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Q: Partnership & Powered By Issues to watch for? ( Answered 5 out of 5 stars,   0 Comments )
Subject: Partnership & Powered By Issues to watch for?
Category: Business and Money > eCommerce
Asked by: lizardnation-ga
List Price: $15.00
Posted: 27 Sep 2002 10:07 PDT
Expires: 27 Oct 2002 09:07 PST
Question ID: 69742

When getting into a deal with a services partner or a Powered By
arrangement for a website, what are the issues to watch for in order
not to corner ones self having focused on short terms goals and not
keeping in mind what would be needed if the cooperation becomes
successful and doesn't hurt either party unintentionally or
intentionally? :-)

A co-branded service in this manner needs a bit of thinking before one
leaps into, specially in the area of service level agreements and the
privacy of ones own customers and the access of partners to that

Also, how a site may protect itself from being hijacked in a way by
its partners if it doesn't pay attention to how they're integrating
with you and interacting with your customers.

How do you cause the most benafit to your own brand instead of most of
it leaking back to your partners and service providers.

I'm interested here in points of view as well as facts if they may be
that available.  The more experience and exposure you have to the
above issues, your opinion may weigh more than quoting other
references and URLs of reports.

This question maybe two in one, so be it, I couldn't seperate them.

Thank you.

Subject: Re: Partnership & Powered By Issues to watch for?
Answered By: lot-ga on 27 Sep 2002 19:46 PDT
Rated:5 out of 5 stars
Hello lizardnation-ga

On a personal level I have co-branded with a free web hosting
provider, free email provider, search engine results, information
directory and online calendar system for a portal. They provided the
service free of charge in return for an extra marketing channel via
the portal and some revenue share. However some of the advertising
became more and more irritable with pop ups and pop unders which
killed the traffic. The free services were gradually being scaled back
and subscription services were introduced with revenue share. However
the attempt to turn the previously free services into a subscription
service turned many users away to other free services. The search
engine results, and directory were not subscription based but
advertising funded and was over loaded with banners, destroying the
user experience. Users who subscribed to the services did so on the
co-partners site, so they had the data and emailed the users marketing
messages. Although I also had the opportunity to email users too, the
mixed messages just diluted the brands and most have annoyed users the co-brand partner did it on a frequent basis with nag emails
to ask users to upgrade to the paid for subscription based service.

If you can lay down the ground rules for your partners regarding the
amount and type of advertising, use of pop up and pop unders,
frequency and content of email sent to users, that should allow you to
build a brand and service rather than let the partner use the co-brand
relationship as a marketing vehicle which it will milk to it's death.
Also chart a clear roadmap of what functionality will be introduced by
both parties so there is a clear understanding on the direction for
the co-branded product.
The smaller brand will normally benefit more from brand pull of the
bigger brand. If the co-brand partner has sole use of the user email
list that can result in hi-jacking, particularly if they send out
messages which pull users to their own services and interests. Sign up
screens may also become less neutral.

The most benefit for you own brand is if the partnership allows you a
high level of customisation, approaching a white label turnkey
solution where you begin to appear to be the main brand which is
'powered' by as you already mention. This has more presence than an
equal weighting co-brand identity.
However this situation will only exist if the revenue kick back for
your partner is perceived to be greater than for them to have a higher
brand visibility.
To strengthen your brand it helps if the provider does not advertise
or make it widely known they co-brand solutions, as the consumer can
use the other co-brand partners and weakens your position in the
provision of that service in the market.

I managed to source two documents on the subject of co-branding.

The following document outlines some issues with co-branding.
"Beware the pitfalls of co-branding" by Mark Abell, Field Fisher
Waterhouse PDF file
Excerpts from the document:
"While lawyers busy themselves with agreements for sponsorship,
merchandising, endorsement and franchising, co-branding still seems to
be relatively virgin legal territory, despite the obvious legal
implications. So far, co-branding deals seem to have been more the
realm of operational managers who, in the authors' experience, view it
as little more than an exercise in commercial expediency. Financial
terms are often the primary reason that businessmen instruct lawyers
to draft agreements: the reciprocal nature of a co-branding
relationship often means that there is no need for payments to be made
between the parties. Nevertheless, there are a myriad of issues which
need to be carefully considered by the respective brand owners and
agreed before embarking upon a co-branding project. As a result, a
written agreement is imperative. The issues and how they should be
dealt with vary substantially depending upon two basic factors: the
relationship between the brands and the nature of the project

It also points out there are at least nine different types of
co-branding relationship, and an empathetic brand relationship is the
most common were the there is an obvious and even natural

The project itself can be split between:
"- Symbiotic project
A major risk in a co-branding relationship is that the juxtaposition
might result in the dilution of one or indeed both of the brands.
Brand presentation, their relative prominence and the use of
associated trade dress are therefore key issues.
- Creative projects
The use of two separate brands to launch an entirely new concept,
product or service naturally presents different issues. The danger is
not merely that one or both of the brands becomes diluted, but also
that a third mixed brand is inadvertently created. The risk for such
junior brand owners is that it becomes so closely associated with the
newly-created product that its brand reputation is damaged.
- Incidental projects
Some projects involve three parties - two brand owners and a common
licensee - where the co-branding is incidental to the main commercial
purpose. ...The sponsorship agreements must therefore deal
specifically with the relationship between the co-sponsors’ brands."

"Scope and Duration
It is unusual and probably undesirable for a co-branding project to be
both widespread and long term. Co-branding is best used strategically
- to strengthen some weakness in a brand or to take advantage of
opportunities that present themselves...
Long term co-branding projects can also be dangerous. Sponsoring the
new stadium of a sports team may seem like a good idea when they are
on a roll but can become a major embarrassment when success eludes the
team and it becomes a regular loser. To the public that stadium will
always bear the sponsor’s brand name long after the formal
relationship has been terminated."

"Exit Routes
Paradoxically, in most co-branding and licensing projects the first
thing to consider is how the relationship can be terminated. Clearly
the usual provisions for termination due to breach of the agreement
will be necessary. In a co-branding agreement there are some
additional requirements. Each brand owner will require the right to
terminate not only if the other party damages its brands, but also,
because of the inherent proximity of the two brands, if the other
party damages its own brand. Having purposely cultivated an
association between the brands, on termination the parties will want
to do everything that they reasonably can to distance the brands. This
in the authors’ experience presents the greatest challenge to brand
owners and their advisors. In order to ensure there is as little
chance as possible of confusion by the public after the co-branding
relationship has terminated, it is best to impose post-termination
restrictions on the parties. In the context of a pizza outlet/petrol
station project for example, the de-branding of the pizza outlet and
restriction on using its know-how will not always be sufficient for
the pizza brand owner. It will usually also want the petrol station
brand owner to refrain from setting up another pizza outlet in the
petrol station for a certain period. On the other hand, if the pizza
outlet was successful, the petrol station brand owner will be
extremely reluctant to accept such a restriction. Ultimately the
difference will be resolved by the strength of the parties’ respective
bargaining positions."

The following are excerpts from
"Understanding Internet Co-Branding Deals" by Eric Goldman, Esq., and
Candice Lee

"A provider also has a number of reasons to enter co-branding deals.
First, a co-branding relationship takes the place of a licensing
arrangement. Rather than using its intellectual property in only one
channel—its own web site—the provider can “distribute” its content and
services in multiple channels, thereby potentially getting multiple
revenue streams. However, when the provider makes its services easily
available on the Internet, the provider then faces the risk of channel
conflict or cannibalization.6 The provider can manage this risk by
developing relationships with branders who have access to
significantly different channels of users. Second, the provider can
“distribute” its content and services without actually having to
provide a copy of the software, thereby avoiding difficult
intellectual property protection issues. For example, consider a
publicly accessible database of facts, such as a directory of phone

Often one of the provider’s key goals in a co-branding relationship is
to obtain new users. To make things easier for users (which increases
the likelihood that users will actually use the provider’s services),
the brander and provider often agree to automatically exchange data
about the users. These types of data exchanges raise a number of
issues. The parties need to think about exactly what pieces of user
information are being exchanged. If the parties choose to use
prepopulated forms, then they can agree to specific lines of
information that will be transferred from the brander’s database to
the provider’s registration form; otherwise, the brander will often
transfer user data directly to the provider’s database. In addition,
the provider may be transferring back referral information to the
To effectuate these exchanges, the parties need to agree on the
technology used to transfer this data. Unfortunately, there is no
standard technology to implement these exchanges, meaning (1) the
parties may have radically different conceptions about how to do this,
and (2) often at least one party, and perhaps both, will have to do
custom development work, a serious proposition for most Internet
companies who often have hundreds or thousands of engineering tasks
that are backlogged and awaiting the attention of strapped engineering
departments. In either case, once the parties agree on the initial
procedure for completing the transfer, they may also need to have a
set of procedures to deal with changes one party wants to make to
their web site or their back-end systems, which would impact the data
transfer mechanism. The parties often give little attention in the
contract to either the initial transfer mechanism or to procedures for
changing the transfer mechanism. This oversight leaves open wide areas
of potential dispute (and possible abuse)."

"As part of the operation of the co-branded site, the provider, and
sometimes the brander, will generate information about referrals. Such
information can range from modestly valuable aggregated demographic
and psychographic information to extremely valuable personally
identifiable information including, in some cases, such sensitive
information as credit card numbers and social security numbers.
Properly drafting clauses governing the use and disclosure of referral
information remains one of the most vexing problems in cobranding
agreements. There is no industry-standard clause for this situation,
so each clause requires, but rarely receives, careful and individual

"Sometimes the parties will consider “joint ownership” of the referral
information, a problematic phrase because there is no intellectual
property right in the referral information to which joint ownership
could apply. It does not make sense to consider jointly owning the
copyrights of the referral information, since the referral information
is almost always just facts and therefore not subject to copyright
protection.13 Furthermore, under copyright law, joint owners have
certain duties to each other,14 such as a duty to account and possibly
a duty to avoid waste, which the parties rarely intend to implicate.
The referral information certainly may be the trade secret of both
parties, but the proper way to assert ownership over the trade secret
is to establish a set of use and disclosure restrictions on the other
party. The declaration of “joint ownership” is not sufficient to
effectuate a trade secret license and often obscures the need to be
explicit about specific use and disclosure restrictions. Often, after
careful consideration of the real economic and competitive risks, the
parties realize that they do not need to aggressively restrict the
other party’s use and disclosure of referral information. In many
cases, all the parties really need is to restrict the other party from
using the referral information in a way that benefits the other
party’s competitors, such as targeting referrals for
competitors’ advertisements."

Search Strategy:
pitfalls cobranding OR "co branding"

If you need any clarification of the answer, just ask.
Kind regards
lizardnation-ga rated this answer:5 out of 5 stars
Great job! Thank you.


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