Imagine buying media space in return for toothpaste. Or incontinence pads. That’s the promise of media barter firm Astus, which since its launch in 2003 has become the biggest media barter player in the UK. Last month it opened for business in Asia, joining companies such as Miroma and Barter Exchange. Can the idea take off?
1 Contra-dealing, the exchange of products or services for media space, is as old as the publishing industry. But companies such as Astus are looking to formalise it by introducing a currency in the form of trade credits. The barter company deals with the client and the media owner separately. From the client it accepts goods - normally unsold stock - which it can sell on. In return the client receives trade credits (one US dollar in value equals one trade credit). It can spend these with a media owner (deals are normally mixtures of cash and credits). In return for credits, the media owner gets access to a range of services offered by the barter company.
2 The system gives companies like Astus two tasks. First it sells on the unsold stock. Second, it bulk-buys goods and services such as hotel rooms and office furniture that it can offer to media owners in exchange for inventory.
“For example, we might make an investment of US$1 million to a hotel group to receive $2 million in room nights,” explains Nathan Beck, marketing director at Astus UK. “If we trade those room nights with a media owner for media space then we own $2 million of media space for an initial investment of $1 million. If we trade the media space to a client for $1.2 million in cash and $800,000 in product then we would make $200,000 profit on the media plus whatever proceeds we received on the client’s product.”
Data from Astus UK shows that toothpaste was the product most commonly traded for credits. Beer, incontinence pads and chocolate balls all featured highly too.
3 The benefit for media owners is, theoretically, to expand share by attracting new clients who could not afford to buy space on a cash basis. A key factor is the ability to deliver the required media inventory. “If we can’t deliver the media, we can’t do the deal,” states Michael Denmark, Astus Asia’s managing director, who claims Astus trades in “prime real estate” rather than acting as a broker for unwanted media inventory.
4 The process is integrated into an advertiser’s regular media buying; media is bought by the media agency at regular, pre-negotiated rates and quality parameters. “The agency is there to ensure the client is able to secure media in the same way as planned,” notes Simon Woodward regional head of trading for GroupM.
5 A golden rule for clients and media owners is to be clear on the take-back before agreeing a deal, says Jonathan Ellis, senior VP of revenue and partnerships at Fox One Stop Media, who worked alongside Astus in London. He adds that a barter transaction cannot be allowed to interfere with existing media deals. “The client cannot come from the existing pool,” he stipulates.
Woodward is more relaxed on this point, saying that for the system to be worthwhile, barter should “ride on existing business”, but adds that barter must “complement existing media deals” without cannibalising them.
6 Astus makes gross profits of about nine per cent, most of which come from the media trade rather than reselling clients’ stock. The risk it faces is that if demand for pre-bought items such as flights or hotel rooms is lower than anticipated, it could face cashflow problems. “There is always an element of risk, but it’s part of our job to make intelligent investments and to keep the balances sensible and manageable,” says Beck.
7 Another challenge, according to Ellis, may be a reluctance among media owners to admit to having excess capacity. But he says this can be solved with education and good practice. “The onus is on Astus to make sure it sets things up correctly.”
Both Ellis and Woodward are optimistic about the prospects for Asia. “I see barter as a very good way of keeping both parties happy in a way that doesn’t overstretch the media owner’s inventory,” Woodward says.
What it means for…
Media owners
- Barter should be used as a way of drawing new business and should under no circumstances be allowed to cannibalise existing cash business.
- It is essential to know what you will get back prior to agreeing to a deal. If it is unclear where you will be able
to spend your trade points, the deal should be declared void.
- Barter transactions must be recorded separately to cash transactions for accounting purposes.
Advertisers
- Trade points offer a viable alternative to contra-deals and should provide greater flexibility. The system may allow advertisers to consider media channels they were previously unable to afford.
- A barter deal should be part of the regular media buying process; it should not involve ‘shoehorning’ media inventory into the schedule. If the requisite media is not available, there should be no deal.
Got a view?
Email [email protected]
This article was originally published in 3 December 2009 issue of Media.
1 Contra-dealing, the exchange of products or services for media space, is as old as the publishing industry. But companies such as Astus are looking to formalise it by introducing a currency in the form of trade credits. The barter company deals with the client and the media owner separately. From the client it accepts goods - normally unsold stock - which it can sell on. In return the client receives trade credits (one US dollar in value equals one trade credit). It can spend these with a media owner (deals are normally mixtures of cash and credits). In return for credits, the media owner gets access to a range of services offered by the barter company.
2 The system gives companies like Astus two tasks. First it sells on the unsold stock. Second, it bulk-buys goods and services such as hotel rooms and office furniture that it can offer to media owners in exchange for inventory.
“For example, we might make an investment of US$1 million to a hotel group to receive $2 million in room nights,” explains Nathan Beck, marketing director at Astus UK. “If we trade those room nights with a media owner for media space then we own $2 million of media space for an initial investment of $1 million. If we trade the media space to a client for $1.2 million in cash and $800,000 in product then we would make $200,000 profit on the media plus whatever proceeds we received on the client’s product.”
Data from Astus UK shows that toothpaste was the product most commonly traded for credits. Beer, incontinence pads and chocolate balls all featured highly too.
3 The benefit for media owners is, theoretically, to expand share by attracting new clients who could not afford to buy space on a cash basis. A key factor is the ability to deliver the required media inventory. “If we can’t deliver the media, we can’t do the deal,” states Michael Denmark, Astus Asia’s managing director, who claims Astus trades in “prime real estate” rather than acting as a broker for unwanted media inventory.
4 The process is integrated into an advertiser’s regular media buying; media is bought by the media agency at regular, pre-negotiated rates and quality parameters. “The agency is there to ensure the client is able to secure media in the same way as planned,” notes Simon Woodward regional head of trading for GroupM.
5 A golden rule for clients and media owners is to be clear on the take-back before agreeing a deal, says Jonathan Ellis, senior VP of revenue and partnerships at Fox One Stop Media, who worked alongside Astus in London. He adds that a barter transaction cannot be allowed to interfere with existing media deals. “The client cannot come from the existing pool,” he stipulates.
Woodward is more relaxed on this point, saying that for the system to be worthwhile, barter should “ride on existing business”, but adds that barter must “complement existing media deals” without cannibalising them.
6 Astus makes gross profits of about nine per cent, most of which come from the media trade rather than reselling clients’ stock. The risk it faces is that if demand for pre-bought items such as flights or hotel rooms is lower than anticipated, it could face cashflow problems. “There is always an element of risk, but it’s part of our job to make intelligent investments and to keep the balances sensible and manageable,” says Beck.
7 Another challenge, according to Ellis, may be a reluctance among media owners to admit to having excess capacity. But he says this can be solved with education and good practice. “The onus is on Astus to make sure it sets things up correctly.”
Both Ellis and Woodward are optimistic about the prospects for Asia. “I see barter as a very good way of keeping both parties happy in a way that doesn’t overstretch the media owner’s inventory,” Woodward says.
What it means for…
Media owners
- Barter should be used as a way of drawing new business and should under no circumstances be allowed to cannibalise existing cash business.
- It is essential to know what you will get back prior to agreeing to a deal. If it is unclear where you will be able
to spend your trade points, the deal should be declared void.
- Barter transactions must be recorded separately to cash transactions for accounting purposes.
Advertisers
- Trade points offer a viable alternative to contra-deals and should provide greater flexibility. The system may allow advertisers to consider media channels they were previously unable to afford.
- A barter deal should be part of the regular media buying process; it should not involve ‘shoehorning’ media inventory into the schedule. If the requisite media is not available, there should be no deal.
Got a view?
Email [email protected]
This article was originally published in 3 December 2009 issue of Media.
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