Should Hyperlocal Publishers Accept Barter Deals?
In the midst of the swirling debate over government-backed health insurance, there’s another big trend affecting folks in the workplace — I’m talking about the steady shift away from traditional “employees” and towards independent contractors. How many people, for example, who do work for the Huffington Post are employees of the Huffington Post? Not that many. Same with Forbes, and it’s inevitable for local media as well.
When I taught ethics classes at the University of North Texas (UNT) a few years ago, my advice to students was to get started immediately in personal brand building. All of the ethical dilemmas I posed as classwork involved hyperlocal news organizations, including those with only one person doing all the work. This, I hoped, would prepare them for the real world more than teaching them anybody’s traditional code of ethics.
You see, we’re all on our own. Nobody cares about you except you. It’s about supporting yourself while you grow your brand, so that the rising stars with whom you are coupled downstream will help you advance your way of life. And being on our own means nothing artificial should (or can) stand in the way of self-support.
If we’re to be on our own, then so be it, and anything goes, including a very old form of compensation — barter.
“Since trade has tax consequences with no actual cash coming in to send to the IRS, I shy away from trade where it’s for my personal benefit. I’d rather trade for office equipment, as I’ve done, than for that lawn. One good trade deal I have that I don’t mind paying the tax on is one I set up early in our business. It’s with a local auto mechanic. It’s so critical to ensure both of our cars are repaired when they need it, and we don’t want to put something like that on a credit card, so the mechanic allows us to bank our trade. One time I had $800 in trade coming right when I needed serious front-end work done on my truck. The bill came to just over $800. I’d rather pay the tax out of pocket on that $800 than the credit card interest it would have cost me had I charged it.”
Most of the better known hyperlocal sites we contacted told us they didn’t do trade or barter, and they didn’t want to talk about it on the record. One former editor, who spoke on condition of anonymity, said, “We never did trade and prohibited our site editors from doing so. Not as much for tax reasons but because it creates grey areas when you have editors doing stories and doing sales, and then suddenly having clients do things for them personally. It can get very messy.”
Hyperlocal pioneer Mike Orren, now at Speakeasy, said people don’t talk about it because they don’t want to attract the attention of auditors, or they don’t want competitors to know that they’ll do barter. He agreed, however, that trade is “absolutely viable” for independents, although he questioned whether trade “really helps one support themselves.” He offered five general guidelines:
- Barter is a great way to get a client to try you in a category you want to break open. But once someone barters with you, they’ll almost never pay cash in the future. Still, so long as you keep things between you and the advertiser, their competitors assume they’re spending cash and may do the same.
- Barter doesn’t pay mortgages, car payments, etc. Unless you’re young, single and VERY resourceful, you can’t live on it.
- Barter needs to be accounted for as carefully as cash, if not more so. And it needs to be taxed as income. If you don’t do that, you will eventually get caught by the IRS or worse, an investor or acquirer.
- Be wary of “part-cash / part-trade.” If you aren’t careful, the cash expense will kill you. I once worked at a fledgling magazine relaunch where we were thrilled to get a suite at a sports arena on trade so we could finally entertain clients. But the food and beverage was cash (and pricey) and nearly wiped us out.
- It’s tempting to use barter (particularly at restaurants) as just a reward for staff. Try to use it for business purposes (entertaining clients or contesting to grow audience) or it’s not really a gain.
Terry Heaton is President of Reinvent21, a consulting company specializing in business reinvention for the 21st Century. He’s an internationally-recognized creative expert on all things web-related, especially as they relate to local media.