The Return of the Barter Economy … Life Online and How to Get What You Want Without Spending a Dime

    July 11, 2003

We’re hearing a lot these days about the “new economy” and the “old economy”. The “new economy”, of course, refers to the growth of stocks in internet and hi-tech companies while the “old economy” (some might say “real” economy considering what’s happened to the Nasdaq this week) refers to traditional, bricks and mortar stocks.

The new economy has brought with it a revolution unlike anything we have seen before in our lifetime. It has impacted on every area of our lives from the way we communicate and shop to the way we work and play.

One would think that, because it’s technology-driven, the internet revolution would have brought with it an ‘anonymization’ of business and business relationships.

What has actually occurred, though, is an awareness that the foundation underlying this new medium is only as strong as the human relationships of which it is comprised.

On closer analysis, of course, this is really not so surprising. Because we are all, to an extent, ‘anonymous’ online (I could be a bearded old man with half my teeth missing writing this article in my grungy vest for all you know) there is, naturally enough, a certain hesitation we all experience before taking a leap of faith and choosing to do business with someone we meet online. I mean, I’m not going to give out my credit card number to just ANYONE online and neither, I’m sure, are you!

But eventually we DO make the decision to do business with someone online. What is it that tugs us over the line from hesitation and healthy skepticism to a level of trust sufficient to convince us it’s safe to give the other person our credit card information or write them a check?

Answer: we invest time with the other person, we communicate with them, get to know them. Electronically, to be sure, but there is real communication with a real person on the other end. At the end of the day, we trust them. It’s that simple.

So, the paradox is that because we’re all so anonymous we must enter into relationships with each other to bridge the trust gap in a way that simply doesn’t happen as readily in the ‘real’ world. After all, how often do you go to that sort of trouble when you’re passing your credit card over the counter when you’re shopping at the local mall? Why is the owner of that business, someone you don’t know from Adam, someone you won’t even think twice about giving your credit card information to, when you know much less about them than the person you’re doing business with online?

What are the implications for this relationship-based business model for your online business? Plenty! Much has already been written about how to develop trust in the mind of your prospective customer. What I’d like to look at is a particular aspect of the model and that’s business-to- business bartering … a new form of currency in the new economy.

If you’re forging relationships with prospective customers, you’re also forging relationships with prospective suppliers in your role as customer. What if your prospective supplier wants something your business has to offer? Has it occurred to you that instead of exchanging cash for each other’s services, and all the tax implications that go along with that, you could instead exchange services?

And, let’s not limit this to just you and that one individual. What we want is a barter RING, a group of likeminded individuals who provide an exchange to any member of the barter group in exchange for something of equal “value” from any other member in the barter group. This opens up many more possibilities than a straight 1:1 barter arrangement. The possibilities are endless!

One way to approach it would be to strike a notional credit value for every service in the group. Hosting of webpages might be worth 1 credit per page hosted, for example. Someone else might throw classified advertising in their ezine into the barter pot. That might be worth 5 credit points, for example, depending on the number of subscribers to the ezine. Someone else might offer web design services at the rate of 10 credits an hour. Another might offer webpage optimization services (to tweak pages to rank well in the search engines) at 10 credits a page. Someone else might offer coaching/mentoring at 10 credits an hour.

Now, someone is obviously going to have to handle the administrative side of all of this. You might start out something like this. Let’s say you have a group of people prepared to barter the following services: webpage hosting, classified ad space, web design, webpage optimization, coaching/mentoring, search engine submission and copywriting services.

Your first task is to ‘credit equalize’ the above services so that they are all worth the same value on a per unit basis. A good starting point might be to take the market dollar value of these services and convert dollars to barter credits. Let’s say one credit equals $5 of market value. Your ezine publisher charges $15 for a single classified ad in her ezine. So for every classified she runs for a member of the barter ring, she gets three credits. Your copywriter member may charge $50 for a full page sales letter. Your copywriter is entitled to ten credits. And so on.

Next, each barter member would be required to agree to provide a certain predetermined number of credits worth of services to other members of the barter ring. You may decide to set a fixed number of credits per month, for example. Also, think about things such as whether credits not taken up in one period can be carried forwarded to the next or are they forfeited? This has implications for ease of administration but there will be tradeoffs too. I don’t like the fact that I lose my frequent flyer miles if I don’t take them by a certain arbitrary date. So give some thought to these sorts of issues.

As administrator, you would obviously need to set up some sort of a ledger to record and keep track of all of this. So credit each member’s account with the number of credits they’re throwing into the pot. This also represents the number of credits they’re entitled to redeem from other members. Then it’s just a matter of recording deposits and withdrawals of credits to make sure everyone’s getting and giving their fair share. Playing by the rules, in other words.

And don’t forget your compensation for handling the administration of your barter ring. This could grow into a pretty major undertaking once it takes off. Make sure you receive compensation in the form of additional credits. That’s something else you need to agree with your barter members.

As you can see, with just a little bit of creativity and thinking outside of the square, properly run, a barter ring can be a way to deliver real value to members without anyone having to spend a dime.

Think about the people you’re already dealing with day in, day out. I’ll bet there’s half a dozen you can think of right off the top of your head that would fit well into a barter ring.

Of course, you would only deal with people you know and trust (or that people you know and trust, know and trust).

But that’s the beauty of this revolution. If you’re doing business in this medium, your very survival is already dependent upon the quality of your online relationships. Why not put them to good use for the benefit of all of you?

So, how about it? Anyone want to start a barter ring?

2000 Elena Fawkner

Elena Fawkner is editor of A Home-Based Business Online … practical business ideas, opportunities and solutions for the work-from-home entrepreneur.