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Why There’s a Crackdown on Crypto Ads, and What It Means for Future Crypto Companies

Bitcoinist

Bitcoinist | Apr 05, 2018 | 16:00

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Why There’s a Crackdown on Crypto Ads, and What It Means for Future Crypto Companies

Bitcoinist

Bitcoinist | Apr 05, 2018 | 16:00


Back in January, Facebook banned all advertisements associated with cryptocurrency, the blockchain, ICOs, wallets, trading advice, and other related topics. Google will enact the same policy in June, which means companies participating in the crypto game are going to face some tough challenges ahead.


What Initiated the Ban

Why are big-name companies like Facebook and Google doing this? In a blog post from March 14th, Google clarified,

 We updated several policies to address ads in unregulated or speculative financial products like binary options, cryptocurrency, foreign exchange markets, and contracts for difference (or CFDs)… As consumer trends evolve, as our methods to protect the open web get better, so do online scams. Improving the ads experience across the web, whether that’s removing harmful ads or intrusive ads, will continue to be a top priority for us.

Members of the crypto community are logically upset. Cryptocurrency and blockchain are intended to be safe and traceable, so why are they being included with other advertisements Google is cracking down on, like gambling and fraudulent rehabilitation centers?

The reason is that the crypto world is still largely unregulated. Despite being on peer-to-peer networks, cryptocurrency value fluctuates all the time. ICOs are sometimes outright scams that require fraudsters to provide nothing in return for investors; and because blockchain is still not quite mainstream, the general public is naturally wary. Currencies that have no government affiliation and no physical form? It’s no wonder mainstream internet users find the general premise nerve-wracking and volatile.

Google’s Director of Sustainable Ads, Scott Spencer, told CNBC:

We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential harm that it’s an area that we want to approach with extreme caution.

The Register reports that after news of the ad ban reached the public, Bitcoin’s value fell from $9,144 to $8,700.

Twitter is expected to follow Google and Facebook’s leads, but Bing and other companies are currently still accepting crypto advertisements, which will hopefully help slow the bleeding.

What Does This Mean for Crypto Companies?

 

What Does This Mean for Crypto Companies?

Cracking down on crypto ads will be beneficial for weeding out scams, but dangerous for people hosting legitimate ICOs or investment firms that specialize in cryptocurrency transactions. Many businesses are afraid they won’t be able to market themselves sufficiently, and if an ICO fails, the product or service behind it may follow suit.

Ivan Goldensohn, Chief Marketing Officer of Dispatch Labs, believes the move to ban these types of advertisements to be a double-edged sword. Goldensohn states,

Reducing the danger to novice investors by removing the ability of illegitimate companies to advertise directly to those populations is important, but it also supports a negative stigma which is developing around the world of blockchain in general and is mostly the result of a few bad actors. Any decent project won’t be too heavily affected by this, however, it just requires more creative, inventive marketing focused on the core channels, community, and events in the space.

However, some companies are finding ways to circumnavigate the ad crackdown. One of the pioneers is a business named ZEN. Founded by Frank Erik Banks, ZEN is an app that enables teenagers to converse with one another and share short videos; it’s similar to Instagram, but in this case, the experience is monetized with ZENCoin cryptocurrency. Users earn these coins by building a social media audience on the platform, and then the company connects them to advertisers targeting their demographic.

According to Forbes:

Banks created an even further differentiator for the company; he decided to pre-sell ZEN’s cryptocurrency through an SEC-regulated equity crowdfunding campaign on StartEngine, a top SEC-compliant crowdfunding platform. ‘We chose this path to provide the broadest access and build the strongest investor community possible,’ he explains. ‘Our ethos of empowerment extends to every facet of this business including how we choose to raise money… We’ve already demonstrated our ability to overcome obstacles more challenging than an ad ban or an SEC oversight. This blockchain wave won’t be stopped, and we intend on being one of the premiere companies pushing things forward.

Banks’ secret was hosting his ICO through a platform approved by the Securities Exchange Commission. StartEngine is the first US platform to offer SEC-registered ICOs, and as the company advertises itself and its clients, it also publishes the StartEngine Index — a list of all of its campaigns and how successful they are, which can get the word out to investors and encourage them to participate.

You may have noticed that the consequences of this ad ban apply mostly to startups rather than established blockchain companies—so what else can new businesses exploring blockchain do? Stan Schroeder from Mashable spoke with Darren Marble, CEO of CrowdfundX. He says,

The only people who are disappointed in Twitter’s purported ban of crypto ads are the scammers and con artists. The big money raised in ICOs is relationship-based, and the most legitimate issuers are well connected to active crypto and blockchain funds. I think the ban on crypto advertising is actually positive change for the industry, and will help clean up a lot of the garbage.

Networking and relationship-building are what startups need to focus on. Not many people who fund or participate in ICOs have been directed from Facebook, anyway. Once projects are funded, blockchain companies should still leverage connections to advertise—there are many outlets available, and exciting blockchain opportunities will still excite the right people.

How will the ad ban affect crypto companies going forward? Do you think the ban is permanent or will Google, Facebook, and Twitter eventually relax their stance? Let us know in the comments below.


Images courtesy of Shutterstock, AdobeStock


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