good affiliates do use PPC and in many cases they’re doing it better than the merchants.

So, how does that affect your business model and what kinds of policies should you establish around this issue? Well, it depends on what your marketing strengths and weaknesses are and it depends on how well you have analyzed your own marketing dollars’ ROI. To simplify it, there are basically three different ways to approach this issue: 1) Let your affiliates do anything they want with PPC search engines, 2) Prohibit affiliates from doing any PPC marketing, or 3) Compromise, and develop a strategy that allows you and your affiliates to divvy up the PPC traffic.

Let’s look at the pros and cons of each of these models.

1. Anything Goes

If you let your affiliates do anything they want, you’ll get the same results as if you have NO policy. Good affiliates will research low-cost, high-traffic keywords relating to your site and products and will actively manage these bids to leverage what they pay for the words against what you pay them for the sale or lead. The “pro” is that the affiliates are bearing the cost of this marketing strategy. The “con” is that you are possibly paying more for that sale than you have to.

2. Nothing Goes

The second option is to prohibit affiliates from doing PPC marketing. Why? Because the knee-jerk reaction to No. 1 is, “Well now, wait a second, I could be getting all that traffic instead of them and paying less for it.” So you decide to pour your marketing dollars into PPC traffic on not only your brand name but on all your products and every keyword imaginable to “corner the market.”

But the “con” of this approach is that your spending will go up dramatically, your management resources will go up dramatically to stay on top of thousands of words daily (sometimes hourly) and, worst of all, good affiliates who are good at this kind of marketing will drop out of your program.

3. Compromise

Finally, there’s the idea of compromising on a strategy that allows both sides to engage in PPC marketing. Helping affiliates make money will help you make money in the long run. How do you develop a good plan? You simply have to evaluate what you can manage and pay for effectively and what affiliates could do better and more profitably.

For example, let’s say you have tested and done well in Overture with 300 top keywords and trademark names relating to your business. You’ve analyzed the stats and you’ve proved that staying in the top position for most of those returns a healthy margin between bid price and sales/lead volume. But you’re maxed out in terms of marketing budget or marketing staff to double or triple your buys.

This is where your affiliates come in handy. Provide them with proven keywords and let them “have at it” on Google Adwords or any of the other PPC engines, like Findwhat or Kanoodle. Also, in order to keep competition between you and your affiliates to a minimum, ask that they not outbid you on Overture and police this aggressively. Take space No. 1 and No. 2 and let your affiliates take bids that place them at Nos. 3, 4, 5 and so on, and you have effectively shut out your competition on valued keywords and phrases.

The main thing is to evaluate and then articulate a well-thought-out policy for you and your affiliates. Decide on the best use of your resources and budget, and then help your affiliates use this powerful sales channel to their best advantage. It will benefit you both.

LINDA WOODS helps companies start and manage affiliate programs. Long known as the Affiliate Goddess, her new company, PartnerCentric.com, offers strategy consulting, training and outsourced program management services.