The marketing strategy for ICOs has been changing ever since the term was coined. An ICO, or Initial Coin Offering, is a way for startups to crowdfund capital by selling their own token in exchange for primarily Bitcoin or Ethereum. Investing in an ICO can lead to tremendous returns as can be seen with success stories such as NEO and Ethereum whose early investors are now looking at 200,000% returns.
Then came companies like Centra, which made false claims about partnerships, and Plexcoin, which promised investors exceedingly high returns. These strategies enticed investors but also drew the attention of the SEC, which became determined to put an end to the “strike it rich” marketing strategies of the past few years.
The Good and Bad of Social Media
Social media marketing has been one of the most powerful tools for ICOs to gain a following and bring value to their projects. Once cryptocurrency garnered the attention of mainstream curiosities, the social media giants began to wake up. In early 2018, Facebook announced that it would be banning ICO-related advertisements, and Twitter followed suit a couple of months later stating: “We have added a new policy for Twitter Ads relating to a cryptocurrency. Under this new policy, the advertisement of Initial Coin Offerings (ICOs) and token sales will be prohibited globally.”
In response to this, the cryptocurrency community has started looking toward more stable and verified ICOs and has become increasingly more critical of those who do not embrace transparency. There are listings such as Top ICO List, ICO Alert, Bestcoins, and many more which offer their services to ICOs and the community; these listings weed out ICOs that show signs of a potential scam and creating prerequisites to ensure that the companies they list have strong foundations. Startups looking to crowdfund via an Initial Coin Offering are strategizing more towards being listed and verified than garnering likes on Facebook.
Still, many ICOs like Centra have tried to use other untrustworthy tactics such as obtaining celebrity endorsements to promote their products. This created further skepticism within the community and is unlikely to continue since these celebrities can be held accountable for the ICO’s. As the SEC stated: “These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”
ICO marketing teams are already being forced back to the drawing board. Services have emerged to take responsibility for rating ICOs based on their own guidelines. This is a huge step towards transparency; with more institutional investors entering the crypto-market, being audited and reviewed could soon become not only advisable, but necessary for any ICO to survive. This has and will alter the marketing strategies put forward by ICOs into a realm of greater transparency and a focus on being “above board.”
ICOs are now required to pay closer attention to potential legal ramifications of their claims. Government agencies have been taking notice of cryptocurrencies and ICOs in particular. Careful wording has become a key component in any advertising campaign. Regulation can change by country and impact a company’s ability to raise capital as well as potentially disrupting their product development.
Once something is announced, there are no take-backs and governments are eager to discredit the cryptocurrency community. Their commitment towards legal action was made clear when Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, said this after the arrest of two of Centra’s founders: “We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses.”
Ivan Goldensohn, Chief Marketing Officer of Dispatch Labs understands the challenges of assembling a strong marketing plan and team within an industry that is under intense public and legal scrutiny at the moment, Goldensohn says, “Moving from implementing marketing for more established (if not necessarily traditional) industries into cryptocurrency presents a new suite of unique challenges. Unlike established industries, the ramifications of marketing challenges within the cryptocurrency space go beyond ROI, and can result in legal action or subpoenas as evidenced by a slew of cases, including Munchee’s now infamous ICO.”
The Need To Stay Up To Date
Cryptocurrencies as a whole are highly subjugated by public perception and confidence, which is not always steadfast. Marketing within the cryptocurrency space requires teams to continuously stay abreast of the latest trends, cases, and rulings to determine how they can effectively distinguish themselves an increasingly crowded market without impeding on any legal gray areas.
“Additionally, as so much of cryptocurrency value is based on hype and public perception, good or bad marketing can change the value of a crypto asset by millions or even billions of dollars. As such, marketing leadership becomes a role involving a lot more than just marketing, it requires an ongoing and constantly maintained knowledge of all aspects of the industry, precedents within the space, and a lot of legal review,” continued Goldensohn.
Luckily, there are many emerging organizations in the cryptocurrency space that are learning that in order to cement the viability of cryptocurrency, a focus must be placed on promoting the utility and longevity of these solutions, rather than making outrageous claims and over-selling half-truths.
Changing the Adage
In the past, the adage ‘spend money to make money’ was put to the test, and has transformed into a new and more reasonable phrase of ‘spend money in the right places, to make money.’ People are catching on, news outlets are becoming more aggressive, and people are suspicious of advertisements that attempt to take advantage of them.
2017 has been called the “Year of ICOs,” and it was. In the Chinese Zodiac it was the Year of the Rooster and the year ICOs ran rampant with little oversight and even less transparency. Moving into 2018, the Year of the Dog, not only do ICOs need to have the right funding, team, and product to move ahead, they also need the trust of their investors. People are skeptical of this market and of institutional money, doubly so.
With big companies like Overstock.com launching ICOs, it will soon become a marketplace dominated by the companies that are willing to be open and compliant with regulators and the public. Because at the end of the day, while you’re outside dumping seed around your crowing rooster, your dog waits patiently inside for you to feed it.