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August 24, 2004

Written by Bob Meyer, Editor of BarterNews

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Barter's Exciting Role In Google's IPO

In light of last week’s initial public offering (IPO) of Google, there are some thrilling stories that certainly reinforce the use of barter as a business strategy...and hopefully expand one’s thinking regarding this versatile business tool.

Over the years we’ve pointed out that tangible assets (products and services) are just some of the tradable possibilities. Virtually everyone has other “assets” to trade upon when they expand their thinking—because barter opportunities, on various levels, exist almost everywhere

Your intangible assets would include contacts and influence, reputation, energy, enthusiasm, drive and ambition, unique background and knowledge, information, and experience.

In the Google story here are a few barter examples:

  • Stanford University’s President John Hennessy assumed a seat on Google’s Board of Directors which brought him 65,000 shares...valued today at $7 million.
  • A faculty member, computer-science professor David Cheriton, served as technical advisor to Google over the years and was compensated with stock. He now holds shares worth $29 million.
  • Five years ago, in Google’s early days, Abbe Patterson prepared PowerPoint slides and speaking notes for the young co-founders Sergey Brin and Larry Page. The bill for her services was $4,000; in lieu of the cash payment she was offered an opportunity to take stock options. She decided to go that route and her decision has really paid off...she’s now holding stock worth $1.7 million.
  • Stanford University, which developed key technology used by Google, received stock and some cash, plus annual royalties, for an exclusive licensing partnership. The stock is valued at $200 million.

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Barter Moves World's Simplest Drink To Celebrity Status

At the haute price of $10 for a liter bottle, Fiji Natural Artesian water is the latest bottled water brand to elevate to celebrity status. It’s now served at all eight New York restaurants managed by Jean-Georges Management LLC, as well as other luxury hotels and restaurants in New York and Los Angeles.

The brand, bottled in the Fiji Islands (a 332-island nation of 890,000 in the South Pacific), owes its current success to Creative Entertainment Services of Burbank (CA). They helped Fiji with product placement opportunities—introducing the water in movies and TV shows.

Fiji provides (barters) its water to television and film sets, as well as to celebrities, in exchange for valuable exposure. It has also made the rounds on the charity circuit, sponsoring events such as the Susan Komen Race for the Cure and the Revlon Racewalk.

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Economist Asks Question About The Euro...
Coming Of Age Or Coming Apart?

Joachim Fels, an economist for Morgan Stanley, writes that it’s about time investors consider what might happen if the euro fell apart. Fels says there is no denying the serious cracks that opened up in Europe during 2003. Suggesting that Europe’s internal fractures indicate that the vision of a United States of Europe may remain a pipedream.

Yet Fels says that a Disunited States of Europe may be just what the doctor ordered for Europe’s ailing economy. That’s because countries pursuing the right tax, welfare, and labor market policies will be rewarded with capital inflows and stronger growth. Eventually, a competitive process of dynamic benchmarking should result in a less regulated and stronger economy.

But a disunited Europe Union has other important consequences for financial markets. Growing divisions on budgetary policy could significantly widen government bond yield spreads between the more and the less virtuous countries. Also, a disunited Europe would likely lead to increased political pressures to create higher inflation. Even the most independent central banks are not immune to the political environment.

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From Our Files...

Amazing Story On How World's Largest Privately-Owned Software Company Traded For Proprietary Software

In 1996, fifty-three-year-old Jim Goodnight owned two-thirds of Statistical Analysis System...a company with a 6.5 million line of code, and the imposing program used by the United States Census Bureau and the Department of Agriculture.

As an under-graduate at North Carolina State University, Goodnight’s major was in applied-mathematics. He spent a year with General Electric working on the Apollo space program before receiving his doctorate in statistics.

He then joined the faculty at his alma mater, and teamed with a fellow university researcher who had worked two years at IBM developing the Pentagon’s information system. It became apparent to Goodnight that there was an enormous brainpower waste in having to write a new program each time they wanted to analyze data.

So he decided to develop, with his fellow researcher, a uniform program that could be used over and over. One that could solve a numerous variety of problems.

The software enabled users to integrate and organize massive amounts of data that are stored in incompatible computers (such as IBM mainframes, PCs, Macs) and then view and mine the data on virtually any computer platform.

With their grant money running low and his new working program developed, Goodnight and friend decided to strike out on their own.

They approached North Carolina State and proposed a trade—give them all copyrights on the analysis system program in exchange for free upgrades. Goodnight admitted, “They didn’t know what software was, so they didn’t know how to control it.”

Thus another entrepreneurial success story. And another creative use of barter, which enabled Goodnight to join the ranks of the Forbes 500—as he’s now worth an estimated $3 billion!

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

Bartering For Financial Breaks Brings Hollywood To Hawaii

Hawaii, faced with double-digit drops in tourism revenue after the 9/11 terror attacks, is taking a cue from such states as New Mexico and Louisiana by developing enticing new tax incentives for the movie and television industries.

The centerpiece is a 4% rebate for production costs while filming in the state (an offset type arrangement often found in the worldwide countertrade arena) ranging from payroll to hotel taxes. This amounts to a healthy savings, when TV dramas can cost as much as $2 million an episode to produce.

The money TV and movie crews leave behind—the Hawaii Film Office estimates production costs in the state will top $100 million this year—isn’t what lawmakers are really after. With tourism as the state’s #1 industry, they see the films and TV shows “sending out a gorgeous electronic postcard” attracting scores of visitors!

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Here & There...

  • Entrepreneur Tony Fernandes, a former music executive for Time Warner, Inc., is turning Asia’s stodgy state-dominated airline industry upside down. The 40-year-old Malaysian, who was educated in Britain and worked for Richard Branson’s Virgin Group, bought AirAsia in 2001.

    It was a money-losing Malaysian airline with a fleet of two aging 737s. He paid twenty-seven cents and agreed to assume $10 million in debt. In three years he as expanded the fleet to 17 airliners, and built the no frills AirAsia into the region’s premier budget carrier. Plus, he has the lowest operating costs in the world, four-cents per seat mile (one seat flown one mile).

  • The growth of the online travel business continues to explode. An estimated $100 billion of travel-related services will be ordered online this year and that figure should rise to $150 billion next year, according to research firm PhoCusWright. In 2003, 33% of all U.S. travel was booked online, compared with under 5% in 1999.

  • Latino’s make up one-third, or 12 million, of California’s population. According to the 2000 census, 57% of California’s construction workers, 58% of its cooks, and 53% of its janitors were Hispanic. (Latino’s constitute about 13.5% of the U.S. population, up from 9% in 1990. By 2030, the proportion is expected to hit 18%.)

  • Further evidence that the institutions best suited to attracting eyeballs and charge cards will become our new sources for entertainment and inspiration: Mass retailer Costco sells lithographs by Picasso, Chagall, and Miró.

    The store marks up the artwork by no more than 14%, compared with the 100% to 150% that a gallery might add. The bargain Picassos are flying off the shelves, and Costco is out of stock on all three artists.

  • Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner) and sign up!

  • What’s the value of one’s voice? For the sequel to “Shrek,” voices Mike Myers, Eddie Murphy, and Cameron Diaz will each earn $10 million for their vocalizations of the characters!

  • The National Association For Business Economics (NABE) says terrorism has replaced weak employment growth, and the ballooning budget deficit, as the biggest immediate threat to the U.S. economy.

  • Yahoo HotJobs is bartering with the Trump “Apprentice” TV hit. The reality show will be promoted on Yahoo HotJobs web site and the Yahoo network. In exchange the job site’s name will appear on the taxicabs used to escort fired contestants from the show.

  • Foreign companies have poured $270 billion into China in the past seven years. Much of it representing factories gearing up to make cars, computers, and a wide variety of other export-quality products.

  • CEO Bob Jeffrey of J. Walter Thompson, the biggest U.S. advertising agency, expects to see a staggering decline in spending on network television commercials, even worse than most of the negative expectations. He believes the share of dollars spent by advertisers over the next five years could decline by half: “I think companies that now spend 70% to 80% in network TV, in five years could go down to 30% to 40%.”

  • Michael Belkin, president of Belkin Ltd., a Bainbridge Island (WA) investment-advisory firm that forecasts financial-market trends, says the long-term bear market that commenced in 2000 is still in force, and the 2003 rally was simply a big bounce in a bigger downtrend. His advice is to be as defensive as possible, because global growth is slowing.

  • Oil at over $40 a barrel, accelerates exploration for new fields and development of known but technologically inaccessible fields...including some that are four miles below the surface of the Gulf of Mexico, where there may be at least 25 billion barrels. High prices could also prompt development of hitherto economically unfeasible sources, such as U.S. oil shale and Canadian tar sands.

    Tim Appenzeller, writing in National Geographic, says tar-sand deposits in Alberta “hold the equivalent of more than 1.6 trillion barrels of oil—an amount that may exceed the world’s remaining reserves of ordinary crude.”

  • Hotel revenue was up 11% in the first five months of 2004 at luxury and upscale chains, but up just 3% at economy chains...according to Smith Travel Research, a market-research firm.

We welcome your comments, questions, and observations.
? Copyright BarterNews 2004. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.

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