TL;DR: An affiliate is an individual or organization that promotes products or services for another company, typically earning a commission for each sale or referral.

What is an Affiliate?

The term “affiliate” is used most often in the business world, by companies describing contractors responsible for driving attention to a brand. Affiliates act as advocates for the companies they work for, performing marketing and promotion tasks, or selling products on the behalf of another company.

Some companies build entire “affiliate” programs which attract dozens of different people, such as the Amazon affiliate network. Other brands will focus on hand-selecting a small number of affiliates they consider to be most beneficial to the growth of their business.

What is an affiliate?

In general business terms, the word “affiliate” refers to the official connection between two business entities. In other words, there’s a contract binding the activities of one brand, and another person or group. The entities don’t have to be publicly connected, but they must have an agreement in place which gives one company access to the other entities services.

According to the SBA, an individual, business, or entity can be an affiliate of another business if the second business has control over the first entity based on various factors. For instance, affiliation may be defined by contractual relationships, ownership, or management connections. Parties to a joint venture can also be considered “affiliates” of each other.

Primarily, there are two specific uses for the term “affiliate” in business:

In corporate law and taxes, an affiliate is a company related to another business by being in a subordinate role.

In online retail, an affiliate is a contractor or company required to help another brand sell products and services through either direct selling or marketing.

What is an affiliate program?

An affiliate program or “associate program” is an arrangement in which a company pays another entity (a person or business), a commission to help with the growth of the business. The affiliate agreement may include having another business or individual selling a product on their website, or through their social media channels.

One of the most common forms of affiliate program is “affiliate marketing.” In affiliate marketing, the affiliate is responsible for sending potential leads to the merchant’s website, where they can purchase a product. Usually, affiliates in this situation are paid based on the number of leads they deliver to the company, or the number of people who convert using a special, trackable link.

Affiliate programs can be beneficial for a number of reasons. First, they give companies access to additional marketing and promotional resources, so they can potentially reach a larger number of customers. Affiliate marketing can also help to improve the reputation of a brand, by creating associations with other well-known individuals.

In the digital marketing landscape, affiliate marketing is often helpful because it can assist with improving the SEO ranking of a company. Backlinks to websites from high-authority locations can improve the image of the brand in the eyes of search engines.

Can anyone be an affiliate?

Affiliate agreements can often be entered into by all kinds of professionals, including freelancers, sole proprietors, limited companies, and joint ventures. For the affiliate relationship to be successful, however, it must have a complete contract, in which the parties outline:

The terms of the affiliate agreement

The definition of “affiliate” in the situation

The relationship between the two parties

The rights and duties of the affiliate

Who pays what, why, and when?

What licenses may be required for the affiliate or company?

Who owns the intellectual property created in the partnership?

Updated January 04, 2024

Axel Grubba is the founder of Findstack, a B2B software comparison platform, with his background spanning management consulting and venture capital where he invested in software. Recently, Axel has developed a passion for coding and enjoys traveling when he is not building and improving Findstack.