Web-bartering enters new era

Swapping possessions might conjure images of little boys haggling over baseball cards, but the art of bartering isn't just for tykes. In a series of 14 Web-based trades over the past year, Canadian blogger Kyle MacDonald eventually swapped a single red paper clip for a house. Yet Mr. MacDonald is far from the only one harnessing the Web to trade stuff.

Next month, Boston-based entrepreneurs Greg Boesel and Mark Hexamer plan to launch Swaptree.com, a website to help consumers trade books, CDs, DVDs, and video games. Using complex algorithms, the site immediately calculates what traders can receive after they create "have" and "want" lists.

The idea of bartering over the Web isn't new. Many similar platforms appeared during the dot-com boom of the 1990s. But bartering websites including Swaprat.com, Webswap, and Intellibarter later failed for various reasons, including poor business models, low Web traffic, and intense competition.

Some business experts question whether new bartering sites are viable in today's currency-obsessed economy.

"It's a hard game," says Arvind Rangaswamy, research director at the eBusiness Research Center at Pennsylvania State University. Currency has always packed a powerful punch, he says, because "money is fluid, divisible, [and] exchangeable anywhere."

Although no solid figures on online bartering are available, the total market value of consumer-to-consumer trading websites should reach $150 million this year, predicts Sucharita Mulpuru, a senior analyst who specializes in e-commerce and consumer behavior on the Web at Forrester Research in Cambridge, Mass.

Experts say that for bartering websites to succeed, transactions need to appear more attractive than traditional online exchanges, such as auctions found on eBay. These sites have "some potential to be ... a niche player," says Mr. Rangaswamy. "They're not stealing from eBay, they're creating a transaction that would not have occurred otherwise."

In the past, swapping sites have encountered trouble when they supplement or replace bartering with a fabricated currency system, like points or credits.

"Nine times out of 10 ... a gap exists between what a person wants and what a person is willing to give," says Krista Vardabash, executive director of the International Reciprocal Trade Association, a nonprofit organization which promotes bartering worldwide.

Effectively addressing that gap may be the key for sites like Swaptree to realize long-term success. At this point, Swaptree does not plan to use points or credits and all trades will be made person-to-person. During a demonstration conducted at the company's Boston office, Mr. Hexamer demonstrated why he and his partner believe the website can differentiate itself from competitors. Unlike some swapping sites, which charge transaction fees, Swaptree's service will be free of charge. Users only pay for the cost of US Postal Service delivery, usually $2 or less, if they ship by media mail (a USPS service that allows senders to ship books, CDs, DVDs and other similar media at a lower rate). Swaptree will generate revenue through highly targeted advertising, Hexamer says.

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