The future of barter in advertising

Question posted by Rishi Anand in LinkedIn Answers with my answer below

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What future do you forsee for BARTER? Is Barter catching up in media industry or losing its grip..

Most of the media organisations have seen a hit, and are now open to Barter with clients directly or thru a mediator. Do you think this system will last long or will fizzle out in the future…
What is your intake on the same?

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I work with Corus Radio in Quebec (GM of Internet) and have also worked with Initiative Trading in 2005.

There really are 2 distinct fields here and depending where you live, where you work, what side of the fence you’re on, they get mixed up.

TRADE is where an agency / mediator will buy media for an advertiser with real cash, made from the sale of the advertiser’s products through various means. There’s a math to it with ratios to ensure the agency actually makes money.

BARTER / CONTRA is where 2 parties agree to exchange a media value against another equivalent media value, or product value. Again, depending who you’re dealing with, this can be done at RATE CARD or EARED RATE, however it is sometimes dealt at 2-3x RATE CARD – depending on the need of the media to obtain the product for it’s own needs.

75% of the radio business here is LOCAL (or direct to client with some minor agencies). Many direct clients like to deal on barter and that’s good for us to a certain point.
The cash flow issue raised by Sanjeev is totally right. However, when you have a sales force acting locally, they naturally take clients out to restaurants, events and show (or give them tickets to these). Whenever we can avoid “buying” these with CASH and use BARTER, that’s less cash out for us and has less impact on our expenses – i.e. allows us to do more.
Sometimes clients try to BARTER to avoir paying money, and if we have no needs for X (say tires for examples) we’ll say NO.
Other than that we de the majority of our total BARTER with other media so we can advertise our radio stations & websites on their newspaper, website or television and vice versa. This is also good as it is less “cash out” once again and allows us to reach a different audience cheaply. Then again we’re doing the same for them.
I see very little barter online here in Quebec.
We do some business with Active International (NY) but only on the radio side and that doesn’t work the same way

Now to answer your question, there may be a slight increase now as there is no cash exchange and its a way to exchange values and continue doing business during this tough economic crisis – but that’ll only last a certain time and return to normal as companies prefer cash to trade value.
On the other hand, at Corus Quebec we are forced to reduce costs due to the ecomonic situation and that INCLUDES barter.
Hope this helps

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