How media barter is reshaping the way media is traded and paid for
It has suffered from a poor image in the past, but in the last ten years media barter has cleaned up its act says Frances Dickens, chief executive and co-founder of Astus Group - and as the pressure mounts to save money, expect it to become more commonplace.
The current climate of austerity means businesses across the spectrum are under pressure to save money and come up with innovative ways of making their budgets go further.
In order to achieve efficiencies, one solution businesses are looking to is media barter. To barter means 'to exchange goods or services without using money' and it's a practice that has been around for centuries.
Media barter, however, is a thoroughly modern business process which allows advertisers and media owners to trade without having to pay 100% in cash.
Ten years ago media barter suffered a somewhat shady image because it was based on a system where advertisers exchanged their products for notional trade credits, which - in theory - could be used to 'buy' media.
The problem was that often they couldn't be redeemed, with the result that advertisers were left out of pocket. As a result, media agencies quite rightly refused to give barter a second look because it disrupted their relationships with both sides.
But over the last decade the UK barter sector has cleaned up its act. Today most media barter companies use a delivery-first model introduced by Astus which means advertisers receive the media they want before being asked for their products in exchange.
Barter companies have developed solid and transparent processes for helping advertisers to increase their media budgets and move distribution into new and innovative channels.
In addition, where media barter traditionally featured distressed or excess inventory, such as product over-runs or stock nearing its sell by date, nowadays the focus is on first line products and services. This shift has paid dividends for the media barter sector.
Nowadays a growing number of companies ranging from SMEs to multinational blue chip companies view media barter as smart business practice and at a time when so much of the advertising industry is under pressure, barter is growing. Here at Astus, for example, we work with more than 100 clients and over 200 media owners in the UK, Europe, Asia and Australia.
So how does media barter work?
Deals brokered by a media barter company are tailored to advertisers' individual requirements, so each one is different.
An overview of how it works is that media barter companies invest ahead into goods and services companies to acquire products or services at below the market rate. These are then traded on a pound for pound basis with media owners for media space/airtime which allows the barter company to create a margin on the media they acquire. The media is bartered with an advertiser who pays for it using a mixture of cash and their own goods or services.
By part paying for media in this way, advertisers are able to transfer the margins on their products and services to the media they want. In doing so, they are able to make significant cost savings on the incremental media they require, with the same discounts they would normally expect.
The media barter company will then sell on the advertiser's goods or services discreetly to pre-agreed channels at a discounted rate.
Media barter specialists make a profit by ensuring the amount they receive from advertisers (cash plus goods and services) exceeds the cost of their original investment.
In order to add real value, media barter needs to be integrated with existing media strategy and business planning. Advertisers considering using barter should discuss it with multiple departments to get buy-in from everyone - from sales and marketing to procurement.
This isn't a quick sell, it should be a form of consultancy. And as tax, including VAT, is applicable on all the deals just as if they were 100% cash, talking to the finance department is key.
It's also really important to involve the media agency early on and to ensure advertiser and agency stay in charge of the media plan. A good barter deal fits with existing media strategy and makes it more efficient - barter should not determine what media is bought by the advertiser or the price they pay.
So what does a media barter deal actually deliver?
Done well, media barter can deliver considerable cost savings for advertisers by allowing them to buy the same media for less cash. Advertisers can then reinvest savings into further media campaigns, potentially experimenting with ad channels they hadn't used previously and in doing so, increase the audience reach for their campaign.
Media barter can also deliver value when it comes to product distribution. Most media barter companies specialise in product distribution and re-marketing, working to strict, pre-arranged criteria stipulated by the advertiser's sales and distribution teams. This means media barter can amplify an advertiser's distribution strategy by, for instance, opening up new channels.
What is the future of media barter in the UK?
Media barter is increasingly being integrated into the marketing and distribution strategies of companies ranging from SMEs to large corporates. As more companies understand media barter it will become completely commonplace.
Currently, media barter in the UK is worth between £250-£300 million up from £200 million in 2010. We can expect it to grow in the next few years, although not at the same rate as we have seen recently.