A lucrative partnership Featured

8:00pm EDT June 25, 2009

As the economy turns the corner to recovery, many opportunities will arise to expand your online business. Seeking co-marketing relationships is one opportunity you cannot afford to miss. Co-marketing costs less than many forms of advertising and can get you the desired traffic or distribution you need to grow your Web site or software.

Smart Business learned more from Greg Akselrud, who chairs the Interactive Media and Videogames Practice Group at Stubbs Alderton & Markiles, LLP, about why online businesses need to pursue co-marketing strategies and the key business and legal issues to consider in any co-marketing deal.

What is co-marketing?

In today’s online world, co-marketing takes on a variety of forms, including true ‘co-marketing’ (where two parties agree to market each other’s Web site or software), ‘co-branding’ (where two parties make available a Web site or software displaying both of their brands or logos), or in the pure software case, ‘bundling’ (where one or both parties ‘bundles’ one piece of software with another, giving users the opportunity to download a second piece of software when they decide to download the first). For example, the only way to log in to Foxsports.com is through an MSN account and, conversely, the sports pages on MSN take you to Foxsports.com. Also, you may have noticed that you get an offer to download the Google Toolbar when you download other software. Both of these cases are classic co-marketing relationships. The possibilities for co-marketing are endless, and are not limited to online products. Often, there are tie-ins with the brick-and-mortar world. Thus you see Oprah quite visibly using Skype as her video conferencing tool.

What are the main objectives for co-marketing, and who is an ideal partner?

The main objectives in any co-marketing deal are to build awareness of your brand, drive traffic to your Web site, increase the distribution of your software, generate additional direct or incremental revenue, and/or complement your product or service with your partner’s offering.

The best co-marketing partner is one that satisfies your co-marketing objectives and, as a result of natural synergies, operates a Web site, service or software that is complemented by the product or service you provide.

What are the key business issues in a co-marketing deal?

If your business already has traffic, downloads and revenue, then an attractive co-marketing partner would offer additional products or services that complement your own successful business. On the other hand, if you are trying to gain traffic, increase distribution or grow revenue, then you would seek a partner with established traffic and/or distribution that might see synergy in your product offering. In either case, the following are some of the key business issues (and some suggested approaches).

? Integration: The level of customization is important, and you should try to have your own custom tab or section on your co-marketing partner’s service, with a shared log-in process, and the right to keep or, at a minimum, access user data; and if the transaction is a bundled download, insist on the right to have your software included in the install flow, as opposed to through a separate link on a CD or folder (the difference is usually substantial in terms of user downloads). In addition, in the install flow, ensure that your software will be presented on an ‘opt-out basis’ (where the user must un-check a box to avoid getting your software) rather than an ‘opt-in basis’ (where the user must affirmatively check a box to get your software — again, the difference is usually substantial in terms of user downloads).

? Branding: You want the co-marketing relationship to present a product or service that is co-branded with both parties’ brands, particularly where you are looking for enhanced value from the partner’s brand.

? Promotion: Avoid passive obligations to promote your brand (Web site and download links on a partner page), and insist on active obligations (to appear ‘above the fold’ on the home page for specified periods of time, measurable distribution obligations in connection with software updates, or joint press releases or other PR obligations).

? Revenue sharing: If there is revenue to share, understand who collects and what are their reporting and payment obligations.

? Other terms: Define clearly if this is a long-term relationship or one designed to ‘test the waters,’ specify limited territories or worldwide, and determine whether one or both parties are to be the exclusive partner for the given product or service offered and/or whether one party should be prevented from doing business with competitors of the other.

Should I worry about the legal ‘boilerplate’?

The legal ‘boilerplate’ provisions are just as critical to the business relationship as the business terms. They help the parties determine their level of business risk and aggregate liability, and accordingly shape how each party works with the other. The following are some of the key legal provisions.

? Representations and warranties: These provide information that may be important to understanding your proposed co-marketing partner and its products/services (i.e., does their Web site/software infringe a third party’s IP).

? Limitations of liability: Just like they sound, these provisions limit your liability and likely that of your co-marketing partner, so analyzing what should be limited depends on the individual business deal.

? Indemnification: These require you to repay or defend lawsuits against the other party in certain events, and shape your total liability (including for third-party claims).

As is the case in any legal transaction, be sure to seek the advice of experienced lawyers to make sure your co-marketing deal achieves your desired objectives.