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May 30, 2006

Written by Bob Meyer, Editor of BarterNews

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From the desk of Bob Meyer...       05/30/06

The following letter was received from Peter Tucker, President of CTEX in Toronto, Canada. His response to my comments (on how algorithms will be a positive assist for the barter world) in this section of the May 16 issue, asks the question:

“Is Barter Industry Ready For The Coming Technology Tsunami?”


In the recent Tuesday Report article on www.Swaptree.com, I found it interesting that they’ve developed technology with sophisticated algorithms to pull off direct trades between more than two parties.

It’s all done for free (cashless) with no rules and regulations or protective manipulations by barter companies. Not everything is available yet, but the implication is that it will be some day.

And maybe a financial giant might just want to have their credit card banner ad front-and-centre to help visitors complete their transactions (taking it to the next level of growth).

So as we see this progress, what does this say about the future of the commercial barter model? Does the barter industry have a breakwater to protect it from the tsunami-like effects of Internet technology flooding its market?

Or will the industry be washed away virtually overnight when these technologies hit the beach? Travel online went from zero to $100 billion annually in a handful of years. 

Meanwhile the barter industry has some breathing room, as this new software has yet to overcome the pricing issues between items of differing value. But given that they’ve nailed the trading of products down to UPC bar codes—used on just about everything we buy—I would assume any other pricing challenges will be solved.

Perhaps the one thing the barter industry has still, is it’s collective database of a million clients. Yet we still have not come up with a formula to combine and multiply. Will we do that? 

Peter Tucker, President
CTEX Group


Dear Peter,

I agree, the industry’s collective database is impressive. It’s been an extraordinary achievement, given their under-capitalization. As you know, these individuals are extremely entrepreneurial, and getting them to collectively agree on something is like the proverbial “herding of cats.”

At this time I see no evidence of any serious collective thinking toward your suggested strategy of combining and multiplying. As you’ve read the article “Suplizio Addresses Biggest Challenge Facing Barter Industry” (found on the bottom of our home page), you know that Paul Suplizio has advocated such a collective effort.

Years ago, some within the industry suggested a move in this direction would parallel MasterCard’s network through which card transactions are processed. MasterCard is owned by thousands of financial institutions, and yet these same banks continue to compete with one another in the marketplace. Such a model could be adopted by the commercial barter industry.

(Last week, on May 25, an Initial Public Offering by MasterCard raised $2.4 billion—for 46% of the company’s equity—reinforced the power of a joint network ownership.)

We’re also seeing movement by major stock-and-bond exchanges toward consolidation, to secure their futures beyond national boundaries. The Nasdaq Stock Market is desiring to merge with the London Stock Exchange. The NYSE Group wants to acquire Euronext, which runs exchanges in Amsterdam, Brussels, Lisbon, and Paris.

(Trading on global financial-markets has risen 20% a year for 10 years. Last year investors bought and sold $51 trillion worth of stocks, and made bets on short-term interest rates with more than 800 million futures contracts.)

The consensus among a growing number of financial experts is rather direct—serve your constituencies, which in the financial sector means going global, or become irrelevant.

The commercial barter industry’s potential is staggering, as the growth of entrepreneurs around the world continues to multiply. Having access to another form of capital—the trade dollar—can be of enormous benefit, as so many of us in the industry have observed first hand.

But I have yet to see any movement toward building an infrastructure, as suggested by Suplizio or similar to the MasterCard model.

My observations lead me to the conclusion that a handful of large barter companies fervently believe they will one day prevail in the marketplace, thereby controlling the vast majority of the multi-lateral trading activity.

And, of course, the application service providers (which have grown substantially in the last six years by providing accounting and other services to the smaller trade exchanges) also see themselves as playing a significant role in the future, wherein they become the network of choice.

But, in reply to your question about the barter industry combining and multiplying together...I just don’t see any evidence of it. 

Bob Meyer

Touma Completes First Step of BBX Global Barter Alliance

Australian based BBX Holdings has announced the sale of a master franchise covering the north and south islands of New Zealand for approximately $2 million. Managing Director Michael Touma says it’s the all-important first step in BBX’s goal of building a global barter trading alliance. For more information see: www.ebbx.com.

Current U.S. Listing Information...

Florida Barter
2290 Lee Road
Winter Park, FL 32789
Ph: (321) 397-2050
Fax: (321) 397-2066
E-mail: exchange@floridabarter.com

(Please feel free to forward our newsletter to your friends and colleagues. We have a “box” at the end of the newsletter for your convenience. See you next week. . .)

ITEX Completes Largest Convention Ever

CEO Steven White is grinning from ear to ear after concluding the largest national convention ever staged for the ITEX Corporation (OTCBB:ITEX). The event was held in Las Vegas at the Excalibur, and according to White, “our attendance was almost double the annual conventions of the industry’s two trade associations.”

“The Winning Team” was this year’s theme, focusing on the power of the network—the company’s 95 locations.

Most significant, from corporate’s perspective, was this year’s convention signifying the end of free conversion for existing brokers to franchises...with 60 offices completing or agreeing to a franchise agreement. (New conversions will be subject to standard franchise initiation fees.)

At the formal awards dinner, Linda Rubendall was the recipient of the Brokers Choice Award, Hal Henry carried off the Jule Gulley Award, and Jim and Carolyn Young (Tampa, Florida) received the coveted Franchise of the Year Award.

For more information on the 22,000-member barter company go to: www.itex.com.



A University Experience To Unite People & Standards
In A Cashless Trading World

IRTA’s 27th Annual Convention
St. Petersburg Beach, Florida, USA

Early registration, before June 5, will save you 20% on the registration fee. (Registration date will not be extended.)

Send an e-mail to Krista@irta.com and you will receive a personalized registration form. Your e-mail must be received before June 5 to receive the discount.

Registration costs can be viewed at: http://www.irta.com/EventsList.asp.



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For complete information please e-mail: norm@edaddywarbucks.com.

The Motley Fool Newsletter Looks At Barter

An interesting article by David Kuo appeared on The Motley Fool web site on May 17. Wayne Sharpe, CEO and co-founder of Bartercard (LSE:BRTR), covered a subject that’s often incorrectly used interchangeably in newspaper and magazine articles—the difference in the meaning of the words bartering and haggling.

Sharpe contends that it is an unfortunate mix-up, because it gives bartering a bad (and an inappropriate) image. Sharpe explained, “When you haggle, you are trying to pay less than the asking price for what you want.

“For instance, when you submit an offer below the asking price, you are inviting the owner to haggle or negotiate with you. But when you barter you are paying the full ticket price for the particular goods and services being sold.

“However, the method of payment is different. Instead of forking over cash for the purchase, you are offering something of equivalent value in exchange.”

Sharpe pointed out to the writer that when bartering, businesses can effectively get what they need at a discount that is equivalent to their gross margin.

Examples were given in the article to further make the point. Overall, one of the more articulate articles on understanding barter’s inherent value and the use of trade dollars when trading.

Trade Exchange Owners...
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Another Perspective on Frequent Flyer Programs

Thomas H. Greco, Jr., the author of Money, Understanding and Creating Alternatives to Legal Tender, has spent more than twenty years studying money, banking and community currency systems, throughout history.

The following is his insightful response to last week’s Tuesday Report, regarding the article on frequent flyer miles (FFM).

Frequent flyer programs are what are generically referred to as “loyalty programs.” Their primary purpose is to stimulate customer loyalty, that is, to keep customers coming back to make subsequent purchases rather than going to a competitor. These programs typically provide the customer with some sort of rebate on purchases.

These rebates are seldom in cash, and most often are in the form of vouchers that can be used as partial or full payment on subsequent purchases. Ideally, a voucher credit should be acceptable in payment on a par with cash, without restriction, but that is usually not the case. In an effort to maximize their loyalty effect and minimize their costs, the issuer of loyalty points, such as frequent flyer miles, will typically impose many restrictions as to when and how vouchers may be redeemed.

In the case of frequent flyer programs, only a certain number of seats are made available for frequent flyer awards on each flight, and often the number of seats so available will be based on the number of seats that are available as the departure date approaches.

It is my experience that on some airlines booking must be made more than two months in advance in order to assure an award flight. If you desire a less restricted reservation, at least one airline, Delta, is increasing the number of miles required for an award flight. The normal number of miles for a domestic flight is 25,000, but few flights are available at this rate. If, however, you are willing o pay 50,000 miles, you can probably get the flights you want.

Considering the vast number of miles that the airlines have issued, it is probably safe to bet that this kind of credit inflation will only get worse as time goes on. The problem may be mitigated to some degree as the airlines recruit “partner” businesses to not only issue miles, but to redeem them, as well.

But any such program that depends upon continual growth is a Ponzi scheme. Is that in fact the case with frequent flyer programs? It’s hard to say without detailed figures for each airline. The key question is, how long would it take the airline to fully redeem its outstanding issue of frequent flyer miles? The numbers that need to be looked at are (1) the number of miles outstanding in relation to (2) the number of round trip flights flown monthly or annually.

Another factor that bodes ill for these programs is the fact that the competitive advantage that loyalty schemes are supposed to provide disappears when everybody starts doing it. Such was the case in years past with supermarket stamp programs like S&H Green Stamps, Top Value Stamps, etc.

One further point: is it proper to refer to frequent flyer miles or loyalty points as currency? Well, that depends on how you define currency. While they are to some extent transferable, they are not generally spendable. On the other hand, value can be obtained for them, but only from a limited number of entities, and only with restrictions. The technical and narrow definition of currency is “anything that is commonly accepted in payment.”

On that basis, loyalty points, including frequent flyer miles, do not qualify. I would prefer to not muddy the waters with loose terminology, and would urge that frequent flyer miles be categorized as loyalty vouchers or rebate vouchers, not currencies.

For more information on Thomas Greco, Jr., see his blog and/or web site: www.beyondmoney.blogspot.com or www.reinventingmoney.com.

Editor’s note: In a recent issue of Parade magazine an article titled “Don’t Lose Your Reward Miles!” noted that 92% of frequent-flyer miles will never be redeemed. The article suggests planning ahead, as FFM seats (about 8 in 100) generally become available 330 days before the flight date.

Also reported was the declining estimated value of a mile over the last ten years, from approximately 2-cents to 1.4-cents today. Miles usually expire after three years on an inactive account.

Our Web Site Has Added A Search Tool For You

Ever wondered if a certain topic, person, or organization has been written about on the Barternews.com web site? Now you can easily find out, as we’ve added a search tool. It will quickly give you the answer to your questions, in 3 easy steps that take about 12 seconds!

At the top right of the page, just under where you sign up for the Tuesday Report you will see a little Google box. It is where you can (1) type in the name of a subject, company or person. Then (2) click the button for www.barternews.com to search the site, followed by (3) hitting the search button.

Every barter company in the world is listed on our web site, click through to our Global List of Barter Companies.

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