(Editor�s note: Brian McMahon, CEO of Orion Trading, authored this
article for
Adweek magazine.)
Many in the industry wonder if, given the economy, barter is still
relevant. My answer? More than ever. Just ask WPP and Havas, both of
which recently opened internal barter units. The evolution of
agencies, new technologies and media formats � as well as a
de-levered corporate philosophy � will continue to sustain and
expand barter for years to come.
In the past couple of years, the explosive growth in technology and
social media � coupled with the global economic recession � have
left agencies with a difficult task: to drive enhanced value for
their clients with less money (in many cases, a lot less money).
Procurement is often cited as the culprit, blamed for viewing agency
services as a commodity. Peter Stringham, CEO of Young & Rubicam
Brands, compared procurement-driven pitches to a �car dealer
negotiating price before showing you any models.�
Barter is one of many solutions. It drives value to the client
without impacting agency fees/commissions. Barter companies operate
at net rates and do not charge a fee for their services � proving
barter is a powerful means of sustaining ad budgets while generating
significant cash flows and optimizing asset dispositions.
Forrester Research�s 2010 report �The Future of Agency
Relationships� states that we are entering the �adaptive marketing
era� � one driven by new technologies and media formats. This will
shift advertising messaging from outbound to surround, campaigns to
experiences and from segmented �audiences� to individuals.
While global ad spend forecasts differ, there�s little debate that
the worst is now behind us. Magna Global, a division of Interpublic
Group, predicts that media expenditures will hit $490 billion by
2015 � eclipsing 2007 levels by 20-percent. This growth will be
driven by the online sector, which is expected to grow at three
times the rate of all other advertising formats. New technologies in
the online sector open up a multitude of opportunities for
advertisers.
Barter can be a strategic solution for advertisers looking to invest
in these new formats, but want to do so with limited risk. Consider
Conan O�Brien�s 30-city �The Legally Prohibited From Being Funny On
Television Tour� that sold out in less than three hours. The only
advertising for the tour was a single tweet by O�Brien.
How should we calculate the ROI of that tweet? Simply, the millions
generated from ticket sales minus the 10-cent cost of an SMS
message, divided by the millions generated from ticket sales. Or is
it the millions generated from ticket sales minus the SMS message
plus all the branding and marketing that has gone into O�Brien over
his career, divided by the millions generated from ticket sales? We
contend the latter. While O�Brien's tweet triggered the ticket
sales, it was his brand equity (built through traditional
advertising) that made that tweet so powerful.
The point: New technologies and formats such as Twitter will
continue to redefine advertising. There�s little dispute that
without an integrated 360-degree approach (comprised of social,
experiential, press and traditional formats) the efficacy of these
emerging technologies and formats will be severely limited.
In order for barter agencies to be relevant and successful they
should be full-service shops with global capabilities across all
media formats. As barter continues to grow as a function of
advertising, the benefits of barter will enable advertisers to
efficiently invest in these emerging areas at a lower risk and
without adversely affecting the advertiser�s more traditional
communication strategies.
Probably the greatest lesson that corporations have learned, and
continue to learn, from the recession is that debt is a risky
endeavor � especially in a global marketplace.
Following the dot-com boom, between 2002 and 2007 the U.S. economy
experienced tremendous growth; the S&P 500 Index grew by more than
300-percent. This growth, however, was primarily driven by an
unsustainable economic platform: debt. At the time debt was cheap
and readily available; this is no longer the case and won�t be for
the foreseeable future.
Our industry has seen a trend where existing and potential partners
are looking at barter as a driving force behind their corporate
financial strategies. First, cash flows generated through barter
help organizations to de-lever themselves in a faster time frame.
Second, barter enables an organization to clean up its balance
sheets without losses. Third, barter enables organizations to
increase marketing efficiencies to drive top-line growth. All these
factors help to raise credit ratings, lift market cap and strengthen
brand equities.
The global economy is one of dynamism and constant evolution.
Organizations consistently react, contract and grow accordingly in
order to remain relevant and be leaders in their respective
industries. The barter industry has evolved from interpersonal
trading of goods and services into a sophisticated global exchange
that enables advertisers to partly fund billions of dollars of media
each year with assets other than cash.
While we are confident that all signs point to a robust future for
barter, we eagerly anticipate new and unique uses of barter in the
equally exciting works of media.
(McMahon can be reached at
Brian.McMahon@oriontradingww.com.)
