Entrepreneurs launching a business are often caught in a catch-22. They want and need to shout about their products or services, but as a startup, marketing is usually way down the list of spending priorities. When money is tight, thinking smart is key.
One example of smart business practice is media barter, a process that allows companies with advertising needs to get the media they want without having to pay for it all in cash.
The practice, worth £350m in the UK and growing, helps advertisers release capital tied up in inventory without compromising the value of their goods and services.
Because advertisers can leverage the margins on their goods and services (inventory), the media costs them less than if they had paid for it 100 per cent in cash. In a typical media bartered deal, an advertiser is able to fund around 20 per cent of their net media budget with their inventory, allowing them to invest in new media campaigns and experiment with different advertising channels. In return, media owners get a good deal on goods and services they need such as flights, hotels, corporate hospitality and cars.
What do media barter deals involve?
Media barter deals can be complex, which is why deals involve media barter specialists to ensure everyone gets what they want. Most media barter specialists use a delivery-first model which means advertisers receive the media they want before being asked for their inventory in exchange.
Successful media barter deals don’t happen overnight, and require good communication between all the parties involved. To make them work, advertisers need to be clear which goods and services they are prepared to exchange in return for their media. Any media barter deal should fit with a company’s wider marketing and business objectives as well as with any existing media strategy.
For this reason it’s key that any different business departments you have collaborate to agree a media barter deal. Marketing can secure the right media placement while procurement specialists can assess the value of any media acquired and ensure the inventory exchanged is traded effectively. All taxes (including VAT) are applicable as if the deal was being paid 100 per cent in cash, so the finance representative must be involved. It’s also essential to include the media agency (if there is one) to ensure the bartered media fits with the advertiser’s existing strategy.
Which products and services can be traded in a media barter deal?
Almost anything. Common items exchanged via media barter are cars, flights, drinks and hotel rooms, but other bartered goods can include utilities, telephony, computers, insurance and food products. In the past, media barter often involved distressed inventory such as product over-runs or stock nearing its sell-by date. Today, media barter experts deal almost exclusively in first line stock.
Media barter should not be confused with “contra”, where an advertiser swaps their goods directly with a media owner at face value. Media barter specialists have access to virtually every media owner in the UK, rather than just those who will accept a company’s specific product. They will also ensure that the media is supplied at the normal discounted rate.
What happens to the bartered products/services?
Once a deal is agreed the media barter specialist will discreetly sell the advertiser’s goods or services via routes that have been pre-agreed with the advertiser and which do not interfere with the company’s existing distribution strategies. Because media barter specialists tend to have a wide network of contacts, media barter deals are designed to open up incremental sales routes.
Who uses media barter?
Media barter is all about thinking laterally about your resources as a business and whether you have inventory which could be working harder for you. It is increasingly seen as smart business practice for companies of all sizes ranging for car manufacturers to hoteliers to utilities and telecoms companies.
The reality is that while ad spend is increasing, marketers remain under pressure to deliver value for money. Handled correctly, media barter can offer a sustainable way of achieving significant cost efficiencies which is welcome news whether you are running a startup or an established multinational.
Paul Jackson is COO of Astus Group.
Sign up to our newsletter to get the latest from Business Advice.