Published by Mi3 

US$1.4bn global barter company Active International is ramping up local operations, wooing brands by offering to take excess stock off their hands and likewise publishers with media inventory.

Active believes barter – in Australia a circa $200m market in traded goods alone, perhaps $500m in media arbitrage – is set for major growth despite a looming crunch as brands and publishers seek to trade excess stock and inventory for credits that can be spent on media or other goods.

Barter v arbitrage

Sarah Keith, the former Publicis Media exec now running Active-owned indie Involved Media, said whereas most agency groups are arbitraging media and call it ‘barter’, Active is also reselling physical goods for brands. These can end up in discount stores such as TK Maxx or in the middle aisle of discount supermarkets, often repacked. Media agencies have a different interpretation, sticking mostly to media deals where they buy cheap bulk ad inventory, on-selling to clients at a mark-up.

“In lots of ways for the traditional agency arbitrage model, it’s about additional value or discount [for clients]; ‘Do you want more spots or do you want additional discount?’ The [networked] agencies’ position to clients is ‘we’re taking the risk on pre-purchasing that media, therefore, it’s non-disclosed because we’re making big cash deals, and then we’ll share with you that return’,” said Keith. “Whereas Active’s business is much more around stock assets and effectively re-marketing them.”

But taking on risk doesn’t always pan out. Active International’s Darren Riley, who leads media and client business outside the US, said the most severe haircut in recent times was on a shipload of masks that arrived as Covid mandates to wear them eased. But there have been some big wins over the years, notably for Calvin Klein underwear, a deal which required Active to pick the stock, re-label it and resell, but that delivered major gains on media as well as product.

In volume terms, the media side of the business is larger than trading in physical goods, said Riley, “because we’re placing much more media value than we’re getting when we sell the asset. But the [physical] asset sale side is more valuable to us, because that’s the cash that we get into run our business. That’s the cash that we make when we sell the product, that allows us to make the investments in the media.”

Programmatic push

The ability to spend those credits programmatically embeds barter more fully into Australia’s $13bn digital ad market, the bulk of which is traded via those pipes. That’s where the major groups are headed – and Active is making its own play to corral both the networks and independents to plug in to programmatic barter.

But that push requires holdcos to engage – and most have their own highly profitable barter businesses, yielding lucrative margins while meeting impression cost mandates from brands. Active’s Riley is confident they will come to the table, recognising a rising tide floats all boats.

Holdco hook-up

Launched two years ago in the US, the programmatic product has “all of the holding companies” now hooked in, he claimed, because they understand the value. “With the exception of Publicis’ Apex, most of those barter businesses were launched and run by people who used to work at Active – that includes Omnet [Omnicom], Astus [part-owned by WPP] and Orion [IPG].”

Riley is pushing the product – dubbed AMP – locally. He suggested it is no threat to agency trading models or relationships. While rival barter firm Astus is also pushing into programmatic, it uses its own trading desk, whereas Active states its approach is “independent”.

Keith backed Riley up while jabbing self-preferential competitor approaches. “There is no preferred tech or inventory suppliers. Nothing changes for our client’s agency, they can use their preferred technology and suppliers,” she said. “We are not operating a bundled trading desk model.”

Downturn hedge

Latest projections from the likes of IPG’s Magna and GroupM suggest Australia’s ad market will grow this year. Whether that eventuates remains to be seen, but Riley claimed barter provides a natural hedge.

“In a bad time, the front side of our business – the asset acquisition side – is usually good because there’s more assets laying around. The back side, the media fulfilment side, may be slower because clients are spending less, but it also gives us an opportunity to get better deals with the publishers and the media providers because they are hungry for more business,” he said. “In good times, it might be harder for us to find an asset, but the clients are spending lots of money on marketing, and that’s good for us too.”

Buy signal

Tighter markets often yield deeper deal-making value and Active remains on the hunt locally and globally. While the firm prefers to avoid warehousing, it’s inevitable some product requires handling and storage – and the economy wide supply chain crunch may yield further opportunity.

“We’re always looking for acquisitions or investment opportunities. We are always looking for agency acquisitions that bring us a skill that we don’t currently have. Technology acquisitions, other goods and services such as travel, freight, logistics. These are businesses that we participate in,” per Riley. “Our clients don’t only they trade their credits for media; they trade for other services. So we’re looking for acquisitions in the travel space, logistics, printing. Those are the type of companies we will invest in or we will look to acquire.”

Price points

Access to barter inventory is underpinning media gains at Involved. Keith said the firm will book “85 per cent top-line growth” this financial year, with two new clients – in vehicle rentals and glazing services – in the bag in the last month.

“In pitch situations, if you’re an independent agency up against big holding companies, you’ve got stiff competition in terms of data, systems and technology, but also in terms of price,” said Keith. “We have those global resources in terms of systems and technology, but most importantly in terms of having access to competitively priced inventory [via barter].”

ESG play

Keith sees further growth from brands piling into sustainability. While carbon calculators and offsets enable advertisers to plant trees and at least do something to negate media footprint, Keith claims barter has genuine ESG credentials.

“These goods may otherwise be destroyed or dumped. We are effectively preventing that by reselling them and getting brands maximum value for excess stock. So we’ve always been part of the circular economy. I think we can genuinely helps brands achieve their ESG goals.”