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November 30, 1999

In this week's report. . .

  • Radio spots via the web
  • Warrants bartered for loan restructuring
  • Is a web currency evolving?
  • SEC limits barter revenue
  • Bartering "here and there" around the world

Web Companies Focus on "Distressed Media Inventory"

Starting early next year, two companies...Broadcastspots.com and Adauction.com...plan to begin selling radio spots on their web sites. They will be collecting a 25% commission on each spot sold.

The idea is to conduct, in cyberspace, industry fire sales. Thus allowing radio stations to showcase spots to hundreds of media buyers at once, and to sell spots almost instantly.

However, the $16 billion radio industry has been experiencing boom times, so it may take some convincing to get the owners interested in this new endeavor! Stations in large markets sell about 95% of available advertising, while stations in smaller markets already sell as much as 70% of available spots. Plus, continuing consolidation in the industry means that smaller stations are increasingly tying in to the national advertising networks of larger parent companies.


Low Cost Warrants In Exchange For Loan Restructuring

Family Gold Centers, a Melville (NY)-based golf center operator, used a barter arrangement to restructure and expand the company's credit facility...from $100 million to $130 million.

In exchange for the consideration, Family Golf issued its lenders warrants to buy up to 10% of its outstanding shares on a diluted basis, at an exercise price of 50-cents a share. The stock currently trades at around $2.50.


Is A Web Currency Evolving? Beenz Thinks So!

Philip Letts, CEO of internet start-up beenz.com, is busily giving away "beenz" for "eyeballs" (industry jargon for web page viewers). Beenz, are like points, much as the airlines' frequent flyer miles. Letts says beenz are now used as rewards for visiting about 200 web sites.

But as more sites are added, he sees his beenz becoming the world's first global currency. The idea has gained momentum this year as the internet has entered a new phase where direct promotions, sweepstakes, and giveaways have become accepted as a way for new companies to stand out in a crowd on the Web.

Letts says awarding beenz to people visiting web sites is a way for sites to give immediate gratification to users, providing a direct link between the readers and the sites. The grand idea is that his beenz, once in circulation, will become the virtual currency of the internet and his company will make money each time they are used.

BarterExpress.com Inks Agreement With Beenz

Frank Crombie, CEO of BarterExpress.com (the world's first online barter site), has signed an exclusive agreement with Beenz. BarterExpress will provide Beenz holders in Australia with an opportunity allowing them to convert their Beenz credits to trade dollars. These can then be used to acquire goods and services from the Australian-based BarterExpress.


SEC Tells Internet Companies To Change Barter Activity Reporting

In a bid to stop internet companies from "overstating their numbers," the Securities & Exchange Commission (SEC) has asked the U.S. accounting rule makers, the Financial Accounting Standards Board's Emerging Issues Task Force, to approve a rule limiting when companies may recognize revenue from bartered advertising services.

Heretofore, internet companies typically reported revenue for one ad and a marketing expense for the bartered ad.

The new rule will allow companies to count the value of ad space exchanged for goods and services only if they have a record showing the cash value of similar transactions.

"Fair value" for advertising is usually based on what companies have received in cash for similar services before. This is sometimes difficult to determine for certain internet companies that haven't had many cash transactions.

Tim Lucas, FASB's director of research, explains that companies "need to be able to come up with evidence to overcome the presumption that this space isn't worth very much."

According to PricewaterhouseCoopers and the Internet Advertising Bureau, bartered advertising space represented 7% of the $693 million in internet advertising during the first quarter of the year...double the percentage of three years ago.


Here And There...

  • What's the value of a name and reputation? That depends. Donald Trump has often "traded" on his fame. In 1991 he negotiated a transaction with a wealthy Japanese family, giving him 50% of any value he added to one of the world's most famous skyscrapers...the Empire State Building in New York City.

  • An 18-year old intern in Silicon Valley was offered either $10 an hour in wages or, in lieu of the hourly wage, 500 shares of stock. He opted to work at Alteon Web Systems for the stock. And when the Palo Alto High School senior watched the company go public, he suddenly was $100,000 richer.

  • Internet-related advertising on the radio is 17 times higher than it was a year ago, reports William Meyers, who follows the broadcasting industry for Robertson Stephens. However, small-town America is the one place where internet advertising is missing. The primary reason is that online companies are particularly interested in impressing the media and the venture-capital community...both of which are located in big cities.

  • America Online has the biggest brand in cyberspace. Their philosophy has always been to invest heavily in brand marketing...and they have no plans to lighten up. Analysts say AOL will spend more than $900 million, or roughly 14% of its revenues, next year to keep its name out in front.

Coming soon. . .

  • South America's bartering on the internet
  • Billions in bartered products used to stimulate on-shelf sales
  • Bartering "here and there" around the world

 

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