Ok, so since affiliate programs have gotten so ridiculously popular, it is easy for companies with such programs to get lost in the crowd. There are hundreds of webhosting providers that offer generous affiliate programs, for example, so going to each one individually to see which one is the best to promote becomes tedious. That’s where Affiliate Networks come in.
An Affilaite Network is just a company that handles the relationship between the company with an affiliate program. An affiliate can sign up to an Affiliate Network and then select from thousands of different products and services to promote, and can easily see exactly how much they will get paid per sale/lead/signup/whatever. The Affiliate Network handles recruiting and paying the individual affiliates, so they never have to have a direct relationship with the Merchant/Advertiser. In return, the Affiliate Network takes a small(well not always small) cut of the commissions. With enough affiliates sending enough sales, Affiliate Networks get rich just for being a middleman.
So why would you work with an Affiliate Network instead of with the Advertiser directly, knowing that they take a cut of the money you are making? Well, there are a few reasons. First, and most important, is payment terms. A lot of merchants will only agree to pay you Net 30, or worse. This means that after the month is over you need to wait 30 days to be paid for that month’s commissions. This can suck if you’re spending a lot of money on advertising their products and can’t afford to continue for 60 days without being paid. Affiliate Networks generally have much better payment terms, often giving affiliates weekly wire transfer payments if they are generating a decent amount per week (usually around $1000 is the standard threshhold). Also, many Merchants don’t want to deal with a bunch of affiliates, they just want an Affiliate Network to just handle it all for them, so even if you wanted to you couldn’t work with them directly.