...referred. The practice spread quicklyand became known as "affiliate marketing." By early 1999,Forrester Research proclaimed "affiliate programs" as the Web'smost effective traffic-driving technique - almost twice aseffective as banner advertising. Consider that by September 1999, more than three years afterAmazon launched, there were over 1,000 merchants offeringaffiliate programs. And by 2000, Amazon's Associates Program hadgrown to over 500,000 affiliates. What Amazon found...

...er and CEOJeff Bezos started as a polite conversation had grown into anentirely new industry, bringing with it affiliate networks,directories, newsletters and a variety of consultants. Otherinnovations followed and affiliate marketing is now an integralpart of the Web's composition. It's also now widely heralded asthe Web's most cost effective marketing vehicle. Still, as affiliate marketing evolved, issues with the modelhave been exposed. The affiliate community needs to rememberthat affiliate marketing is not about generating cheapadvertising, but developing profitable strategic relationships. But now there is a way for merchants to now offer a win-winwhere both merchants and affiliates have a vested interest.Improving technologies now make it possible for the formerlyCPS, CPA, CPL performance programs and the CPM, CPC, and flatadvertising models to unify creating a new hybrid that I callthe CPP (Cost-Plus-Performance) model. The CPP combines a paid campaign with a performance campaign andoffers the best of both worlds. I see this as the future ofaffiliate marketing, a wide-open world of performance andpayment where the CPP takes inventory lost to Google's AdSenseand advertisers back. The result is a whole new world ofopportunities for merchants, affiliate managers and affiliates. The hybrid CPP is converting former CPM, CPC advocates intoaffiliate marketing believers. For many top websites, affiliatemarketing now represents a chance to loosen the grip ofpay-per-click search engines and costly advertising. The mostdifficult obstacle in affiliate marketing is finding goodaffiliates with traffic. If a site sells traffic then they musthave it, and if you negotiate a Cost-Plus-Performance payoutvaluable opportunities begin to open up. Merchants are also realizing that affiliates need better toolsas well. Technologies such as data-feeds, site and shopping cartabandonment (exit traffic) promise to allow merchants, who arealso affiliates, to increase EPC and EPM numbers withoutcompromising the visitors experience, thereby improvingmonetization. By simply offering additional products and/orservice offers at or after the point of sale, merchants can addrevenue without diluting the sales process. It's becoming clear to merchants, affiliate managers andaffiliates that the line between performance and traditionaladvertising has been breached. It started with Google's entry into the market. Google's AdSensecaptured valuable affiliate program inventory, which caused theflexible affiliate marketers to evolve again. The industry'sresponse was to tangle with the paid advertising side of themarket. Google's method is to pay out for ad space - the same adspace that was used by affiliate marketers. That limitsavailable inventory and changes the Web publisher'sexpectations. Some affiliate marketers using AdSense end up to cannibalizingtheir own market. Why? To get guaranteed income from traffic. Ifyou pay for traffic, you're guaranteed to get it. The merchantsget guaranteed traffic and the affiliates get guaranteed revenuefrom traffic. However, this presents a problem. Traditionaladvertising places the risk on the merchants, while performanceplaces the risk on the affiliate. In either case only one has avested interest in the campaign.It's clear from a handful of recent studies and reports thatmarketers are frustrated with the current process. In a survey of 135 senior-level marketers a recent study foundthat while 60 percent of respondents said that defining,measuring and taking action on ROI is important, only 20 percentare satisfied with their ability to do so. In addition, 73percent reported a lack of confidence in their ability tounderstand the sales impact of a campaign.The study, conducted by Marketing Management Analytics (MMA),the Association of National Advertisers (ANA), and ForresterResearch in April 2005, was presented in July at ANA's 2005Marketing Accountability Forum.Also this summer, a MediaLife's media buyer survey quantifiedwhat most already suspected: media buyers think that about onlyhalf of media reps know what the heck they're doing (viaMediaBuyerPlanner.com). A significant minority of the buyers -about one in six - have such a low opinion of representativesthat they said only 10 or 20 percent are useful.Complaints centered, unsurprisingly, on time wasting, both inthe form of over-contacting and proving ill prepared whenconversations do take place. Another big complaint proved to beoverly hard selling, with some reps seeming to believe thatrepetition or browbeating may succeed in getting a property onthe buy where the numbers won't.Half of the buyers said they agree with the statement that therep problem was "no big deal. Sure, they're annoying sometimes,but I'm sure they find me equally so. It's how the industry isset up." About 45 percent agreed instead that they are "anecessary evil. Most are okay, but there are a few reallyobnoxious ones I hate doing business with."Even with all the issues, the good news is that the affiliatecommunity is still evolving. Organic search is becoming morecompetitive. CPM rates are going up. Paid search is becomingcost prohibitive and the need for cost effective onlineinventory is becoming stronger, causing the affiliate space togrow at ever increasing rates. As merchants, affiliate managersand affiliates become even more interwoven, the frictiondecreases and new forms of integration and aggregation are madepossible. I see it this way - the race is on! In the last year the numberof merchants offering affiliate programs has more thanquadrupled. Literally, millions of websites now participate asaffiliates - from personal homepages at Geocities and Homesteadto Fortune 500 companies. And now, more often then not,merchants with affiliate programs are also affiliates. Whether termed affiliate marketing, collaborative commerce,revenue sharing or syndicated selling, the affiliate space leadsthe way in the ever changing landscape of online marketing andhas become the Web's fastest, simplest and most cost effectivemarketing vehicle.As both merchants and affiliates continue to recognize the powerof change, affiliate marketing's best days are yet to come. In afew short years, affiliate marketing looks to become the tailthat wags the dog - controlling the majority of the advertingand marketing dollars. Despite the less then impressiveadvancements in the advertising world and hype, affiliatemarketing stays true to its origins as a better way ofconnecting buyers and sellers and rewarding those thatfacilitate those relationships.