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Why Barter has media's interest

When two of the main agency holding group’s launched barter units within the space of a couple of weeks, it suggested a big shift in media trading is afoot. Josh Colley talks to those involved.

Bartering has long been considered a dark art best confined to market stalls. But clearly, the media industry is beginning to shift that perception by allowing advertisers to trade off inventory to help fund media expenditure. Now, the prospect of building better relationships with clients by offering full-book value for under-performing assets is proving hard to resist.

“The industry perception of barter has evolved from a charlatan-type practice into a leading strategic solution for advertisers,” says Orion Trading chief executive Brian McMahon.

Who benefits?

Kathy Kladopoulos, ex-Carat Trade and now heading up The Midas Exchange, maintains that while the advantages for agency networks are clear, it’s been clients that have driven barter’s growth.

“It helps for obvious reasons,” she says. “We’re in unique position to offer trade in a seamless fashion and implement against the marketing objectives. Clients are able to recover full book value on the asset.”

However, Kladopoulos is keen to point out that barter is not a one-size-fits-all approach to maximising revenue but it is for those companies looking to create capacity. It requires large amounts of due diligence before a company is able to ascertain the value of what’s on offer.

The biggest driver for barter is the potential for advertisers to squeeze more out of its media activities. With this in mind, there are concerns it could aid the push towards the commoditisation of media. However, Orion believes this is avoided by providing media services at the same set price and using assets to pay off just 20% of that price.

“If a client has got excess stock that they can’t sell and they’re looking to sell it at a loss, the first thing they usually do is cut back on their marketing budgets to balance the books,” says Paul Benson, Orion’s European managing director.

What happens next?

Agency divisions have so far been the preserve of the US market, with only Orion Trading operating globally. However, for the majority of agency networks the need for greater efficiency should see them go global in the coming 12 months. Orion Trading now operates across 13 markets and GroupM’s The Midas Exchange is planning to expand outside the US within 18 months.

For Benson the benefits of going global are clear. “It means companies can work in three ways now, finding solutions against their requirements on a local market to a pan-European basis.“If you’re doing a UK only transaction the amount of inventory you can take from a global client is limited. If you are a global company you’re going to be a bigger solution for them,” he says.With the weight major players are throwing behind it, barter in media looks certain to become mainstream practice sooner rather than later.

Josh Colley, London