The weekly newsletter for everyone interested in barter--the world's most versatile business tool!
November 14, 2000
Buying Online - - -
A little observed ad buy by the H.J. Heinz company three weeks ago has major implications for the advertising industry, as well as corporate barter companies, in that its purchase was done via an online exchange.
The buy offers a peek into the future of media buying (one of the major "products" used by corporate barter companies to fulfill their corporate deals) as it used a reverse auction on FreeMarkets.com.
The First, Tiny Step Toward Electronic Buying
The process presently used by advertisers to buy and sell media (some $225 billion this year) is admittedly time-consuming and inefficient. In contrast, electronic marketplaces can cut buying cycles to less than a day, and save 15% or more of the cost of running the transaction... which brings sellers higher profits and buyers lower prices.
The consensus among media executives is that time on local radio and TV will be bought electronically by the end of next year, followed shortly by local newspaper and cable.
Selling Online Commoditized The Product
Online exchanges won't work for all media because broadcast networks and the marquee cable channels hate the idea of putting their inventory online, because they're afraid of losing control of their ad rates.
But change is coming since the major advertisers are interested in this method of buying, and they're trying to figure out how to make online systems work for them. FreeMarkets reports that other major companies (clients) are interested in setting up reverse markets for their media buys.
And Ford Motor Media, a division of advertising agency J. Walter Thompson that buys all of Ford's ads, has been testing its own online media marketplace through Covisint, an exchange being put together by the "Big Three" automakers. Ford Motor Media expects to buy 25% or more of its media online within five years, although they don't expect any of these purchases to be prime time on a broadcast network.
Amazon Earnings Buoyed By Barter Deals
Everyone knows that Amazon.com's claim to fame is selling huge volumes of books, and a growing number of other goods to consumers over the Internet. But some of its biggest sales recently have come from promoting other internet companies to Amazon's huge customer base, via the Amazon Commerce Network. And these internet companies often pay in stock for the promotions.
The appealing aspect of the Amazon Commerce Network is that it is extremely profitable. Amazon's selling of what is, in effect, advertising space to other internet companies, carries little marginal cost to Amazon. Evidenced by Amazon's first-half of the year reporting of 98% as the ACN's gross profit margin.
And in its most recent federal filing, Amazon stated that 64% of the $166 million it received in payments from ACN partners during the first three-quarters of 2000 was in stock. Amazon posted $1.8 billion in total revenue for that period.
Incorporate Barter Purchases At Every Opportunity This Holiday Season
Another year has quickly passed. During the coming holidays your use of trade dollars will be especially helpful, because using your exchange's services can be a major cash saver at this time of year.
Here are a few suggestions:
Here And There. . .
We welcome your comments, questions, and observations.
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