Both IMS and ITEX posted decreases in third quarter revenue over revenue generated in 2012 during that same period.
ITEX reports an 8% drop in income, a 31% decrease in income from operations, and a 29% drop in net income.
IMS reports a 5% drop in income, a whopping 60% drop in income from operations, and a net loss instead of income in that same period.
(You can read their statements by clicking the links above.)
Both companies seem to be making strides to strengthen themselves and their relative positions, but when both of the two publicly traded barter exchanges post a drop in gross income, it may be something to take note of. Unlike other industries with a wide variety of firms distributing income information publicly, the barter industry has two, so we should not be too quick to assume a drop in the industry’s income overall.
While IMS chose to remain a bit silent on why things had changed, ITEX explains the lower revenue this way:
We believe the reduction in members and transaction volume is attributed in part to the prolonged weak economic climate for small businesses (our primary clientele), the lingering disruption from two proxy fights and related litigation, and increased competition from pricing of big box stores and certain Internet sites featuring leading brands, discounted pricing and speed of delivery…the primary driver of revenue growth in recent years has been through our business acquisitions. These acquisitions are intermittent and cannot be relied upon as a future source of revenue growth, because of the absence of acquisition candidates, lack of financing, or unacceptable terms.
Of particular interest to the author were ITEX’s statements regarding the emergence of virtual currencies as destructive competition to the barter exchange business model.
Virtual or digital currencies are receiving increasing interest from investors, businesses and governments. Examples include private virtual currency or payment systems such as BitCoin, Ripple, and Litecoin. As peer-to-peer currencies, they rely on a system of mutual trust and do not rely on a central bank, a third party or other intermediary to effect transactions or act as guarantor in the event the currency collapses. They do not have the status of legal tender. However, increased popularity or government acceptance of virtual currencies could encourage competitors to utilize virtual currencies or the exchange of online credits for goods and services.
Does this spell the beginning of the end for the barter industry? I don’t think so. Does it mean an adjustment period is coming, perhaps similar to the adjustment after the IRS cracked down in the early 1980’s? Maybe. One thing is for certain, the barter industry is here to stay. It may not look the same ten years from now, but the need for good brokers to help business owners maximize their potential does not change.