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October 29, 2002

Written by Bob Meyer, Editor of BarterNews

A Mini-Billboard In Your Car Radio?
Southern California Test Promises More Media Inventory For Barter Industry

A new technology called Dynamic Radio Data Service, or dRDS is being tested with 53 radio stations in the greater Los Angeles area. (15 independent stations while the rest are part of Clear Channel Communications.)

At the moment most cars are not equipped with radios able to accept such advertising, but the numbers are growing. And radios with LCD and LED screens are standard in 75% of 2002 and newer cars. It's estimated that more than 20 million people have cars that use the technology.

It's a very passive system, all the driver has to do is look down at the radio screen. It's an information source that doesn't have to be stared at for a long period of time--yet is another way of driving a web site or a phone number into the heads of the consumers. (Navigational systems and more interactive features within cars present more of a concern for safety

The system synchronizes with data feeds from the station, such as a play list or weather or stock reports. Once the parameters are set, the songs or reports serve as triggers to run the ad. The commercials are broken up and run in approximately eight-second blocks. Ads are limited to eight characters, with the client deciding whether the ad will scroll, remain still, or notify the driver through a paging mechanism.

Perception Is Reality for Barter Transactions

In our September 24th issue "CFOs May Avoid Barter Transactions" we noted that CFOs may be hesitant to sign off on barter transactions, due to the deceitful behavior of several major corporations.

Now the SEC has started to increase its scrutiny of barter transactions, according to a recent article in Entrepreneur magazine, which states that companies bartering risk SEC action when they exchange goods and services at a price well above fair market value and when the goods received go unused or unsold.

Such trades suggest the bartering is solely for a revenue boost. And Adrienne Miller, a SEC enforcement accountant in San Francisco, says that's a no-no for public companies.

Miller cited an example, whereby a company unloaded obsolete inventory for Internet advertising credits which was never used, saying it was "an accounting gimmick to avoid writing the inventory off as a loss."

Private companies, which do not fall under the jurisdiction of the SEC, must worry about the image a barter-heavy income statement projects because potential lenders and investors are concerned about the quality of earnings for asset-based companies. The amount of barter activity versus cash would also come under question if a company is relying on cash flow.

Bottomline: Overpricing one's goods or services is inviting trouble. And looking for write-off avoidance by trading inventory but then never utilizing what's acquired (in the trade) won't fly either...nor should there be a need for these actions because barter's inherent incentives can stand on their own merits.

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Never Underestimate The Value of P.R!

While advertisers paid $300,000 for a 30-second commercial during the World Series, Taco Bell staged a playful promotion that featured a target in the cove behind the Giants' ballpark. The floating logo got a lot of free on-camera airtime during the three games played in San Francisco, with the announcers pointing out that if any player's home run ball hit the raft, the chain would offer a free taco to every American. (No one's ball reached the mark.)

Another public relations coup which garnered national recognition was Microsoft's lining New York's streets (from Times Square to Central Park) with colorful butterfly decals launching the latest version of its MSN internet service.

Headlines in newspapers across the nation stated, "New York Fines Microsoft $50 for Marketing Decals." The ensuing story reported on NY's Department of Transportation telling the software giant that its butterfly decals were defacing the city's streets and instructed the company to remove them. Plus they would be fined $50 for the incident!

TradeAmericanCard Member Scores Big With World Series Tickets

Dick Lobin, President of Century 21 Real Estate in Huntington Beach (CA), has been a long time member of local trade exchange TradeAmericanCard (TAC). He runs the top real estate listing office in Orange County.

Every year Lobin buys a dozen season tickets for the California Angels baseball season--for schmoozing with his clients. As a season ticket holder, he was eligible to purchase two tickets for every season ticket when the Angels made the Playoffs and the World Lobin bought the additional 24 tickets.

He then traded some of the difficult-to-acquire tickets to $3,000 trade dollars a pair, per game!

Lobin has been trading his real estate commissions (buying and selling), as well as consulting, notary and property management services through TAC.

"Stealth Pay" Commonplace In Corporate America

The November issue of Business 2.0 published an exceptional article on "insider loans." Succinctly, it wasn't just the Enrons and Tycos of the world that will eat huge losses on insider loans. It turns out that the practice--now banned by the Sarbanes-Oxley Act--saw roughly 75% of the nation's top 1,500 companies (1,133) providing loans to top executives. The average loan was about $5.5 million. (This information was disclosed in recent regulatory filings.)

Insider loans started cropping up several decades ago, with a clear but limited business purpose: Companies in high-cost housing areas wanted to help newly hired executives relocate. And forgiving such loans was rare.

But colossal fortunes amassed by corporate raiders during the 1980s had an intriguing effect on many chief executives. They felt underpaid. Then the Internet boom changed the scale of CEO pay again; consequently insider loans became a key facet.

All told, loans to insiders in recent years may have reached more than $5 billion. Hundreds of millions of dollars in loans, perhaps as much as $1 billion, have been or will be forgiven...based on SEC records and estimates by corporate compensation experts. Companies will be eating losses from insider loans for years to come.

More damaging is the perception that management has all too often lined its pockets at the investor's expense, and the public's newly exacerbated distrust of how American companies are run.

What More Can You Do For Us?

Corporate travel planners negotiating for hotel rooms know they have more leverage in this market than they have had in the past. So they're now hitting-up hotels for value-added amenities.

In the past, hotels offered little beyond the standard corporate rate, but today value-added amenities include complimentary shuttle service, waiving high-speed Internet access fees and local telephone charges.

Here And There. . .
  • Approximately 10.1 million Americans are attempting to start new businesses at any given time, according to a nationwide survey by the Panel Study of Entrepreneurial Dynamics. Men between the ages of 25 and 34 are the most active entrepreneurial group, and are twice as likely as women to start new businesses.

    Education influences minority entrepreneurs, as about 26% of African-Americans and 20% of Hispanics with graduate degrees are trying to start new businesses in comparison to 10% of whites of similar education.

  • 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) to sign up!

  • Dreamworks recently concluded an innovative $1 billion securitization from a group of banks that will advance funds against a portion of the entertainment company's revenue streams. (Entertainers James Brown and David Bowie have worked out similar arrangements...obtaining money upfront and paying back from future earnings.)

  • A bullish sign for commercial real estate (existing properties) is the fact that U.S. construction activity is expected to grow only 1% in 2002 and to decline 1% in 2003. Even so, some major corporations (AT&T, Citigroup, MetLife) are cashing out of their real estate holdings to bolster their balance sheets.

    Investing in real estate used to be considered a necessary piece of a company's infrastructure. But owning real estate can be a drag on a company's balance sheet, because of depreciation costs and the interest expenses on any financing debt. More and more, major corporations are leasing their real estate (53%) today than years ago.

  • In conjunction with the preceding story, today more than half of the corporate conference centers (used for training corporate employees) in the U.S. are now accepting outside business (weekend vacationers), according to Horwath Horizon Hospitality Advisors of Charlotte (NC). The $2.7 billion conference industry is down 10% this year.

  • The low-cost carrier phenomenon may have started in the U.S. with Southwest Airlines, but low-fare airlines now have greater market penetration in Europe (25%) than the U.S. (15%), according to American Express.

  • How many cars and light trucks were sold last year? If you said 59 million you're right on!

  • The General Accounting Office, Congress's investigative arm, found that corporate earnings restatements rose by 145% from 1997 through June 2002. Some 919 financial restatements, caused by accounting irregularities, cost investors $100 billion according to the study requested by Senate Banking Committee Chairman Paul Sarbanes (D, MD.)
We welcome your comments, questions, and observations.
? Copyright BarterNews 2003. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.