Barter is now big business on the internet. This year more than 400,000 companies worldwide will swap some $10 billion worth of goods and services on a growing number of barter sites. These Web sites allow companies to trade products for a virtual currency, which they can use to buy goods from other members. In Iceland, garment-maker Kapusalan sells a third of its output on the booming Vidskiptanetid exchange, earning virtual "exchange krónur" that it uses to buy machinery and pay part of employee salaries. The Troc-Services exchange in France offers more than 4,600 services, from algebra lessons to ironing. This is not your caveman's barter system.
By creating currencies, the Internet razes a major barrier--what Bob Meyer, publisher of BarterNews, calls "the double coincidence of wants." That is, two parties once not only had to find each other, but also a swap of goods that both desired.
Now, they can price the deal in virtual currency. Even so, when Brazilian José Rivaro tells people he is CEO of Tradaq, a barter exchange in São Paulo, he still gets comments like, "We're going back to the Stone Age?" Hoping to shake the throwback image, industry players are trying new terms such as "trade exchange" or "cashless economy." The market's main trade group, based in New York, calls itself the International Reciprocal Trade Association (IRTA). These exchanges are very liquid. Because virtual currency doesn't earn interest, people tend to spend it quickly.
In the Netherlands, TradeXchange member Erwin Kettmann, a cosmetic surgeon who works for Laser Surgery, with operations in 13 European countries, says they get a lot of clients who would not lay out real money for say, liposuction or a tummy tuck, but will spend virtual currency earned as perks or part of their salaries. Barter also helps firms make use of idle capacity. For example, advertising is "hugely bartered" because many media, particularly on the Web, can supply new ad space at little cost, according to the IRTA. Moreover, Internet ads don't register in industry-growth stats, because many swaps are arranged outside the formal exchanges. Like eBay, most barter sites allow members to "grade" trading partners for honesty, quality and so on.
Barter exchanges can allow firms in countries with hyperinflation or nontradable currencies to enter global trades. Next year, a nonprofit exchange called Quick Lift Two (QL2) plans to open in Nairobi, offering barter deals to 38,000 Kenyan farmers in remote locales. Two small planes will deliver the goods. QL2 director Gacii Waciuma says the farmers are excited to be "liberated from corrupt middlemen." For them, barter evokes a bright future, not a precapitalist past.