Barter is the next great frontier to be conquered by the Internet. The mixture of goods and services supplied by barter exchanges runs the entire range from professional services, such as legal and accounting services, to big-ticket items, such as jewellery, appliances and holidays. For a modest fee, a business can swap professional services and retail goods on the Web.
To join a barter exchange club, an initial cash outlay is needed. The idea with barter sites is to let businesses reduce excess goods and services while conserving cash.
The barter sites make money by charging a commission on transactions, which are valued according to a site-specific currency. Most barter clubs publish an annual directory of members and services, with weekly or monthly updates.
Examples of recent exchanges include a television station that exchanged unsold advertising space for various expenses relating to a conference for its employees, and a hotel that sold unsold rooms in exchange for printing services and janitorial services.
Deep pockets required for cashless trading
A growing number of barter clubs have set up websites. And some of the companies with deep pockets are vying to become the Amazon.com or eBay of business to business cashless trading.
BigVine.com, which launched its site earlier this month, has American Express as a partner and is funded by some big-name US venture capitalists. Other venture capitalists are also backing BarterTrust.com, and Nasdaq-listed ShopNow.com recent bought Ubarter.com to give it the funding to battle its competitors.
The stakes are high. Barter is estimated to be a $65 billion business worldwide by the International Reciprocal Trade Association (IRTA), a barter industry group. The IRTA, which has been governing the barter industry for 21 years, is the watchdog of the industry that helps new companies get started in the barter industry and where others come together to trade with each other. It also tries to set the standards for exchanges, and acts as a lobbyist in dealing with government and regulatory agencies.
The IRTA has a European chapter, and Robin Maini, its executive director, also said that traditional bartering can be limited to certain geographical areas, but online exchanges connect users worldwide.
Search technology: patents applied for
BigVine.com said it had collected more than $50 million in venture funding. In its competition with other barter startups, BigVine has submitted numerous patents related to search technology that the company said are "a real differentiator between us and our potential competition."
The company's chief technology officer, Louis Monier, is the founder and former chief technologist for search technology firm AltaVista.
Launching its virtual bartering community, BarterTrust.com acquired bricks-and-mortar barter houses.
"Bartering is a market that is ideally suite for what the Internet is really good at," said BarterTrust chief executive Mike Edelhart, former president and a founder of Third Age Media and vice president of Softbank.
He pointed out that the bricks-and-mortar exchange allows you to interact with a few thousand businesses which are constrained by a geographical area. "With the Internet we can create a large scale, worldwide exchange for these types of transactions."
Comparing prices and products
Online marketplace, Ubarter.com, which began in 1996 as International Barter Corporation, was recently bought by ShopNow.com. The combined company said it has more than 40,000 businesses and merchants with which it is already affiliated. The company also acquired WebCentric, which runs the Botttomdollar.com website, that allows Internet shoppers to compare prices and products.
Chairman and chief executive officer Dwayne Walker said he has bigger plans for the shopping engine than just expanding the ShopNow network. The company plans to use the search engine technology to capture product and merchant data across the Web, including international listings that extend beyond the Canadian, French and UK sites Bottomdollar.com already has.
"We want ShopNow.com to be an open doorway to commerce on the Internet. What we're trying to do through acquisition is build up more side doors to our network," he said. "It makes no difference to us if consumers come to us through the front door of ShopNow.com or through side doors."
Creating a global swapshop
While offline barter groups have traditionally been local affairs with businesses using 'barter cash' to trade services such as printing, advertising, entertainment and travel, the online companies believe they can turn the business into a global swap meet.
Additional sites include WebSwap, which plans to launch this quarter, and Swap.com, which is launching under Bill Gross's Idealabs, a startup incubator that includes eToys, GoTo.com and NetZero.
Swap.com said it has the invesment of a "handful of pretty big name VCs."
The barter sites are pinning their hopes on the phenomenon that propelled eBay to profitability - people trying to get rid of more stuff than they need.
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