After ad bans by Google, Twitter, and Facebook, cryptocurrency enterprises, such as ICOs, have been using social media influencers to build hype.
Companies have long used celebrities to hawk their products. Tobacco companies used baseball players to spike sales in the early 1900s, and soft drinks today use popular singers and models to push their cans of sugar water. The realm of cryptocurrency is no different as they use pop culture figures to build up hype and generate some revenue, but there’s a new twist to this game: social media.
Influencers Lead the Herds
It used to be that only people like athletes, actors, or singers were considered to be celebrities and influencers. Those days are gone forever as individuals on YouTube, Twitter, Instagram, and other social media platforms now wield considerable influence over their millions of followers.
As social media has risen in stature and popularity, the business world has taken note. Companies pay these “influencers” a nice chunk of cash to tweet about their product or to use it in a video. Everything from fashion to food has been promoted online via social media once some money has changed hands. This is true as well for the cryptocurrency space.
Buy This ICO!
The crypto sector of social media has a number of its own celebrities, each with a devoted following. Someone like John McAfee can instantly grant a lot of attention to a coin or project with just a tweet, and he admitted earlier this year that he charged $105,000 for such tweets. He’s stopped doing so, claiming that the SEC has been issuing “threats” to him.
A lot of cryptocurrency projects, especially ICOs, have a bounty program, in which they pay out cash or virtual currencies to celebrities to promote their project. Boxer Floyd Mayweather promoted a project called Centra. A recent cannabis-focused crypto called ParagonCoins used The Game, a famous rapper.
With outright advertising banned on Google, Facebook, and Twitter, crypto startups have to find ways around such limitations to reach potential customers. Such bounty programs are increasing in number because they work. 2018 has seen 518 ICOs launched, generating a whopping $11.7 billion in revenue.
However, using bounty programs to hire social media influencers has some risks. Lex Sokolin, global director of fintech strategy at Autonomous Research, explains:
Once it becomes clear that financial outcomes can be manipulated not just by trading but creating perceptions through social media, regulators will take a very hard stance.
Another potential problem can arise if the ICO turns out to be a scam. The founders of Centra have been indicted, and a class-action lawsuit has been launched by duped investors. Mayweather isn’t named in the lawsuit, but The Game hasn’t been so lucky. As he was on the advisory board for Paragon, the company behind ParagonCoins, he’s been included in the recent lawsuit by disgruntled buyers.
The important thing to take away from the use of bounty programs is to always do due diligence before investing. Also, one shouldn’t buy into a project just because someone famous on social media tells them to. The only reason a social media influencer is tweeting or making a video about an ICO or other crypto-related project is that they’re being financially compensated. While cryptocurrency is a brave new world, the old paradigm of having famous people shill for products is still the same.
Do you listen to the hype generated by influencers on social media? Let us know in the comments below.
Images courtesy of Shutterstock.