Affiliate Agreements for Web Sites

A number of e-commerce sites establish affiliate or associate programs, intended to encourage other Web sites to send potential customers to the site by paying commissions or referral fees. Learn the key provisions addressed in a standard affiliate agreement.

A number of e-commerce sites establish affiliate or associate programs. These programs are intended to encourage other Web sites to send viewers and potential customers to the e-commerce site by paying commissions or referral fees. You can think of it as "send me money if I send you business."

By way of example, Amazon.com, the leading online bookseller (which has expanded into music, videos, and other items) has an "Associate Program." (This program allows its "associates" to offer books and other products on their site, through special links to Amazon. When a customer comes to your site, then is transported to Amazon's site through a link and the customer purchases something, Amazon commits to pay you a referral fee (generally 5 to 15 percent of the product sold, depending on the product.)

From Amazon's perspective, its a way to drive more traffic to its site and increase sales. From the associate's perspective, its a way to provide more products on its site to viewers and potentially receive fees. For more information on the Amazon program, read What Do Affiliate Programs Cover?

Key Provisions of Affiliate Agreements

If you are setting up an affiliate program, you will need an Affiliate Agreement. Typically, the form of agreement is posted online on your Web site and the potential affiliate partner needs to enroll in the program and agree to the terms of the Affiliate Agreement. The key provisions to address in an Affiliate Agreement are as follows:

• Enrollment. The prospective affiliate should submit an application to become an affiliate, with your site retaining the right to accept or reject the application. After all, you may not want sites that promote violence or contain sexually explicit materials to be an affiliate.
• Links. The agreement should spell out what types of links will be provided to the affiliate - a product link, a search box link, or some general text link.
• Tracking. The agreement should spell out how the referred customers will be tracked and reported.
• Referral Fees. The precise referral fees should be spelled out. How much is paid for what customer purchases?
• Payment Terms. How often are the referral fees to be paid? (Quarterly payments are typical). Also, consider a provision that a check won't be sent until at least $100 in referral fees are accrued.
• Customers. Most agreements provide that the customer is "owned" by the e-commerce site where the product or service is bought. This means that all information about the customer is the sole property of the e-commerce site.
• License. Most agreements will provide for a non-exclusive revocable right to use certain graphic images and text of the e-commerce site, that the affiliate may not modify them in any way and that it has to follow trademark guidelines provided.
• Terms of Agreement. How long will the agreement last? Most affiliate agreements provide that they can be terminated at any time by either party.
• Modification. How can the agreement be modified? Most affiliate agreements allow the e-commerce owner to change the terms at any time, and if the affiliate doesn't like the change, its only right is to terminate the agreement.
• Limitations and Disclaimers. What limitations of liability should there be? Most agreements say that the e-commerce owner is not liable for indirect, special or consequential damages. In any event, the well-drafted agreement will typically limit the liability to be the amount of referral fees paid or payable under the agreement.

It is often helpful to also include information about your affiliate program on your site. This can include a general description of the program, step-by-step instructions, and listing of current affiliates.

It can also be useful to add a "FAQs" section ("Frequently Asked Questions"). Make sure that what you say here is consistent with your Affiliate Agreement.

Click here to see a sample Affiliate Agreement.

Find more advice on setting up your own e-commerce website and internet marketing tips at AllBusiness.com.

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