Quid Pro Quo: The Barter Agreement

A long time ago, in a galaxy far far away, I worked at an agency that counted among its clients a major search engine. This property, which shall remain nameless (let's just say, it ended up as part of "the happiest place on earth" and was never the same again), was interested in placing an enormous media effort all over the web.

They were looking for audience development on the grandest scale, with ads running on every web site imaginable. The scope of this effort was going to be in the realm of nearly 100 million impressions a month. In 1997, that was an extraordinary volume. Amazon, one of our other clients, was one of the preeminent online advertisers and spending a great deal of money, and even they weren't choking through that much online ad inventory.

The budget for this blowout?

Zero dollars.

So how were we going to come close to accomplishing this goal, with a zero-dollar budget?

Enter the barter arrangement. Barter, as the word suggests, is an exchange of something for something else of equally perceived value. According to Merriam-Webster, it means "to trade by exchanging one commodity for another."

Many web sites out there have an extraordinary amount of inventory that goes unsold each and every month. Hundreds of thousands, and sometimes millions of impressions go unloved and unwanted each month. But one way to burn some of this inventory without it being all in bonus rotation and overdeliveries is through barter.

Media bartering goes back to the good old days of media. Large packaged goods companies exchange surplus product inventory for an equal value of media inventory. This is not an uncommon practice.

So it is with online. Let's say my client, Site X, has 1 million impressions left unsold every month. This inventory can be exchanged with Site Y for a certain amount of impressions on Site Y. But is it an impression for impression exchange? Of course not.

How to Deal With Barter Opportunities

My current boss and mentor, Dave Smith, always says that in a barter deal, there are always really two deals: the value of what you are giving, and the value of what you are getting. This may seem like a no-brainer postulate, but most people out there don't think this way. Barter gets treated like an after-thought. Attention is paid to it at the front end, but no one is watching over it on the back end.

So, how does one go about negotiating, executing, and stewarding a barter arrangement?

1. First things first. Determine the value of what it is that you want to trade. If it is impressions for impressions (basically reciprocal banner exchanges, or the like), rate card values are usually applied on both sides of the exchange. If my client's ROS has a rate-card value of $20, and the site I'm trading with has inventory with a $15 rate card value, my client should get 1,333 impressions from the site for every 1,000 of theirs.
   
   This is the most common form of barter. Rate card value for rate card value. Site publishers, though they prefer cash, of course, like this system of barter because the determined value of the exchange is realized as actual revenue on the bottom line. And why wouldn't you want maximum value dropping on top of that bottom line?
   
   I prefer, however, to take another tack. I like to evaluate the real value of the bartered inventory based on what I could buy it for on the open market. This helps to give me a real idea as to its actual value and helps in determining the success or failure of the effort based on real worth. Remember that though no money is changing hands, you still want to make sure that you are making a fair trade. If we're trading cars, we need to take into account the Blue Book value as well as the marketplace for a particular automobile.
   
   
2. Second, approach the sites you are bartering with as though you have a cash deal. No one is doing you a favor by agreeing to a barter arrangement. If the site could sell the inventory for cash, you guys wouldn't be having any conversations at all. As the value is realized on the bottom line as though it were cash, it should be treated as such.
   
   
3. Get solid confirmation on placement. Unless the exchange is for ROS, don't let all your inventory run that way. Once again, treat this like a regular buy.
   
   
4. Watch over the "buy" once it has been executed. As I mentioned before, these tend to be forgotten about and, once running, they languish in a random limbo. Often times, a barter deal runs like a remnant inventory buy, with ads running in haphazard fashion, depending on where there is "availability." Certainly some of this cannot be helped, as the status of inventory can change all of the time. One can't expect a barter agreement to take precedence on inventory over a cash deal that may have come in subsequent to the barter agreement.
   
   However, keeping a watchful eye and keeping in contact with the vendor does help to limit this from happening too often. This is particularly important if the value of the inventory for which the client's inventory was exchanged, was dependant on a particular placement. That's to say, if I estimated the value of the exchange using some of my bartered rotation using keyword impressions, I would not be happy with an equal amount of ROS impressions. I'll either still need those keyword impressions, or a greater number of ROS impressions to ensure what is called "in-kind" value.

There is a whole lot more to barter agreements, particularly as they tend to be for much larger values than traditional vanilla media buys. Instead of $20K per month on a site, you're looking at $1 million value over 3 months or something to that effect.

But just knowing it's an option should open a whole new world of media opportunities for you and your clients.