Affiliate agreements

An affiliate agreement is an agreement between a merchant and affiliate under which a website operator will usually pay a commission or fee for referrals from an affiliate to the merchant's website. They are particularly useful when there is some sort of crossover between the two businesses and the target customer bases. 

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Affiliate programmes are arrangements in which an online merchant website pays an affiliate website a commission for sending them leads (customers). Usually, there is a link on an affiliate site and when users click through, they are transferred to the merchant's website. The merchant will usually have a tracking mechanism to track how many leads or referrals are being directed through the affiliate link and can pay the affiliate a fee or commission accordingly. 

Many online businesses benefit from recruiting affiliates to sell products or services online, but it can also be a cheap and effective marketing strategy.

The fee the affiliate recivies is usually based on the number of people they send to the merchant's site, or the number of people they send who purchase products or services or perform some other action, also known as a 'Converted lead'. These are often called 'Pay per sale', 'Pay per click' or 'Pay per lead'.

Depending on the agreement, the affiliate may also be obliged to keep the relevant affiliate website up-to-date and in good working order, to ensure that the website design, content and functionality remain an acceptable standard, and ensure that the marketing of the affiliate website is in accordance with applicable law, any applicable codes of practice, and good industry practice generally. 

The agreement can be drafted to prohibit affiliates from:

  • including any illegal or unlawful, or otherwise prohibited content on the affiliate website

  • marketing using spam or unsolicited emails, or other unsolicited communications

  • marketing using any form of spyware, parasiteware, adware, or similar software, or using any other antisocial or deceptive methods

  • increasing, or seeking to increase, the number of payment trigger events using any fraudulent or deceptive method

Some of the many benefits for merchants include:

  • free ad space and payment only for proven results

  • promotion of a product to a vast audience, giving their brands more exposure and recognition

  • easy marketing strategy on focused consumers 

Benefits for affiliates include, increased goodwill from customers if the merchant is reputable, and the agreed commission.

Both parties should be clear on the terms which they agree to be bound by when entering into any type of commercial arrangement.

Merchants should seek to protect their reputation from false advertising on the affiliate’s website by contracting with trusted affiliates and putting an agreement in place.

Affiliates should be aware of:

  • the risk of not getting paid 

  • what actions will actually result in a commission (eg while a merchant could offer high commissions affiliates may get less than what was promised because the customers did not sign up) 

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