By "make it work," I mean accomplishing your original goals. Those goals were probably something like "acquire hundreds of new customers per month that Fog Creek otherwise would not have access to."
The easiest way to make it work is contact someone that has some working experience with being a software affiliate, or is a part of an affiliate network. In the same way that successful start ups need to understand what users want, successful affiliate programs need to understand what affiliates want. For instance, the majority of 1 sale affiliates could have been prevented by having a payout limit of $X, where $X = (cost savings from 1 sale) * N, where N > 3. That way, they need to at least convince 2 other buddies to purchase FogBugz. Also, you were probably attracting the wrong type of affiliates. Finally, you need to have a good idea of what each unique visitor is worth, what each lead is worth, what each sale is worth so you know the best price you can give to your affiliates.
It can definitely increase your reach/customer base, but it does take effort to make it work.
