We think of billboard revenue as being strictly in dollars, but for decades some operators have garnered income in barter, as well. In this Billboard Mastery podcast we’re going to examine how you can use barter – exchanging goods and services – as a productive way to fill your vacant ad space.
Episode 121: All About Bartering Transcript
Normally when we think about filling a vacant advertisement on a billboard, we're thinking about getting cash, money from an advertiser who pays us every month for the right to have their ad up on the sign. But sometimes it's an equal or better option just to do bartering. This is Frank Rolfe with the Billboard Mastery Podcast. We're gonna talk all about barter, how it works on billboards, tips, things to avoid. What is barter? Barter is when you trade goods or services as opposed to cash for someone to rent your sign. I'll give you an example to start off with. An early barter situation I did was, I once had a billboard in downtown Dallas and a restaurant came to me, called the Blind Lemon, I know it sounds weird, but the food was pretty good. And the guy said, look, here's the deal. I want to rent your billboard, but I don't have a very big budget, but I do have food. So I will give you $1,000 a month of food in exchange for that sign. Well, the sign was sitting vacant at that time. And even though I had hopes and dreams I would get an advertiser for money, nothing had popped up yet.
And I wrote a contract that allowed me to cancel in the event I had a better paying customer. So I went ahead and put the ad up for the Blind Lemon. It was a great relationship. I basically ate every meal out at the Blind Lemon for years. I found that the mixture of the menu and the location and the hours of operation worked just fine with me. And I was able to steer every meal to the Blind Lemon. Even if we had guests go out to dinner with us, we went over to the Blind Lemon. And I would have never gotten $1,000 a month for that sign. And I didn't have any cash customer at the time. So I learned from that experience, wait a minute, bartering my vacant space for a good or service, that's maybe not too bad an idea. And then I heard about things called barter exchanges. These are exchanges where you could go ahead and barter your vacant space into the exchange. And rather than just have one item, like just that food from the Blind Lemon, now you had an array of goods and services to choose from. So now I was able to basically trade billboard space, but more like on steroids, more like trading through Amazon.
Once I learned that, I started doing even more bartering because I found there were things I could do with those goods and services I got through the barter exchange. Some I could use personally, things like auto repair, but others I found I could use to further my business. I would often go in and get hotel accommodations, which were from some fairly decent brand hotels. And I would then give those to property owners and advertisers as freebies just to get goodwill. I would tell the McDonald's, hey, if you rent my billboard, I'll give you two nights at the something suites over in San Antonio. And they'd say, oh, okay, I'll take the sign. The bottom line to it is, there's really nothing wrong with the concept of bartering as foreign as it may sound to many people. But yet there are some things you need to be aware of if you're going to do bartering. The first is you need to understand the tax consequences because you are receiving something, although not cash, that could have taxable value. So talk to your tax accountant, your tax professional on what the tax treatment is for bartering, so you understand that on the front end.
Because you may have to pay actual cash in the form of taxes on the barter that you receive. Also, if you can try and structure your bartering agreements so they can be terminated at will by you with a certain number of days of advance notice. And that way, if an advertiser comes along who will pay more or pay in cash, or you're just unhappy with this whole bartering arrangement, you can go ahead and get out of it. Also be careful because many people put goods and services that are flawed or unpopular into those barter exchanges. That was one thing I learned very early on is that many times if a business is not doing well, has a bad product, is a hotel that no one wants to stay in because the air conditioning doesn't work, they'll throw those in the barter exchange. So you've got to be extremely picky. And when you look at the products in a barter exchange, make very sure that you don't go all in in a big way on the front end. Remember the old adage, first you should crawl, then walk, then run.
That means you need to go slowly and test and see what's really going on. If you say, aha, I love that idea of getting those hotel rooms and trading those to advertisers as a goodwill gesture to kind of create excitement for them to rent the sign. You better get a few nights at that hotel and check it out yourself first. Because you wouldn't want to find out that the hotel you got doesn't get you brownie points, but you just get people mad at you because it's of lesser quality. Also make sure that you don't think of bartering as your first option. Cash should always be your first option. Cash is what pays the bills. That's what pays your loan payment, your taxes, and everything else. All those people take it in the form of cash. They don't take it in the form simply of barter. So if you can get a cash customer, always take a cash customer. But if the sign is sitting vacant and you have the ability to cancel that barter agreement if you get a better deal, there's really very little risk in putting up that bartered item.
That being said, be very careful you're not getting enticed into going with a bartering exchange partner that's actually about to go under. I took a great gamble with the Blind Lemon because I had to do up the artwork and put it up on the sign, and at that point I had real hard cash in the deal and they had nothing. I only made it back after the first several months of their payment in the form of those bartered goods. So make sure that you don't get stuck in a rut that many billboard companies do of having clients who are unscrupulous who wanna go ahead and rent billboards right before they go bust to try and sell as much as they can before they close their doors. If the business looks very flaky to you, then I wouldn't do it. The last thing you'd wanna do is pay to have the advertisement installed only to find out when you try and get your bartered good, that their account is completely closed out. That's a pretty common practice of many advertisers to ramp up their marketing dollars right before they go under and you should not get stuck in that trap. Also remember that bartering, although it's a reasonable concept, is also filled with many unscrupulous people.
So make sure the bartering exchange you're looking at working with comes with some degree of recommendations from others. Look through the products and make sure those are products you can actually use. Don't get stuck with worthless barter credits. And be careful of some of the items. I once got some land at a barter exchange out in West Texas. And I thought, well, I can use this. Someone's gonna want land. Isn't it exciting to own land? So I tried to swap that land with an attorney for legal services. And that guy said, are you serious? This land is basically worthless land. This was down in South Texas where land goes for as little as $50 an acre. I didn't know any better. I was an idiot. And so I thought it was far more valuable. So I found that this product, which I had bartered for, really wasn't worth much. It would be like buying something at an estate sale and looking on eBay and seeing the thing you thought was worth $200 was actually only worth $10. It was very depressing. Bottom line to it all is that bartering is a very good idea, but only if done in the right measure.
Cash is king. You should always attempt to get cash customers on your billboards. That's priority number one. But if a cash customer is not coming down the road and you've got that vacancy staring you in the face, and there's something out there you can barter for that you can actually use, then why not give bartering a try? It's one more element to have an occupied sign that's pulling its own weight. This is Frank Rolfe with the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.