ICO (Initial Coin Offerings) is an effective method to crowdfund capital for a startup by selling their tokens in exchange for the leading cryptocurrencies in the market such as Bitcoin or Ethereum.
ICO’s are promoted aggressively on social media and discussion forums. However, there have been challenges in organizing marketing campaigns in recent times owing to advertising restrictions on ICO’s imposed by the big technology giants such as Facebook, Twitter, and Google.
Hence, this has made ICO investors more cautious and ensure they make an investment in projects with a strong foundation and avoid becoming a victim of scams. Certain tactics like using the massive image of celebrities to promote projects have created more skepticism in the crypto community.
As more and more institutional investors enter the market, it is better that ICO rating agencies independently audit and review each ICO project being launched in the industry. This will ensure greater transparency in the marketing strategy being used by a firm for promoting its project.
Regulatory bodies such as the SEC (Securities and Exchange Commission) have kept a close watch on ICO’s of late. This can impact a company’s ability to raise capital from investors and disrupt their product development process.
In December 2017, the SEC forcibly shut down Munchee. Inc’’s ICO worth $15 million through a cease and desist order as the company actually released a security masquerading as a utility token. They managed to return the money to their 40 investors who dumped their coins into their scheme.
How Should ICO Marketing Be Done?
With so many changes taking place so fast, it is important to stay abreast of the latest trends, use cases and rulings passed by regulatory authorities. This will help a firm to effectively distinguish itself in a crowded and competitive market without impeding on any legal grey areas.
It is important to stay in the good eyes of investors all the time as bad marketing practices can change the value of the crypto assets drastically.
It is important to promise realistic returns based on utility and longevity than making outrageous claims and over-selling half-truth ideas.
Companies need to be transparent in their source of funding and must comply with both the regulators and members of the public.
A Few Indicators of a Bad ICO
The owners or founders promoting the project have a controversial past or do not possess appropriate qualifications relevant to the industry. This leads to more chances of an exit scam occurring where an adequate amount of capital will be raised and they will disappear with the funds of the investors. Check out their social media profiles in detail and do some background research before committing your money.
If the tokens are not properly integrated into the project’s ecosystem, it is an indication that the project will fail miserably. The best example is the BNB token promoted by the leading centralized crypto exchange, Binance which provides discounts for its users and allows payments to be made from other platforms. In case, the token does not possess any useful properties, the project will not survive in the long run in the market.
In case only flashy updates are made on social media without showing any technical progress, it is better to let go of that ICO. If no new concept is brought by the ICO project to the market, it will never be successful at all.
How to Identify a Few Blunders Made in ICO Marketing
Despite reading their whitepaper thoroughly, you are still unclear why they offer their product or service on the blockchain, it is better to skip that ICO for good.
If they do not have a proper roadmap for their product in the form of the change that they are aspiring to create in the existing or new ecosystem and if they lack a solid vision, it shows that it is likely to be a dubious ICO.
Lack of proper communication with the target audience indicates that the firm is not serious about the business realities. They should be active on social media platforms, the leading media outlets, and their team must create a constant buzz about their project.
Their tokenomics should have sound financial logic behind it as it determines the functioning of the value structure being offered. This will boost the utility and usage of their tokens. Their tokens should be used for buying products, exercising voting rights, access to ownership, access to profit-sharing, and connecting with other users on the platform. It will directly have an impact on your ROI. The terms and conditions regarding when the founders can cash out their tokens should be noted down carefully.
If there is no personal cap or a defined hard cap for investors, there is a high chance of dumping by a whale when a certain amount has been reached. This can lead to a collapse in the market demand for that token.
Not having a proper referral system indicates poor community management. The best referral system should distribute a bonus for inviting new users and an instant notification system for showing the details of who joined and when they joined via your referral.
Take into account all the above factors before investing in an ICO to ensure a successful trading experience.