Liad Meidar thinks the ancient practice of barter can make a comeback–with a dot-com twist.
Meidar, chief executive of Seattle-based Ubarter.com, wants a good-size chunk of the hot business-to-business market. Ubarter.com has just been bought by Network Commerce, formerly ShopNow.com, another Seattle company riding the business-to-business wave by offering consulting services and software tools to conduct e-commerce.
Ubarter.com offers on-line Ubarter dollars, which allow businesses to buy and sell items from pencils to airline tickets over the Internet. The site targets cash-strapped small businesses and Internet start-ups that need goods and services they cannot afford but for which they can trade.
The company charges a 5 percent cash fee on each transaction. It does not accept its own Ubarter dollars.
The site, whose membership has grown 150 percent in 2000, averages $3.5 million to $4 million worth of transactions a month. Meidar hopes to sign on 100,000 members by year’s end.
Ubarter.com lost $3 million on revenue of $2.7 million in the nine months ended Dec. 31, according to a quarterly report filed with the Securities and Exchange Commission.
Here’s how the site works: Say a small hotel in Chicago needs two or three computers. It registers on Ubarter.com and puts a three-night stay up for barter. A lawyer in Houston needs to travel to Chicago, so he books the hotel room, paying with Ubarter dollars he earned from services to a company registered on the site. The hotel then takes those Ubarter dollars and buys the computers from another Ubarter participant.
Meidar said Ubarter.com also can help its customers generate real money by allowing small businesses to “buy” media space with Ubarter dollars. In fact, advertising is the site’s most popular item, he said.
“It’s psychologically difficult for a small business to buy radio ads because they are such big-ticket items,” Meidar said.
The site only really benefits businesses that have something to give, such as an unbooked hotel room or an extra computer.
For instance, Meidar said, an Internet-service provider can barter its service at little or no cost to its bottom line since its infrastructure already is in place. “Very few businesses operate at 100 percent capacity,” Meidar said.
In a way, the IRS helped inspire Ubarter, Meidar said.
In 1982, the agency hoped to prevent tax evasion via under-the-table barter by requiring businesses to declare such activities as revenue.
As a result, the IRS recognizes one Ubarter dollar as one U.S. dollar.
Meidar, a Princeton economics graduate who once worked at a Wall Street investment firm, has long been interested in alternative currencies.
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As e-commerce becomes a bigger part of the U.S. economy, he said, money as we know it will become less relevant. He noted the popularity of debit cards and frequent-flier mileage.
“The U.S. dollar won’t disappear,” Meidar said, “but I think it will be less significant than it is today.”