Definition of Affiliate

Shawn Collins’ recent post reminded me once again how often the term “affiliate” is being misunderstood. When looking at how it is defined in any literature on business and economics, we will see the following:

• “The term ‘affiliate’ means any company that controls, is controlled by, or is under common control with another company” /Compilation of State and Federal Privacy Laws, 2002, p. 76/
• “The term ‘affiliate’ can be used as a generic word to indicate either a subsidiary or division” /Business information: how to find it, how to use it, 1987, p. 38)
• Terms “affiliate and subsidiary” are “used synonymously” /International dimensions of management, 1989, p. 2/
• Graham & Dodd (2005) point out that “affiliate is a more indefinite term” than a “subsidiary”. “An affiliate may be a company effectively controlled — perhaps jointly with others — through ownership is less than 50%. Or the relationship may exist through control of both companies by the same owning group or ‘parent’, with resultant close commercial or operating ties.” Also, “in some cases a company may be called an affiliate although it really is a subsidiary.” /Security analysis: principles and technique, p. 155/

None of the above are even close to what the term “affiliate” means in the context of affiliate marketing! Looking at the mentions of common ownership, control, and “close commercial or operating ties”, we can conclude that one “affiliate” can almost be an antonym of the other. Neither of these elements are present in the context of affiliate-merchant relationship.

Affiliates (sometimes also called associates or publishers), as the term is being used throughout my blog and other affiliate marketing websites/blogs/forums, are independent marketers who may choose to promote a business, and be paid on performance-based basis. Say, you have an online storefront where you sell the crafts you produce. You can start an affiliate program whereby you would pay everyone who sends you a sale a percentage of that sale. You are then a merchant (sometimes also called advertiser), and those who refer sales to you are your affiliates.

Affiliates are independent marketers who choose what affiliate programs to promote, and what programs to drop, what merchants to push more aggressively, and on what merchants to spend less effort. They are self-managed, and not accountable to merchants for performance. All of this makes them very different from the traditional business definition of an “affiliate”.