CBS was a pioneer of making airtime its currency in creative online deals. In 1997, the network bartered for stakes in SportsLine USA, an online sports-news provider, and MarketWatch.com, an online financial news service. Now they have turned into home runs.

CBS two years ago exchanged just $30 million in plugs for 50 per cent of the equity in MarketWatch. The stake, now reduced to 38 per cent as a result of MarketWatch's initial public stock offering in January, was worth $246.7 million on July 12 based on its closing share price of $53.375. The SportsLine transaction was a trade of $57 million in CBS promotions for a 12.5 per cent stake in the online company. CBS's stake, which it has since expanded to 19.5 per cent, was valued at $166.3 million on July 12 based on SportsLine's closing share price of $36.625.

The deals are producing a cacophony of commercial messages, often inplaces that would have been plug-free just a few years ago. On theCBS Evening News, for example, anchor Dan Rather often refers viewers to MarketWatch whenreporting business news. "On the CBS Worldwide MarketWatch, a baby bell is getting hitched," he said to introduce a report in May about the merger of US West and Global Crossing. A CBS.Marketwatch.com logo hovered over his left shoulder.

Placing dollar values on the ad-for-equity swaps has been giving network bean counters a workout. According to the contract with MarketWatch, for example, CBS's on-air promotions can take the form of 15- or 10-second ads or a variety of other plugs, including on-air "mentions," "scrolls," "credit rolls," "sign-offs" and "banner" advertising. An on-air mention is worth 30 seconds of paid advertising.

During the recent broadcast of a golf tournament, CBS sports announcer Jim Nance directed sports fans to the Web to check the latest golf scores. "You can follow this tournament and all the sports world at America Online under the keyword CBS.Sportsline.com," he said. For that, CBS deducted the price of a 30-second ad from what it owes SportsLine.

As part of its promotionalsupport for SportsLine, CBS also furnishes written "crawls" - commercial messages that scroll across the bottom of a screen. Until the ad-for-equity deals came along, says Fred Reynolds, CBS's chief financial officer, the crawl was "space that wasn't being used, space we thought was valuable but that we couldn't convince others was valuable at the time."

At NBC, promotions for TalkCity currently consist mainly of promotional voiceovers on programs' closing credits and short promotional spots along the lines of the ones NBC creates for its own programs. "Talk with fellow fans of your favourite NBC programs at the Internet's most acclaimed chat site NBC.TalkCity.com," says one NBC on-air promotion. "Join the conversation."

For the Internet ventures, the deals represent access to a mass audience they otherwise couldn't afford. The major networks, meanwhile, get an online foothold that they don't have to pay for with cash. Plugs like these are better than advertising, network executives say. "You'reimmediately telling people to go to the site for more information," says Tom Rogers, an executive vice-president at NBC. "You're motivating someone based on their interest" in a program to visit a related Web site. "That is a higher form of 'call to action' than seeing an ad."

Networks clearly hope the ad swaps will sell the charms of network-TV advertising to other Internet companies - others who pay cash. "As Internet companies start having cash, that's where they're going, to the place their competitors are as a result of equity deals," says a network executive.Sometimes, the deals are a productive way to unload unsold ad time. Edward Hatch, a securities analyst with SG Cowan Securities, says commercial inventory is "a finite thing that spoils." In the past, he notes, if networks didn't sell the time, they lost it: "Now they're trying to turn it into another growth vehicle for the future."

For Internet start-ups, the deals can be expensive: The value of the ad time may get charged against theirearnings, crimping profitability. SportsLine and iVillage, for example, have both had their earnings penalised by special charges connected with their network-barter agreements.

Still, the online concerns get preferential treatment over paying advertisers who walk in off the street. The time they get for advertising is often calculated at a discount to the regular rate. In documents filed recently with the Securities and Exchange Commission, iVillage says that 30-second ads that have been airing on NBC - featuring women sitting around gabbing about everything from food fights to serious illness - are "calculated at 85 per cent of the gross market rate." Similarly, NBC's agreement with Talk City provides for advertising valued at unspecified "rates discounted from the respective rate card," a Talk City SEC filing says. An NBC spokeswoman declined to comment.

Some online companies try to extract extra value from network TV partners. They don't want just any ads - they want ads targeted at specific consumergroups. For instance, NBC's agreement with iVillage obliges the network to run iVillage ads in programs targeted to women aged 25 to 49, according to iVillage's SEC filing.

A few of the deals are structured to give the networks other ways to work off the price of their investments. In June, CBS bought a 35 per cent stake in Switchboard.com, an online telephone directory and search engine, for $135 million. It wasn't all in the form of bartered advertising and promotions. Switchboard gets certain rights to use the CBS name, which the network figures is worth $40 million over ten years.

CBS says the deal gives Switchboard.com name recognition and credibility. But the image-polishing works both ways. Associating a dot-com company with CBS, a network known for its aging viewers, can help it seem hipper.The ad swapping looks like a bargain to network executives hoping to get in early on the next Yahoo! or Amazon.com. Often, "it's a more valuable use of our inventory than even what the highest advertiser canpay," says NBC's Rogers.

Other media companies are giving swapping a try. When the New York Times Co. recently purchased a minority stake in TheStreet.com, the deal included a $12 million ad credit and $3 million in cash. And swaps between Time Warner's CNN and International Data Group's PC World magazine were part of a pact giving CNN a minority stake in an online company IDG is forming.

--The Asian Wall Street Journal