Forming Strategic Alliances Online

by Richard A. Chapo

The internet is unique in the business world because of the common presence of what are known as strategic alliances. In fact, forming alliances with others online is often considered critical to making a profit. Although webmasters and companies enter into such relationships all the time, few understand exactly what they are and the consequences.

Let’s start with the basics. What is a strategic alliance? It is simply a legal relationship between two or more parties that hopefully benefits them all. An affiliate agreement is a simple example of a one sided alliance. One party has something to sell and the other party has buyers in the form of traffic who might be interested in buying.

Equity Alliance

There are two general types of strategic alliances you need to know about — equity and contractual. An equity alliance is one where two parties come together to form a new business. The parties remain independent, but put together a new company to develop an entirely new channel of business. An example might be an online marketer and a programmer forming an alliance to build and market iPhone apps. A new company would be formed to hold the intellectual property rights for the apps and so on with profits being distributed to the marketer and programmer as shareholders.

Contractual Alliance

The contractual strategic alliance is another beast entirely. It is pretty much what the name suggests. Two or more parties simply agree to pursue some form of business that both can contribute to. Let’s look at a classic example. Let’s say I have a huge double opt-in email list and you have a product line that would be perfect for mailing. Assuming we could agree on a revenue split, we would enter into a contract detailing how the deal would work and then get down to business.

The contractual strategic alliance is extremely popular on the web. As mentioned before, affiliate agreements are essentially alliances, although affiliates rarely have much say in the terms of the deal. That being said, you rarely want to just agree to an online agreement if you can avoid it because nearly every term of the agreement is written against you. More than a few affiliates have learned this when they’ve been terminated from programs and lost their revenues.

Get It In Writing

Strategic alliances are something you always want to have prepared by or looked at by a lawyer. There are major issues that must be hashed out. Failure to do so can result in complete disasters. For instance, assume you are a programmer. Assume you bring one of your custom pieces of programming to an alliance. In doing so, you will grant a “license” to the other party to use it. Well, what happens when the agreement ends? Does the other party get to keep using it? Do they get to use it on other projects or sites that you don’t receive any money from? If the answers are not detailed in writing, you can end up being burned and that certainly defeats the purpose of entering into the strategic alliance to begin with!

Should you be looking around for potential strategic alliances on the web? Absolutely. Just make sure you are protected when entering into them.

Richard A. Chapo is an internet attorney with – where he negotiates and drafts strategic alliance agreements for clients.