There are some people who say that affiliate marketing is a waste of a website's real estate and that, in recent years, companies have turned away from affiliates in favor of search engine advertising. Marketing gurus may soon be eating their words, though, as ingenious entrepreneurs and savvy consumers have found a groundbreaking way to make affiliate marketing both fun and profitable for all involved.

From an advertiser's perspective, offering an affiliate program helps fill the insatiable need for new customers or clients. It may not be the only element of the company's marketing efforts, but affiliates continue to provide a steady stream of new business. Because companies pay their affiliates based solely on performance (as opposed to based on, for example, the number of impressions), it's a good investment for the advertiser.

From the affiliate's perspective, button and banner advertising have no hard costs. The space is there anyway, so why not incorporate affiliate advertising as one of a website's revenue streams? In order to bring in significant revenue, however, the challenge for the affiliate is the same as that for any other website: generating traffic. After all, without traffic, affiliate revenue, AdSense revenue, and any other revenue grinds to a halt.

This is the point where affiliate marketing has undergone a transformation. By offering incentives to consumers and other webmasters to patronize the first website's affiliates, everyone wins. Advertisers get new customers, affiliates receive revenue, and consumers and other webmasters receive enticing incentives. If you were a gamer, why wouldn't you want a free PlayStation 3, Xbox 360, or Nintendo Wii? If you love music, you'd certainly be up for getting a free iPod or MP3 player. And who wouldn't celebrate receiving a new HDTV, new computers, or cold, hard cash?

The way it works is both simple and clever. A website with dozens or hundreds of affiliates offers free memberships to individuals and webmasters. A new member starts by selecting the incentive he or she wishes to receive - money, a PS3, an Xbox 360, a Wii, a cell phone, or an iPod, for example.

There are three different methods a member can use to earn the free gift: referral, cash back, or points. Through referral, the member encourages friends to sign up using a link that connects to the member's account and to complete offers from a variety of affiliate partners. The number of referrals needed varies by the value of the incentive the member has requested. The cash back method allows members to receive cash for each offer they complete, and the points method enables members to accrue points towards their prize of choice.

Once a member completes the requirements, he or she can order their free gift and the website fulfills the request. Essentially, the gift is a commission on the money earned from the member referrals and completed offers.

This kind of transformative affiliate marketing enables websites to encourage consumers and others to advertise their affiliate programs while rewarding them to do so. Advertisers, meanwhile, receive the new customers they need and want. It's a sure-win for everyone involved!