Troubled Economy Increases Media Ad Bartering

Swapping May be the Answer When Inventory is High and Cash is Low

Dec 2, 2008

Since one man's junk is often another man's treasure, the recession is prompting some companies to get rid of surplus property by swapping it for media advertising.

The world’s troubled economy has caused more companies to barter excess inventory for media ads or corporate trade credits. Some firms even acknowledge they are indulging in the age-old bartering practice that has often been considered embarrassing but which is now looked upon as smart business.

Steve McClellan reported in AdWeek December 1 that "an increasing number of marketers" are swapping product inventory for advertising. He said the process "involves clients exchanging unsold goods, services and other underperforming assets -- such as real estate leases on stores they have closed -- for ads."

Experts in the field say it is an old practice. However, in the past most companies hid the practice because it tipped competitors that the firm may have trouble getting rid of its inventory, perhaps a sign of organizational weakness.

Bartering Smart Business

Since most everyone is struggling now, the economic crisis is changing the bartering image from embarrassing to smart business.

The Barter News magazine says "media is a ‘major currency’ in the barter marketplace because of its perishableness. One must use it, move it, or lose it. The second hand on the clock never stops."

Media willingness to swap ads for product may be at an all-time high these days because of the drastic declines in newspaper, radio, television and billboard advertising.

Corporate Trade Credits

AdWeek reports that bartering and corporate trade have become so common that some agencies, including big agency holding companies, have established subsidiaries to handle their media bartering business. Omnicom has set up Icon International; Interpublic has Magna Global Trading (MGT); and Aegis Media has Carat Trade.

Active International points out that there is a "significant difference" between barter and corporate trade, which it conducts in 16 countries. While barter is a direct exchange of assets between two entities, Active International says corporate trade "involves the establishing of a trade credit to purchase underperforming stock or assets."

The purchase usually involves a combination of trade credits and cash and is handled through a trading organization which serves a role similar to that of a consignment company.

Corporate Trading Capabilities

According to AdWeek, Active International handles about $1 billion of corporate trade annually. Magna Global Trading estimates the total worldwide business exceeds $3 billion.

Some agency executives told the magazine that clients are now asking them about their barter and corporate trade capabilities. Those capabilities are also showing up in requests for agency proposal forms.

MGT CEO Brian McMahon told AdWeek that he expects the trading business to increase 30 percent in 2008 and 35 to 40 percent in 2009.

The copyright of the article Troubled Economy Increases Media Ad Bartering in Advertising is owned by Carroll Trosclair. Permission to republish Troubled Economy Increases Media Ad Bartering in print or online must be granted by the author in writing.