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Contracts & affiliate partnerships

Posted by Michael Bloch in web marketing (Sunday December 17, 2006 )

The reason they could do this is due to a grey area in the special contract we signed that didn’t cover the “ownership” of users. I hate to think what this is going to cost us in lost revenue in the time to come. If I had my time over with this mob, I would have ensured that there was a clause in the contract that would have either required compensation of $x per registered user under those particular termination circumstances or obliged them to continue to pay on those existing users should they terminate the contract.

Bear in mind, the partnership didn’t end because they were struggling; quite the opposite. The partnership ended, in my opinion and based on various conversations with them, purely to satisfy greedy shareholders.

It didn’t have to be this way. I’m involved with affiliate marketing at both ends of the spectrum and when one of the companies I work for decided to end their affiliate program; we decided that in the interests of good business ethics, we’d end the program *but* continue paying affiliates on the clients they had referred to that point.

Ethics and ecommerce can sometimes be an oxymoron I’ve noticed of late. Ethics and trust are nice buzzwords, but a solid contract is better.

If you do find yourself in a position where you can exercise a little more control in the arrangements of an affiliate partnership; don’t be shy to do so – and remember, there’s no friends in business.

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If you’re into affiliate marketing as a publisher, you’d no doubt have signed/ticked a box on a contract agreeing to terms of participation in a revenue share arrangement.

Do you really know what you’re agreeing to? Have you thought about the long term implications in relation to the effort you’ll put in promoting someone else’s services – and the risks?

It really is important to read those agreements carefully; especially in relation to residual or recurring revenue arrangements or will you will be investing significant time and/or cash in promotion. I learned this the hard way recently due to a grey area in a contract I signed back in 2002.

When it comes to commission payment arrangements, savvy affiliates tend to go for residual options if they can instead of larger one-off payments. The reason for this is if you have a few of these arrangements going, it can build into a decent ongoing revenue stream, which can help get you through a lean period. Also, if the products and services of the company you are promoting are solid, those residual payments can be worth more than the one-off payment over a period of time.

With most affiliate programs you join, the terms aren’t negotiable and you’ll have no say in them; but occasionally you’ll be able to negotiate a special arrangement with a merchant if you’ve proved yourself to them by first referring substantial numbers of leads and sales. We enter into these sorts of arrangements on a fairly regular basis. The terms may be just a better commission rate, and/or it could be improved long-term arrangements.

Where I was caught recently was with a partner we’d been involved with for nearly 5 years – it’s a long time, especially on the web. They were a start-up when we first hooked up with them and we pushed thousands of leads their way that converted well. Partially through our efforts, they became an industry leader.

We then became more closely aligned through a co-branded service we subsequently established. A great deal of effort on our part went into that co-brand; not just in pushing people to it, but ongoing marketing to registered users. The arrangement we had was for x% of the revenue generated from each account, for the life of the account.

The arrangement went relatively well for a couple of years, then the company was acquired. Uh oh. They were acquired by a very large company with shareholders. Double uh oh. It was at that point I should have bailed :).

To cut a long story short, despite various reassurances from the company, the axe fell on the partnership this year. Various excuses were used by the company, the final one being “to improve our ROI” (return on investment). They basically took tens of thousands of registered users we generated and continually marketed to and moved them entirely under their own brand. That’s it. no further commissions, hardly a thank you for all our efforts etc. It was a very bitter pill to swallow.

The reason they could do this is due to a grey area in the special contract we signed that didn’t cover the “ownership” of users. I hate to think what this is going to cost us in lost revenue in the time to come. If I had my time over with this mob, I would have ensured that there was a clause in the contract that would have either required compensation of $x per registered user under those particular termination circumstances or obliged them to continue to pay on those existing users should they terminate the contract.

Bear in mind, the partnership didn’t end because they were struggling; quite the opposite. The partnership ended, in my opinion and based on various conversations with them, purely to satisfy greedy shareholders.

It didn’t have to be this way. I’m involved with affiliate marketing at both ends of the spectrum and when one of the companies I work for decided to end their affiliate program; we decided that in the interests of good business ethics, we’d end the program *but* continue paying affiliates on the clients they had referred to that point.

Ethics and ecommerce can sometimes be an oxymoron I’ve noticed of late. Ethics and trust are nice buzzwords, but a solid contract is better.

If you do find yourself in a position where you can exercise a little more control in the arrangements of an affiliate partnership; don’t be shy to do so – and remember, there’s no friends in business.

Related articles

Affiliate marketing survival strategies

Other articles on affiliate marketing

Contract and agreement templates for online business.



 

 
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