Jan 24, 2019
Kelley Weaver joins us today to talk about the factors that influenced Facebook, Google, Twitter, and other digital advertising giants to institute sweeping bans on cryptocurrency and ICO advertising on their platforms. We talk about how these crypto businesses are faring as a result of these restrictions (some blanket bans have been recently relaxed to varying degrees) and what impact they’ve had on the bottomline and survivability of these crypto businesses. We talk about the creative ways in which companies and ICOs are navigating these ad bans and getting their story out to potential customers and investors. And we look ahead to the long-term effects of the ad ban on the industry as a whole.
(Disclosure: Gem’s portfolio app
marketing was adversely affected by the ad ban.)
Topics Covered in this Conversation with Kelley Weaver:
– The ICO gold rush and resulting scams, frauds, and nefarious schemes
– The ad ban as a way to protect innocent retail investors
– Both sides of the ICO equation, the good and the bad
– How the ad ban will help investors but also hurt legitimate businesses
– Walking the fine balance between protecting investors and helping innovation
– Companies are turning to other ways of getting the word out
– Using the power of story-telling and platforms such as Telegram
– The rise of influence marketing to replace ad campaigns
– How the public relations industry is evolving to adapt to crypto and ICOs
– A pause in action and the breath of fresh air in the post-ICO frenzy is a welcome change for PR firms
– The importance of due diligence for PR and marketing firms in vetting ICOs from a liability perspective
– Moving the narrative from the hype of ICOs to the promise of blockchain technology and cryptocurrency
Questions and Comments?
Guest Contact Information
Chitra: Hello and welcome to Running With Unicorns. Your portal to the world of cryptocurrency. I'm Chitra Ragavan, Chief Strategy Officer at Gem. The topic of today's discussion is the crypto ad ban by Google, Facebook, Twitter, and other social media giants. My guest is Kelley Weaver. She's Founder and CEO of Melrose PR and host of the popular podcast, Crypto Token Talk.
Kelley: Thanks so much for having me, Chitra.
Chitra: It's great having you. As you know, in January when Facebook announced that it was going to ban cryptocurrency companies and ICOs from advertising it created quite a wave in the industry. And then Google followed to Twitter, Linkedin, now even have Reddit and MailChimp. They're all jumping on the bandwagon and saying that cryptocurrency and ICOs can't advertise on their social media platforms. So when Facebook said that these companies are engaged in misleading and deceptive promotional practices, what were they talking about?
Kelley: So I think when we... Last summer or in the past 18, 24 months, you've seen a huge shift in the way that capital is being raised via these ICO campaigns, which stands for Initial Coin Offering. I'm not sure how familiar your audience is. And there was sort of this gold rush mentality of I need to raise money for my project. And there was a lot of innovation happening. A lot of amazing ideas. World changing ideas for how to implement this novel blockchain technology for projects. But then there was also... It was a global rush to raise money and culturally I think... Not that any specific culture is to blame, but there was this mentality of, oh, it's so easy to raise money right now. I might as well throw together an idea, launch an ICO. It must be so easy to raise money. And there was a lot of money being raised for the sake of raising money as opposed to money being raised for the sake of fostering innovation. And maybe some... I think there was also a middle ground of some teams that maybe had a great idea and had the purest of intentions, but didn't have the expertise in terms of how to organize a team to make that happen once you raise in the millions of dollars. What do you do to make that... Bring that idea to life.
So in other words, the backstory was that there was all this money being raised and not necessarily all this innovation happening just yet. It was too early to tell. Now I think what happened unfortunately was we saw a variety of the different types of things that I talked about. So we had teams that had the purest of intentions that really were going to develop technology that could change the world and are still heads down building that. We had teams that had the purest of intentions that once the money was raised, weren't necessarily able to deliver on that. And then we had teams that only raised money to by a Lamborghini or for selfish reasons. And I do think that culturally one of the reasons that Americans were maybe spooked is that there is a sort of I would say an ethics bar or an expectation bar around fundraising in the US. If you raise money in Silicon Valley, for example, you have benchmarks for success. And in other countries, maybe that wasn't... Maybe it is okay to go and buy yourself a car when you raise all this money. But here, I feel like there's a moral standpoint where that wouldn't really fly. That wouldn't...
So unfortunately, because all of this was happening and there was so much of the latter of what I was talking about about money being raised maybe not for the right reasons that unfortunately a lot of uninformed excited enthusiasts who wanted to jump in and they were maybe hearing that their neighbor had put in $10 and now had $1000 worth of this cryptocurrency or this new coin that they had that people were uninformed and basically buying what they believed would... Something that would increase in value. And so I think ultimately Facebook made a call to protect the greater public from misleading information. Now, some of that was purely misintentioned. And some of that may not have been. Does that make sense? So I think there was a combination. But ultimately Facebook was trying to protect the mom and pop investors from making decisions from I suppose impulse buying when they didn't have all of the context. And because it was such a new wild west of fundraising.
Chitra: Yeah there was this Wall Street Journal investigation that showed that 20% of almost 1500 ICOs turned out to be scams. So there's definitely an ethical reason for companies like Facebook to say let's pause for a minute and see are we serving the public good when we do that. But on the other hand, there are people who say that cryptocurrency is a very revolutionary kind of technology. blockchain technology is gonna change the world. And when you come down hard in this way, you are essentially chilling innovation. You're having a chilling effect on innovation. So who's right?
Kelley: Yeah. No, it's a great question. And I do see both sides because ultimately there are companies who are building the future of how we're gonna transmit financial assets, and how we're going to transact with each other in the future, and how we're gonna store information. And that shouldn't be stifled. And unfortunately, by Facebook putting the ban on ads relating to cryptocurrency and blockchain, not only are they preventing the potential ICO scammers who are saying, "Buy this. 10X returns." They're also potentially preventing companies who are very legitimate. Like your company, Gem, for example. From being able to run a legitimate campaign that has nothing to do with raising money. It has much more so to do with engaging a community and generating a user base who might be actually interested in what you're offering.
Chitra: And launching a product.
Kelley: Exactly. So it's tricky because yes, the ban was very wide spread. And so it was ultimately... It affected both those who were out for the good and the negative. But I think at the time when this ban came down in January, it was sort of the, I would say, the wave was cresting at the height of the just exhaust... Us as a service provider, were just simply exhausted with the amount of noise that was happening that didn't really have merit. So ultimately, I think that this was maybe a positive step in the right direction. But was it the right long term? Are there better ways? Potentially could they look at maybe you can't sell your investment but maybe you can talk about your product or your technology. Or maybe there's some middle ground where it's not…
Chitra: Mm-hmm (affirmative). Well as you know in July, Facebook then said, "Okay, we're going to now partially reverse what we did and we're going to allow a limited set of companies, legitimate companies, if we deem them to be legitimate, to be able to advertise." So that raised another fire storm because then people were saying, "Well, they realized there's so much money to be made so that's why they're now allowing companies to advertise. But I think if you kind of step back from kind of being this close to the debate, you kind of see this David versus Goliath kind of philosophical battle between the centralized social media giants like Facebook and Google. And then you have kind of the decentralized new movement. The crypto innovators. The scrappy little startups. And so you kind of see this philosophical battle too and the question is who's gonna win it?
Kelley: I'm not sure who's gonna win. But I ultimately think that Facebook is doing... Is making decisions that they believe are in the best interest of everybody at play here. And I think that they're not trying to. They maybe recognize that they might be stifling innovation, but they're not trying to so that's... It is tricky. As a centralized entity, they're going to have to make decisions about what they can and cannot have on the platform. Can they have terrorism, for example, or things like that. They have to make some calls either way. Right or wrong. But ultimately I think that as the industry matures ... We've seen a lot of maturity happen. Even since January when that call was initially made. There's a much greater awareness from companies that are even performing ICOs or fundraising that they can't just sell securities to the greater general public. Many companies are offering security offerings only to accredited investors. We weren't seeing that last fall, for example. So the industry is maturing. And as such, my hope is that company centralized institutions that are sort of calling the shots here are going to say, "Okay, as the industry matures, we believe in these companies that are really trying to innovate here and we're going to support them," is my hope.
Chitra: Yeah. So I was just gonna add. It's a perfect segue to looking at how this is all going to evolve. Will Google, for instance, look at what Facebook did and say, "Yeah, maybe as things... As the dust settles, we can maybe relax our rules a little bit." And there are a lot of social media platforms that are saying, "We don't believe in an ad ban. And we are going to support advertising." So where do you see all of this headed?
Kelley: It's interesting because as a public relations professional and marketing, we don't do as much on the advertising side. But I do remember ads that I was being targeted with, for example, last fall. And it would be like buy this ICO, 10X returns. And that needed to end. So they had to start somewhere. So I support the big... Them for making a move. But how companies will innovate around this, I think that companies are having to turn to other methods to engage their audience as opposed to just advertising. So while that may pose a challenge, it also provides opportunities for them to get scrappy, like you said. Scrappy startups are using other methods. They're harnessing the power of communities on platforms like Telegram. They're utilizing Twitter to deliver messages. They're-
Chitra: And influencer marketing. Or turning to companies like yours.
Kelley: Yes. Yes.
Chitra: To get the message out in other ways.
Kelley: Yeah, reaching out to podcasters and influencers in the space. They're utilizing Medium and blogs. Blog posts to generate thought leadership. And LinkedIn for really putting out great content. And they're not sitting around waiting for companies like Facebook to reverse their policies. They're moving forward and trying to tell their stories using other methods. Which I think is really clever and smart. And ultimately, I think what companies... At least what we educate our clients about is sometimes they come to us and they say, "How do I market my offering because I'm gonna be a security token offering," for example. And we say, "It's really not about what you're offering to the market. It's about..." Well, in terms of the investment standpoint, we really like to talk about the power of the technology that you're going to be delivering to market. The power of the problem that you're solving here. A lot of times educating about the issue at hand initially.
So it's really about the greater story about what you're bringing to market as opposed to how you're selling the investment. Because ultimately you want to generate awareness whether or not the person that you're marketing to is going to be a potential investor or not. So it's much more about storytelling and generating those great angles than it is about pedaling your token. And so that doesn't really... Ultimately doesn't really... Ultimately the storyline is going to be similar throughout. Does that make sense?
Chitra: Yeah. And I guess the market has to mature too. The industry has to mature in terms of how it's delivering these messages and how to get it across to the right communities.
The other question is when you have a marketing ban like this, an advertising ban, is the average Joe investor, Joanne investor out there actually protected or are they actually ill served by not being able to get access to information or not being able to be marketed to? Where do you come down on that?
Kelley: My feeling is ultimately, especially right now that they are being protected. What I was seeing over the holidays, for example, and in the fall was a lot of people just wanting to jump in. How do I get my hands on some bitcoin? What are these ICOs? I heard my neighbor made 10X returns, how do I get in on that? And when you have that kind of crowd mentality, that's not the type of people who are in it for the right reasons, who are seeing it as a long-term investment, who are taking the time to educate themselves on what this is. So I do think that for the time being, they are definitely being protected. Because I do think it's a dangerous and a slippery slope for them to have access to marketing information that might be misleading.
Chitra: And you've seen this industry evolve over the last few years in terms of the blockchain industry, cryptocurrency industry. And you've been right in the middle of it in terms of being able to market, provide a help to companies. How have you seen sort of your own business evolve, and the work that you're doing evolve, and getting that story out in the right way?
Kelley: So it's interesting. We've also seen a shift with reporter coverage. So I think reporters are a lot more skeptical, rightfully so. They want to protect their audience from making irrational investments or from misleading information. So they really have to do their own due diligence on these projects too. So as such, the stories that they're writing are much more thought through. They're doing a lot more background research to make sure that this is something that they want to... That they feel... Excuse me. That they feel like it's in the greater public's best interest to put out there. And so-
Chitra: Because you definitely saw a lot of companies make a tremendous amount of money based on coverage. The initial kind of height filled coverage in late last fall and late summer and fall.
Kelley: Right. So ultimately it's a lot harder to get reporters' attention these days. So as that relates to our business, that is our business. So we still have amazing relationships with the press, but we're really having to prove our clients that much more. And one of the ways that we're not sitting around and waiting for the press to write about our clients. But really saying to our clients, "You have to be in the driver's seat here and tell your story and really put out the message that you want to hear in the press." So we're really doing a lot more thought leadership, content development. So Medium is a great place to put out content. And we're seeing our clients using it more and more and it's syndicated to places like Entrepreneur, and Forbes, and different things. Quora is another platform we use. Steemit, which is specific to the crypto community, which is a blockchain backed Medium type of platform. So we're seeing our clients understand that and really realizing that we can't just wait for earned media. We have to put out our own media.
Chitra: And I think the other change also is when... Last year when you were right in the thick of it with all of the ICO frenzy that was going on and it just seemed like there was all of this. You had to really learn how to market these companies while protecting yourself too. Because there was so much that was unknown. And there was so much hype, and so much frenzy, and so much money. And you really had to kind of evaluate things above and beyond. And now with the SEC weighing in, it just seems like... With companies getting into legal trouble, it seems like the crisis management piece is also something that you have to handle.
Kelley: It's been a bit of a breathe of fresh air recently because it's been less of a gold rush. But in the fall particularly, we were being hit up left and right. Which was a wonderful... From a business perspective, a great place to be in. But also a challenging place to be in because we had to be very selective. And I'll be the first to admit that we made some wrong decisions with the clients that we ended up working with. And oftentimes, I think about five times, we had to walk away. And that was really challenging because ultimately when we were working with them, we uncovered that maybe they weren't doing this for the right reasons or didn't have the proper expectations around things. Or didn't have the infrastructure to be able to work with us, let alone develop the technology that they're promising to the world. So we had to quickly put in due diligence framework as a service provider, which is a bizarre and wonderful place to be in. But bizarre. It's almost like the roles are reversed where you're doing diligence on the clients that are inbound as opposed to them... So it's almost like they're pitching to us as opposed to we're pitching to them because we found ourselves in a unique position where we were one of the only firms in the world that had experience within this specific industry and successfully running campaigns for people.
So now it's been nice as the industry has matured slightly, we definitely have seen that it's less of a gold rush. There's more thoughtful teams coming to the table. We're having to be less picky and selective because we're not seeing as much of the riff raff. So I do feel like things are shaking themselves out. But it was an interesting time where we had to also protect our own reputation with the press because ultimately our whole business is based on relationships with the media. And so if we're pitching them something that turns out to be a scam, that's not good for our reputation, right? The next time we try to pitch them something, they're like, "Oh, gosh. Melrose is trying to pitch me that other thing and that didn't go so well." So it really was an interesting time. I do feel like that time luckily has subsided where at least we're only getting things that seem to be more reputable.
But I mean, we have a funny example that we talk about in our office. Someone hit us up because they wanted to do an ICO around shrimp farming. We're like, "Okay, does blockchain really need to be related to the shrimp farming specifically industry?" And that was sort of representative of the type of wild requests that we were getting. It was like any idea would fly and just slap ICO on it and it seemed like a great idea. And so we're not gonna be pedaling shrimp farming solutions any time soon.
Chitra: Are there any other examples like that?
Kelley: I mean, there were just some silly examples of things that nobody would want in the real world, let alone add a token to it and then make people have to buy ether on a Coinbase to exchange it for this new token. It's like why don't we just go down to step one which is do people even want the thing that you're bringing to market before you try to make them jump through hoops to buy Monopoly money to make that happen.
Chitra: So now do you have a standard due diligence process to evaluate these companies? I know there are fewer of them probably, but by no means, has the ICO trend... I mean, it's slower now, but I think companies-
Kelley: It's different.
Chitra: It's different. Not slower. Companies are still raising, but in a different way. So how do you adapt to that?
Kelley: Yeah, it's been a lot quicker because we're able to recognize things a lot faster. I think from personal experience, with what's worked for us. We're also having to be really selective because ultimately even if it is a great team that has a great potential product, are they going to be able to deliver that? Is it something where we think that we can generate stories? Because it is earned media that we're dealing with so we really need to make sure that the reporter context that we have, we have to keep them in mind as we take on new clients. Are they going to be interested in this? Because if they aren't, then we can create content all day and we can create our own stories, but we can't necessarily guarantee earned media coverage.
So I think it's become quicker for us because we're more intuitively knowing whether there's good stories there. Ultimately the leads that are coming our way that we pick up on right away are usually coming from... We're pretty connected within the industry so it's coming from sources that we know and trust. And so ultimately there's a few steps. Especially for ICO type related clients. And we do handle a lot of blockchain infrastructure clients too. So it's not just ICOs. But as it relates to ICOs, usually they're working with a token advisory company or someone to help structure their offering a couple months before they come to us. And so if they've had a good experience working with them and it's someone that we trust, it's easier for us to say this is gonna be an interesting project that we will like to work with.
Does that make sense? So I think it's become sort of quicker. But we do look for who is the team? Are they going to be able to deliver on this idea that they're promising? Are they going to... Do they have any partnership announcements with big companies that are recognizable that the press might like? How likely to succeed do we think they're going to be? Because ultimately if there are big fundraising events, that is news to the media. Which is sort of a slippery slope I feel like. But the media does say that if they raise a big amount, that can be news. Do they have a minimum viable product or a prototype that works that we can have the press play around with to see that this works in principle? Is the problem that they're solving a real problem? Can we talk about that in thought leadership type pieces? So those are the things that we look for.
Chitra: And it seems like those are the exact sets of questions that investors should be looking at and also companies like Facebook and Google when they're trying to evaluate these companies to see whether or not they should allow them to advertise and to market their products. The basic baseline of questions.
Kelley: I totally agree. I sympathize for the bigger companies like Facebook because how do you do that at scale? It's something where we're a small company and we're still... We've come up with our own systems. But how do you... There has to be some framework for what does and what doesn't. And to make it fair for everybody.
Chitra: And ultimately there's so much money at stake. You wonder if that's going to make a difference in terms of Facebook, and Google, and other companies saying, "Yes, there are issues, but we can't say no to this."
Kelley: Well, I think there's so many companies that are doing... That... I don't want blockchain. We're such big believers in this technology. And I don't want ultimately... Yes, we're in this cycle of heads down, let's build. We're in this skeptical press cycle where the articles that are like bitcoin's going to zero are getting a lot more clicks, let's say, than the articles about the innovation and the 20 year old who's gonna change the world. So it's tricky because I would hate to see this really slow down the innovation and slow down the interest. Because we've seen... It's not dead. But we've seen less interest in people coming to meetups and things like that because there's just less talk about it. I think the wind is out of people's sales a little bit. They thought that they... I suppose those who thought that they could make a quick buck have kind of realized that maybe that's not the case.
And so there's just a sort of an overall fatigue in the market. And so I'm hoping that there's some great innovation of the actual technology and some actual use cases that come soon that are talked about because I think that will re-energize everybody for the right reasons. And I think ultimately let's move away from the fundraising component. You know what I mean? Yes, we need to raise money to be able to put these things together. But if we can turn the narrative away from that and the consciousness away from how much money can I make to how is this gonna change how I handle my medical records of the future?
Chitra: Yeah, what value am I gonna provide?
Kelley: Right. Then we'll be in the right direction. That's my hope is that this doesn't deter companies that are creating solutions for enterprise and that are really gonna help consumers. But maybe not for five or ten years, but they're really going to help. My hope is that those stories can still be told during this time.
Chitra: And those are the stories you're telling more of, I think.
Kelley: Yeah, we're really looking for those stories because that's what's exciting about this technology is really how it can change people's lives. In third world countries, here in America, everywhere. How can this technology really change the way that we do business, the way that we communicate, the way that we view our data, the way that we have access to things. Those are the exciting stories and that's what gets me fired up about the technology. Not about the money that can be made. Although that can be fun as well, of course, but it's only a small piece.
Chitra: Great. Any closing thoughts?
Kelley: I think ultimately it's been interesting. Companies have had to be really creative in the ways that they've told their stories. And I think in a way, that's a really good thing. They've really had to prove themselves. And that's ultimately a net positive for everyone. So I feel like the stories that you're hearing now are probably more... Hopefully more legitimate. And that we'll begin to see some real innovation announcements. I'd love to see some announcements soon about scale of the actual building of blockchain. I think that that has been somewhat tiring too for developers is how do we really scale this? It's been trickier than I think people thought. And it's taken longer than people have thought. It's still gonna take a long time, but it's going to happen. We're big believers in that. And so have to be patient but realize that... Stay at it. And don't get discouraged because this is really an exciting time for this technology and there are so many opportunities for so many people to get involved at various different levels. Whether it's to work with the technology, apply your marketing skills, or your legal skills, or whatever to blockchain. Or to get involved with the community.
Chitra: Great. And where can someone learn about you, and the work you're doing at Melrose, and your podcast?
Kelley: Sure. So Crypto Token Talk is the name of the podcast. It's on iTunes. And our website's CryptoTokenTalk.io. Melrose is MelrosePR.com. And you can reach me, I'm on Twitter @CryptoKelley. I also have my own website at KelleyWeaver.com, as well.
Chitra: Great. Thanks so much, Kelley, it's always great to have you on the show.
Kelley: Thank you so much.
Chitra: That's all for now. Join us again soon for another edition of Running With Unicorns. Until then, enjoy your crypto journey, unicorns.