Last weekend Montreal blogger Kyle MacDonald threw a party to celebrate the fact that he got his new Saskatchewan home in exchange for a red paper clip. Starting a year ago, MacDonald bartered the clip for increasingly valuable stuff, including a camp stove and free rent in a Phoenix flat. Having announced his aim (the house) in advance, MacDonald likely got a boost from techies eager to see the Internet pass this audacious test of its networking power. "My whole motto was 'Start small, think big, and have fun'," says MacDonald, 26, "I really kept my effort on the creative side rather than the business side."

Yet as odd as the MacDonald swap was, barter is now big business on the Net. 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 ...