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Affiliate Agreements: Everything You Need to Know

Affiliate Agreements
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Let’s be real. Every time you log on to social media, you see your fave celebs, influencers, and even your friends talking about some fab product they love. Savvy startups, small biz owners, freelancers, coaches, you name it: everyone can benefit from what an affiliate program has to offer. Affiliate agreements are what keep the arrangement on the up and up, ensuring your brand is safe, sound, and well-represented.🤩

Here’s the 411 on affiliates: between 2010 and 2022, business owners are set to go from spending $1.6B to $8.2B a year on affiliate marketing. You read that right.

What does this mean for an unstoppable go-getter like you? This strategy works, and the process is easy as pie. Here are the typical steps:

  • An individual loves a brand and shows it by buying, engaging, and promoting the goods or services.
  • Representatives from that brand reach out to the individual and initiate a conversation about an affiliate relationship.
  • Affiliate program materials are handed off, which typically include guidelines, branded assets, and promotion materials.
  • The affiliate is usually given a financial kickback or form of compensation for talking about the brand online or in person.

Pretty straightforward, right?

If your brand is very well-known, people who want to be affiliates will probably come knocking. Well, virtually knocking, that is. Whichever direction the sourcing goes, it’s important that you don’t take this process lightly. Affiliates are essentially brand ambassadors, and what they say and do online must be carefully guarded by expertly worded, legally binding agreements. What’s more, the financial transactions that occur between a business and an affiliate can be very tricky. Everything from taxes to employment status to rates must be laid out in plain and clear terms. 

Keep in mind: affiliates have the power to promote your brand, or seriously hurt it. Yikes! Because of that, an informal, “we agreed over DM” transaction won’t cut it, sis. Protect your biz, protect that golden reputation you worked so hard for, and protect your hard-earned profit by instituting sound affiliate agreements. 

If any of this sounds daunting, don’t sweat it—we’ve got you covered. That’s right, deep breath. Just keep scrolling.👩‍💻

Affiliate Agreements: Everything You Need to Know

What Is an Affiliate Agreement?

An affiliate agreement is an agreement between a business owner or merchant and an affiliate, which sets the terms for exchanging affiliate representation and referrals for a commission or fee.

So what exactly needs to be included in an affiliate agreement, you ask? Ask and thou shall receive. Here are the high points:

  • An affiliate agreement should be a legally binding contract between two parties: you, as a business owner or operator and the affiliate.
  • An affiliate agreement sets out mutually profitable financial terms, or a bargain of services in exchange for compensation.
  • The agreement will delineate guidelines on affiliate behavior and use of items that are the intellectual property of the business/owner.

Aside from the word “affiliate,” the second most common way businesses may refer to the people in these arrangements is the word, associate. Amazon, for example, uses the term “Amazon Associates” to describe people with whom it has an affiliate relationship.

Still with us? Good choice, because here’s a little newsflash: businesses do not have to reach a certain size before they are eligible to participate in affiliate marketing and boost their bottom line. That’s right, mompreneur, even if you are the sole proprietor of your business, affiliates can help you earn money. 💰 #hellopassiveincome

Benefits of Affiliate Agreements

Benefits of Affiliate Agreements

Before you get started, however, it’s critical to get all of the pieces in place to create a stellar impression and stay legally protected! The way to do this is with an airtight agreement. (Shocker. The lawyer says you need a contract…. what a twist!)

There are three compelling reasons you need to get this important piece of the puzzle right though:

1. Control How Your Brand Is Marketed

We know your brand is like your baby. You have spent countless hours caring for it, investing in it, and perfectly positioning it in the marketplace. We cannot say this loud enough: you cannot trust affiliates to make the same decisions you would on instinct. They must be given specific instructions and boundaries for how, when, and where they speak about your brand to the world. 

You don’t want just anyone shouting anything about your brand from the rooftops. Great affiliate programs project all of the warmth and professionalism of your brand, replicated many times over in many different contexts. This is only achievable with an affiliate agreement that specifies the boundaries of brand presentation.

We’ll go one step further and acknowledge that we live in a graphic-first, immersive, creator-driven online world. That’s why everything from your brand logo to your pitch-perfect tagline should be legally protected from misuse. 

2. Stop Affiliate Fraud

Affiliate fraud? That’s a thing? Unfortunately, yes. There is some debate over the rates of fraud in affiliate marketing, so it may not be as high as it looks if you Google it, but reliable affiliate fraud estimates still put it close to 10%. As the owner of a small or online biz of any size, the nature of affiliate marketing is inherently personal. Rather than professional salespeople, you are leaning on regular people to represent you. If you are defrauded, it is both a personal and professional blow. Ouch.😣

Because most affiliate programs are performance-based, here are some examples of how nightmare affiliates may attempt to commit fraud:

  • By inflating statistics and conversion rates
  • Through click fraud (using bots or software to simulate activity)
  • Typosquatting or traffic diverting to disrupt traffic and referral tracking
  • Through cookie stuffing to inflate attribution and commission
  • With attribution fraud, which manipulates tracking
  • Through returns (once the affiliate has been paid)

A binding affiliate agreement protects your business from affiliate fraud. It also provides a line of legal defense in the event that an affiliate attempts to defraud you. There is too much at stake for you to not cover your bases on this one. Trust us.

3. Reduce Your Risk

Knowledge drop: risk management is a skill that every savvy business owner should hone. Now, there is risk associated with affiliate programs, which is why affiliate agreements matter. Affiliates could pose a threat to your business in the following ways:

  1. Not all affiliates will create real value for your business. Your sourcing and onboarding processes may address this in part, but your fee structure and compensation terms will ensure that you don’t suffer because of talent that doesn’t pan out.
  1. With an affiliate, you may encounter integrity issues, not just in terms of fraud. Being out of sync ideologically or in terms of goals can undercut the power of an affiliate program. It can be very hard to discern this up front and require more due diligence as you find and sign affiliates.
  1. The long-term consequences of fraud are worth mentioning here, because they may not be immediate but can be devastating. Spammy behavior, manipulating traffic, and other black hat practices can actually shut down an eCommerce platform for good. This is all an immense risk, but one against which you are well-protected as long as you are not the one taking the fall for an affiliate’s bad behavior.
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Types of Affiliate Agreements

There’s more than one way to make a martini. Likewise, there are a few types of affiliate agreements, which essentially come down to how you are structuring the financial arrangement. After all, affiliates want to enter into this engagement to add an additional stream of revenue. In that sense, you have shared #goals. These are the three most common types of agreements that businesses use:

  1. Pay-Per-Click agreements — Affiliates have a unique link and earn compensation when people click on that link.
  2. Pay-Per-Action agreements — Affiliates earn compensation when they bring in a new lead, secure a sale, or achieve another defined action.
  3. Two-Tier Affiliate Programs — Affiliate programs that grow large often become tiered, whereby affiliates enlist affiliates beneath them, building a network and earning commission.

All of these agreement types are supported by similar terms and conditions. 

Convinced that you need this protection? You can buy our Affiliate Agreement Template, which will contain all of the below, to know that you are fully covered.🔥

What to Include in Affiliate Agreements

Affiliate agreements safeguard your brand assets and ensure you gain all of the pros of an affiliate program, without leaving yourself exposed to the cons. Honestly, who has time for that noise anyway? Not you, sis. No way.

Every affiliate agreement should include, at minimum, the following elements:

Brief Introduction

The introduction of any legal contract will define language, differentiate responsible parties, and include a description of the document’s primary purpose.

Terms and Definitions for Affiliates

As mentioned above about Amazon, the term “affiliate” itself is not always used. It may or may not be the official name you are using in your own program. This section of the affiliate agreement should be used to clearly label and define both parties, as well as their roles.

The terms of the agreement should include:

  • The circumstances in which the agreement can be terminated
  • The relationship between all parties
  • The responsibilities of all parties
  • The employment status (and tax responsibility) of the affiliate
  • The types of collateral the affiliate is free to use
  • The types of collateral the affiliate is not free to use
  • Intellectual property and license ownership
  • Permissions and restrictions on using intellectual property
  • The forum that will be used if there is a lawsuit
  • Confidentiality language
  • An indemnification clause

It is vital that the terms set forth provide clear parameters for the following:

  • Commission or fee structure, including the amount and payment cycle
  • Rules and procedures for using trademarked or intellectually protected materials
  • Rules and procedures for where and how materials, including affiliate links, can be displayed
  • Policies for affiliate communication, including emails, and other program-specific methods
  • Policies for using the company name in the press and in public
  • Guidelines for affiliate behavior and brand representation

Clearly, this is a document that must be carefully thought out and merits investing in attorney-drafted contracts. Ensuring that everything is well-defined and that the boundaries are crystal clear, is the surest way to protect that beautiful budding business of yours.💫

Professional woman in affiliate program

Affiliate Agreement Templates to Keep You Protected

As legal godfairies, here’s what we know: life isn’t always a fairytale.

Your big dreams for joining forces with awesome affiliates may face a huge wake-up call if you are ill-prepared. Don’t worry. We’re in your corner and we’re not going to let that happen. That’s why we’ve created an Affiliate Agreement Template. All of our legal resources are lovingly created with business owners like you in mind. We’re fortunate to work with leading individuals who create courses, launch creative businesses, freelance, or simply want trustworthy resources. This is not something to leave to chance, and we’ll help you protect your business. 

After all, we’re in this together.✨

Shop for an Affiliate Agreement Program Template Now

It includes:

  • Legal language around the application process
  • Criteria for potential applicants
  • Commission details
  • Affiliate reports
  • Affiliate obligations and FTC compliance
  • …and so much more!

Purchase and download this bad boy now, then make your own affiliate agreement within minutes. Why don’t you brew yourself a cup of tea while you’re at it? 🍵 Go on. You deserve it.

Interested in learning more about our own Referral Rewards Program? Friends and insiders alike: click here to learn more about how to help your audience build a legally sound foundation while increasing your earnings with consistent income.⚡️


*Disclaimer: This blog post has been prepared solely for general information and educational purposes. It is not intended to provide, nor should it be relied on for, legal advice. Should you require advice regarding a specific matter, appropriate legal or other professional advice should be obtained.

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Hi, I'm Neesa.
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I traded stuffy suits, corner offices, and corporate boardrooms to serve small business owners and other freedom-seeking entrepreneurs like you from a tiny island in the Caribbean Sea.

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