Years before the Nasdaq tanked and banner advertising died, e-commerce pioneers like Amazon.com and CDNow began partnering with topic-centric Web sites to drive revenues, paying a commission for each sale referred. The practice spread quickly and became known as “affiliate marketing.”
By early 1999, Forrester Research proclaimed “affiliate programs” as the Web's most effective traffic-driving technique — almost twice as effective as banner advertising.
Consider that by September 1999, more than three years after Amazon launched, there were more than 1,000 merchants offering affiliate programs. And by 2000, Amazon's Associates Program had grown to more than 500,000 affiliates. What Amazon founder and CEO Jeff Bezos started as a polite conversation had grown into an entirely new industry, bringing with it affiliate networks, directories, newsletters and a variety of consultants.
Other innovations followed, and affiliate marketing is now an integral part of the Web's composition. It's also now widely heralded as the Web's most cost-effective marketing vehicle. Still, as affiliate marketing evolved, issues with the model have been exposed. The affiliate community needs to remember that affiliate marketing is not about generating “cheap” advertising, but developing profitable strategic relationships.
But now there is a way for merchants to now offer a win-win, where both merchants and affiliates have a vested interest. Improving technologies now make it possible for the formerly CPS, CPA, CPL performance programs and the CPM, CPC and flat advertising models to unify creating a new hybrid that I call the Cost-Plus-Performance model.
The CPP combines a paid campaign with a performance campaign and offers the best of both worlds. I see this as the future of affiliate marketing, a wide-open world of performance and payment where the CPP takes inventory lost to Google's AdSense and advertisers back. The result is a whole new world of opportunities for merchants, affiliate managers and affiliates
The hybrid CPP is converting former CPM, CPC advocates into affiliate marketing believers. For many top Web sites, affiliate marketing now represents a chance to loosen the grip of pay-per-click search engines and costly advertising. The most difficult obstacle in affiliate marketing is finding good affiliates with traffic. If a site sells traffic then they must have it, and if you negotiate a Cost-Plus-Performance payout valuable opportunities begin to open up.