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September 28, 1999

In this week's report. . .

  • Virgin Entertainment barters $15 million
  • Commercial barter moves up a level
  • Two examples of how the internet is changing the way business is done
  • Help for start-up companies
  • Economy promises more barter

Virgin Entertainment Exchanges $15 Million In-Store Promotion

Entrepreneur Richard Branson, owner of the Virgin Entertainment Group, has finalized a barter arrangement with Wavo Corporation, an industry leading digital media services provider, to create Virgin JamCast.

Branson's Virgin Entertainment Group will get a 25% equity stake in JamCast.com for its $15 million of in-store promotion at various Virgin mega-stores and Virgin's other online properties.

The Virgin Label, Known Worldwide, Was Built On Barter

With an estimated worth of $1.7 billion, according to London's Sunday Times, Branson has harnessed a barter strategy that's enabled him to launch a myriad of businesses with minimal investment.

He calls it "branded venture capital." Essentially, he agrees to manage a new venture and puts up the Virgin name—usually in exchange for a controlling interest—while his wealthy partners put up most of the cash.

This barter strategy has helped Branson, the 48-year-old flamboyant English showman, and Europe's best-known entrepreneur, build an empire of some 200 companies, and expand Virgin's brand name around the world.

Commercial Barter Industry Moves Up A Level

Just back from the International Reciprocal Trade Association's 20th Annual Barter Congress, held this past week in Vancouver, Canada. There, it became evident that the biggest change in the 40-year history of the trade exchange industry is now taking place.

With the infusion of Wall Street money, the industry has taken the first step toward having the ability to combine high-tech with high-touch—what trade exchange owners now provide their clients.

Major barter entities (public companies) will provide clients, of all sizes and every description, the option of bartering an immense number of products and services online, in real time.

Such trading will quickly accelerate as soon as the two diverse, distinct business models converge. Next week we will look at the implications of the new business model, and the three acquisitions made by BarterTrust.com.

Conditions In Economy Promises More Barter

Low interest rates (which mean a lower inflation rate) along with a booming U.S. economy has been especially good for the small business sector. And the larger trade exchanges can attest to this fact, as many owners exclaim, "Our clients are so busy with their cash business that they don't have the time to think about anything else. such as trading their goods and services.

Well, there's a growing concern that this could change—quite soon—according to Lawrence Lindsey, a former Federal Reserve governor and currently chief economic adviser to Republican presidential hopeful George W. Bush.

Speaking at an investment conference in New York this month, he related that America's current borrowing of $300 billion a year to finance our spending boom will soon see a growing tightness in our credit markets.

Why? Because as foreign investors' nervousness increases (about our record borrowings from them) higher interest rates could well be needed to keep their funds here. Higher rates normally mean a slower economy or recession, which in turn has historically seen an expansion of barter business.

Venture Frogs Incubator Trade Core Necessities

A new, fully-integrated office and breeding ground for early stage internet companies is located in the Marquee Historical Building at 1000 Van Ness in San Francisco.

Known as Venture Frogs Incubator, the angel investment company complements the funding efforts of Venture Frogs, LLC, in that it allows the companies they invest in to grow faster and move quicker.

Early stage startup companies can move right into a fully integrated office, equipped with computers, Internet connections, phone systems, conference rooms, reception areas, copiers, and fax machines. Startups also have access to legal, financial, and engineering consultants to help them refine their product and market strategies.

How The Internet Is Changing The Way Business is Done

  1. Adauction.com has auctioned off some San Francisco Bay Area billboards for 50% more than the already high prevailing rates. For buyers, it meant getting a chance to secure space once reserved for advertisers who enjoyed special relationships with billboard brokers. For sellers, it means getting the top price—the price the market will bear—as a larger pool of advertisers bids for a limited and desired commodity.
  2. Two steel web sites (MetalSite and e-Steel) are providing steel producers the opportunity to quickly unload excess and secondary steel, accounting for about 15% of the steel sold in the U.S. Traditionally the "overages" were warehoused or recycled—consuming inventory space and draining company profits.

Here & There...

  • Gloria Estefan, a bilingual singer and role model for many Hispanic-Americans has bartered her services—ad appearances and marketing assistance—for a 1% equity ownership stake in Quepasa.com. (The company went public in late June and now sells for around $12 a share.)
  • Sponsorships at $3,500 to $75,000 for the final race of the American LeMans Series, the San Diego Grand Prix, held in early November, are available on trade.
  • Best Buy has agreed to work with Sun Country Airlines, making Sun Country its preferred airline for corporate travel. It was simple and effective—more of my business in exchange for better rates.
  • Last Tuesday we reported on how Dot.com currencies are driving business. The next day CBS and America Online (AOL) arranged a barter of space wherein CBS gains access on AOL's online service to promote its new season of shows to their 17 million subscribers. In exchange CBS will provide advertising time to AOL.

Coming soon. . .

  • Multi-talented Spielberg uses barter
  • Implications of the new business model
  • How an electronic barter network will fuel world economy

 

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