107158553 1669750145714 Gettyimages 1245208592 063 IRNUSA20221129 Ag 7141   063   Iran And United States   FIFA World Cup Qatar 2022   Group B

Crypto crash may leave ad-supported businesses with hole in budget

Sergino Dest of USA and Milad Mohammadi of Iran fight for the ball during the FIFA World Cup Qatar 2022 Group B match between IR Iran and USA at Al Thumama Stadium on November 29, 2022 in Doha, Qatar.

Matthew Ciambelli | Defodi Images | Getty Images

There were Super Bowl commercials, arena sponsorships and celebrity endorsements. TV commercials landed during the nightly news. Money poured in Facebook, Twitter and TikTok.

Crypto companies spent anywhere and everywhere.

Through October 2022, crypto-related brands shelled out $223 million on advertising in the US, up 150% from $89 million for all of last year, according to MediaRadar. Few have been as aggressive as Crypto.com, which in late 2021 said it had committed $100 million to an ad campaign that will feature Matt Damon and run across 20 countries. The company is an official sponsor of the 2022 World Cup taking place in Qatar.

What the crypto industry gives, it can take away.

The stunning collapse this month of cryptocurrency exchange FTX and founder Sam Bankman-Fried’s broader empire spells further trouble for ad-supported media companies that have come to see crypto as a new growth engine with money to burn. And FTX is far from the only problem, as the contamination has been spreading for months.

Coin base lost more than 80% of its value and the company cut 18% of its staff in June, when CEO Brian Armstrong admitted the business had grown too fast and stressed “the need to manage expenses.” Crypto.com reportedly cut 40% of its workforce, reduced eToro by 10% and canceled a planned merger with a special purpose acquisition company in July, and BlockFi just declared bankruptcy.

“Crypto winter is a crypto advertising winter,” said Grant Harbin, CEO of performance marketing firm Headlight, which has worked with companies in the industry. “There’s probably very little thought about the scale of advertising budgets right now.”

In the third quarter of this year, top crypto advertisers spent just $35 million on advertising, according to MediaRadar, an 80% drop from the first quarter, given a big boost from the nation’s biggest single sporting event – the Super Bowl.

The pullback in spending, which is expected to increase given the industry’s growing turmoil, is notable as ad-based companies face broader challenges from rising inflation and fears of a recession. But while crypto has represented a promising area for growth, it still makes up a small portion of the overall advertising market.

Companies are expected to spend nearly $89 billion on TV advertising this year, across linear programming and connected devices, and nearly $250 billion on digital advertising, according to Insider Intelligence.

Blockchain holds a lot of promise, but most of it is speculative, says Mr.  FDIC Chairman Sheila Bair

Facebook (including Instagram), Snap, Twitter and TikTok combined are expected to pull in $57.1 million in advertising from crypto exchanges this year, according to SensorTower. That’s about even with 2021 numbers, although almost all of the spending last year was on Facebook and Instagram.

In AlphabetIn its third-quarter earnings call last month, the company blamed a slowdown in revenue growth in part on reduced ad spending by sipto companies and other financial firms. Google’s sales growth was the slowest for any period since 2013, except for one quarter during the Covid pandemic.

The spending roller coaster

SensorTower data shows a big spike in crypto ad spending on digital media around October and November of last year as prices peaked, and a sharp drop after the first quarter of this year. In April, the crypto sales began in earnest, with bitcoin and ether each lose more than half their value over the next three months.

The Super Bowl created a spending spree that the industry may never see again. A 30-second spot during the NFL’s grand finale in February cost an average of $6.5 million, and crypto was a big theme.

Coinbase, Crypto.com, eToro and FTX spent a combined $54 million on Super Bowl ads, according to MediaRadar. Coinbase aired a 60-second ad showing a reflective QR code that, once scanned, led to a promotion offering $15 worth of free bitcoin to new users. FTX signed up Larry David for an ad, urging viewers not to miss out on crypto and declaring NFTs “the next big thing.” A version of “Fly Me to the Moon” played during eToro’s commercial.

Promotional costs were not limited to airtime.

In 2021, Crypto.com paid $700 million to put its name on the Los Angeles Lakers’ home for the next 20 years. FTX has signed a 19-year deal worth $135 million with the NBA’s Miami Heat for naming rights to the team’s arena, along with the NBA’s Golden State Warriors and its logo on uniforms worn by Major League Baseball umpires , placed.

Miami-Dade County is now trying to get the FTX scrubbed from the arena. Miami has become an important hub for the crypto industry, and in September FTX moved its US headquarters there from Chicago. The company spread his wings in town, is sponsoring a three-day crypto weekend in May on South Beach called “FTX Off the Grid.”

Jordan Levy, a venture capitalist in Miami, said that while other crypto companies were advertising in the city, FTX was on a different level.

“None of them have as significant a presence in Miami as Bankman-Fried and FTX,” said the managing partner of SBNY, formerly SoftBank New York. “They tried to do some guerrilla marketing things that put them at the top of the food chain from a perception perspective.”

The money that FTX spent now is presumably going to zero. According to SensorTower, the company’s online ad spending quadrupled this year to $13.3 million, with about half of that coming in the first quarter.

Crypto.com’s online ad spending fell from about $16.2 million in the first quarter to $1.6 million in the third, SensorTower said. And Gemini, the exchange owned by the Winklevoss twins, cut spending from $8.5 million in the first quarter to $2,500 in the third.

Coinbase, the only major exchange publicly traded in the US, said in its earnings report this month that its sales and marketing expenses fell 46% in the third quarter from the previous period to $76 million. The company attributed the decrease to “our decision to reduce performance marketing, due to lower efficiency in this spend related to softer crypto market conditions as well as savings related to our staff reduction.”

Coinbase did not respond to a request for comment.

A Crypto.com spokesperson said via email that the company’s $100 million campaign ran from October 2021 to February 2022. Since then, we have run additional advertising as part of our marketing strategy, and we continue to focus on our global brand and sports partnerships,” the spokesperson said. This includes sponsorship of the World Cup.

Brad Michelson, eToro’s U.S. chief marketing officer, said the Israel-based investment platform will “actively adjust spending based on performance,” and plans to continue building its brand in the U.S.

“It’s no secret that the markets are in a pullback, and our budgets are being reallocated accordingly,” Michelson said in a statement to CNBC.

The crypto market has suffered downturns in the past, only to bounce back and attract even greater amounts of cash and new entrants.

Joseph Panzarella, director of digital media and marketing at Yeshiva University’s Katz School of Science and Health, said that even if the market starts to recover, the high-profile scandals of 2022 will force companies to take a more serious approach when making their offerings. promote.

“What they came up with was like, ‘Hey, we’re going to stick it to the Fed,'” Panzarella said, referring to the industry’s focus on decentralization and its ability to operate without the heavy hand of government. “I think they should eat a crow and say something like: ‘Hey, we are now we are now [open to] is regulated.'”

LOOK: FTX’s bankruptcy puts more pressure on the advertising market

FTX's bankruptcy puts more pressure on the advertising market

Related Posts