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May 16, 2000

In this week's report. . .

  • Bank of America enters $325 million barter agreement
  • Trading plays big part in Planet Extreme Games
  • Barter builds brand for Roots Canada
  • Here and there. . .

Electronic Bill-Processor Makes Big Barter Bet With Bank of America

Bank of America (B of A) and CheckFree Holding Corp. have entered into a 10-year barter pact that's valued at a minimum of $325 million. Under the agreement CheckFree will take over online bill processing for B of A's internet customers.

In return, B of A will receive a 16% ownership stake in CheckFree with the option to buy more than 10 million more shares if its customers begin paying and receiving their bills online from CheckFree.

Some stock analysts have questioned CheckFree Holding's big barter bet with B of such a huge stake in return for future customers. But the market liked the trade, as CheckFree's shares rose 37% (up $14.81 to $54.38) after the deal was announced on April 27.

Barter Fuels Planet Extreme Championships

The island of Oahu, Hawaii will be the location for the competition between the top extreme athletes in the world. The Planet Extreme Championships' games are now being aired on the Fox Sports Network, and will continue for 13 weeks.

CEO Ross Love of Corpas Investments, which founded the Planet Extreme Games, enthusiastically talked about the company's self-supportive model. "By taking some cash and some barter from traditional sponsors, and some ad swapping with Lycos to diversify our ad inventory to the net, we take full advantage of our position."

He continued, "We covered all our costs and we still have additional ad inventory (for) our other properties. This is unheard of in the new net economy. Our model creates ad dollars while branding, instead of just mindlessly spending our investors money."

Roots Canada Builds Brand Using Simple Barter Arrangements

The rugged imagery of Canada (elkskin jackets, leather bags, shoes and casual wear) has been captured, packaged, and smartly marketed by two American from Detroit...Michael Budman and Don Green.

And having laid down roots in New York, Aspen, Beverly Hills and other cities, the 160-store chain now plans to add 25 outlets at U.S. resorts including Sun Valley and Vail.

Roots Canada was founded in 1973 and the company, short on cash, learned the value of cultivating and bartering with their celebrity connections to market their product.

The late Gilda Radner used to lend a hand selling shoes in Roots's first store in Toronto. She introduced the partners to Dan Aykroyd and other local comedians, as well as the cast of Saturday Night Live.

Roots's popularity grew after the company outfitted the Canadian team at the 1998 winter Olympics in Japan. Television viewers around the world watched the team parade through the stadium wearing their red-and-white melton and leather jackets with red poorboy caps, emblazoned with the words "Canada" and "Roots."

The garb drew high-profile attention. Actor and comedian Robin Williams wore one of the red Olympic caps to the Academy Awards ceremonies.

In exchange for nothing more than Roots merchandise, the two founders have gotten stars such as Matt Damon, Ben Affleck, and Jason Priestley to wear Roots clothes in marketing campaigns.

Here And There. . .

  • Individual Investor Group, a financial media company that reaches more than three million people each month, has achieved another equity-for-advertising trade. (In 1997 the company acquired a stake in Wit Capital through an equity-for-advertising barter transaction.) In February they acquired a 3.3% stake (on a fully diluted basis) of Inc., an internet auction site. The value of the deal was $1.5 million.

  • We've heard about the increasing use of a company's stock as payment for commercial property (office) leases. But here's a new one regarding a company executive looking to buy a home in San Francisco. Knowing he was one of multiple bidders for the property in the city's ritzy Presidio Heights section, he sweetened his offer with 1,000 shares in his company when it goes public. And that clinched the deal, as the seller of the property was in the investment business.

  • Did You Know? The average family pays roughly 16% of its monthly income to service its debt. And right now, the U.S. government is spending 13% of the national budget to service the nation's national debt.

  • French auto maker Renault traded its entire RVI truck business to Volvo in exchange for a 15% ownership stake in the Swedish truck and construction-vehicle company. The value of the deal was $2.07 billion.

  • Enron Energy has done it again...signing on to be an equity partner for an entertainment facility. In an earlier edition we reported on their bartering effort with the Houston Astros' new baseball park, now named Enron Field. Now in a similar deal, they will provide electricity and facilities management services to an Orange County (CA) action sports and media mega-center known a Gotchas Glacier for an equity stake in the center. The facility will house 18 different sports in a 600,000 square feet development.

  • Here's another example of the classic trade offer, "Give me your business and I'll give you something in return." In this case the Marriott hotel chain has created a new status for its most frequent overnighters. The best perks will go to the travelers who spend 75 or more nights a year in one of Marriott's brand hotels. Perks will include fruit baskets and mineral water in the room, room upgrades, free phone service, and access to concierge lounges.

  • Robert Coen, McCann-Erickson Worldwide's veteran ad-spending forecaster, predicts dot.coms will spend $7 to $10 billion this year compared to $3.1 billion in 1999. He also said that advertisers will spend $233 billion in the U.S. on broadcast, cable, magazine, newspaper, and outdoor ads. Editor's Note: With a roaring economy, today's roller-coaster stock market won't be any more than a little speed bump...and won't affect the spending habits of advertisers. This is substantiated by prices in the TV scatter market (ad inventory sold during the season...about 15% to 20% of their networks' overall time available) up 35% over last year.


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