Tuesday Report - January 16, 2001

January 16, 2001

Active International Introduces ActivePoints Rewards Program

First Loyalty Program Available in Corporate Barter Industry

Active International, the world's largest corporate trading company has announced the launch of a customer affinity program. It's designed to reward its corporate trading clients for using the trade credits they've received through trading.

The program, called ActivePoints, is the first of its kind in the corporate barter industry. Clients will be awarded ActivePoints, using a procedure similar to that of airline frequent flyer programs, redeemable for a wide variety of merchandise and travel products.

Active is offering this program through a partnership with affinity program provider, perks.com. Established in 1998, perks.com creates customized web-based incentive and loyalty marketing programs for a wide variety of prominent companies.

The ActivePoints Program can be accessed online through Active's corporate web site, www.activeinternational.com. All Active clients can review their ActivePoints accounts, as well as browse through the rewards at each program level. Categories include electronics, home furnishings, jewelry, and travel packages.

Icon Launches New Program With "Save The Children"

Corporate barter company ICON International has launched a program in partnership with Save the Children, a non-profit international organization that helps disadvantaged children and families in more than 40 countries.

The purpose of the program is to help companies alleviate the problems and expenses associated with excess commercial real estate assets, while at the same time benefiting the Save the Children association.

Under the terms of the partnership, ICON will use its asset management expertise to turn companies' commercial real-estate donations into tangible dollars for Save the Children programs.

If a company chooses to participate in the program, its real estate will be contributed to a special-purpose LLC rather than to Save the Children. The organization receives a security rather than the actual real estate.

ICON's contribution to the LLC is to provide capital and management expertise, including financing all costs associated with carrying, holding, and developing (if necessary) the real estate until sold.

Demand For Entrepreneurs Who Barter Their Expertise Will Continue With Changing Economy

According to corporate and securities attorneys with Foley & Lardner (a company with more than 900 attorneys practicing in 15 offices in the U.S. and affiliated offices in Europe and Asia), entrepreneurs will have to learn to deal with the changing economy.

"Owners of emerging growth companies must accept the fact that business and funding sequences in capital markets are cyclical, and then put that reality to work to their own advantage," stressed Martin Traber, head of Foley & Lardner's in Florida.

He said that although there may be a constant number of dollars "in play," their deployment changes. And the successful business owners will be those who understand the changes, positioning their businesses accordingly.

A "down market" (best defined as one with more limited harvesting strategies), more extended "hold times," and lower "pre-money" valuations will affect three levels of entrepreneurs:

1.	The most mature level of entrepreneur has already had the experience of several successful harvestings and/or rounds of financing into the current venture. These are the well-funded companies with good management track records. Even in periods of consolidation and dismemberment, companies with good access to funds and seasoned management will continue to grow.
2.	The middle tier of entrepreneurs includes many individuals who trade their technology expertise for equity. Even though their businesses may suffer during periods of constriction and consolidation, there is still demand for their individual executive technological talent.
3.	The remaining tier is that of start-ups who may have a great idea but little financing, no track record, nor ability to execute with their own technical skills. When business conditions tighten, these entrepreneurs are most at risk and may become consolidation targets.

Here And There. . .

Canadian legislation providing for designation of barter exchange networks received Royal Assent on October 20, 2000. Such designation relieves members of a designated trade exchange from having to pay tax on barter units accepted in exchange for their supplies of property (products) or services.

(They would, however, continue having to charge tax on the taxable supplies provided for the barter units.) Barter companies must make application for designation before April 20, 2001. Failure to do so leaves a GST/HST liability, on trade credits used by their members, for payments in lieu of cash since introduction of the Goods and Services Tax in 1991.
(Information provided by John Madsen, C.A.)
Two new barter sites are getting off the ground, www.biz-barter.com and www.heavybarter.com.
Advertising mail has, for the first time ever, surpassed first class mail. In the first quarter of the fiscal year, the U.S. Postal Service reported processing 24.3 billion pieces of advertising mail versus 23.8 billion pieces of first-class mail.
Montgomery Ward's bankruptcy and closing of its 252 department stores and 10 distribution centers will see a flood of cut-rate merchandise, adding to the growing excesses already in the marketplace. Look for much more barter activity this year, due to the economy's slowdown.

One other note of Ward's demise--that shows the value of building a network--is the fact that Ward's credit-card business, which includes more than five million accounts, is still profitable. It will bring GE Capital (owner of Ward's) a significant return.
The Internet Advertising Bureau reported third quarter 2000 revenues declined 6.5% from second quarter 2000, but grew 63.2% over the same period in 1999. For the year 2000 online advertising revenues are expected to top $8 billion, with barter making up 7% of the total revenue.
Europe's Trading and Compensation Group (TEC), established in 1986, has integrated its different business segments into the Barterforum Group. They will be launching www.barterforum.com in 2001