The cryptocurrency space has become an industry worth many billions of dollars, it wasn’t too long ago that Bitcoin, many of the altcoins, and a great deal of the cryptocurrency-related platforms that were developed around them were first created–often without much (or any) startup capital or expertise, and often without more than a handful of people working on a project out of a basement.
In order to make these projects successful, the earliest movers in the cryptocurrency space were essentially forced to survive on nothing but their wits: creativity was king.
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These days, there’s a lot more capital within the space. However, the spirit of entrepreneurship, creativity, and community still remains within the industry.
This spirit isn’t just limited to the technical side of things. The cryptocurrency industry has also benefitted heavily from creative and unconventional marketing strategies, including performance-based marketing.
Performance-based marketing is a type of digital advertising that is not paid for with a flat fee but is instead paid for with a price that varies depending on how the ad performs. The cost of an ad could be determined by factors such as how often it is viewed or clicked, how many sales it makes, or how many leads it generates.
Given the ways that the industry has evolved, how effective is this method of advertising? And what are the ethics and best practices for using affiliate marketing to promote financial products and services?
“Affiliate marketers who are dedicated to a specific arena, like crypto, usually have unique methods that a ‘normal’ marketer wouldn’t conceive of.”
Perhaps the most common type of performance-based marketing in the cryptocurrency industry is affiliate marketing. This is when companies pay web content creators who promote a certain product or platform each time their website, blog, or video leads to a sale or lead on the affiliate website.
“In the past, the cryptocurrency space was occupied mainly by developers and mathematicians that didn’t have the know-how to drive traffic to their projects. Those who used the help of affiliate marketers could easily bridge that gap,” said Ofir Beigel, owner of 99Bitcoins.com, to Finance Magnates. 99Bitcoins is a popular informational site for the cryptocurrency industry.
Beigel said that in spite of the fact that “the industry has changed and many companies already employ full-time marketers on their team,” these companies can still benefit heavily from having an affiliate program: “affiliate marketers who are dedicated to a specific arena, like crypto, usually have unique methods that a ‘normal’ marketer wouldn’t conceive of.”
Akshay Makadiya, a digital marketing consultant and crypto journalist based out of India, explained the concept to Finance Magnates this way: “affiliate marketing is another lucrative way to monetize the crypto website. Website owners partner with trading websites like CEX, Binance, Changelly, and a lot more website offers an affiliation option to earn money from the traffic.”
“Whenever a user makes a purchase from the link on the website/blog, the owner gets a specific percentage of the fees as revenue.”
”You can make hundreds of people work to promote your product and services while paying them on a ‘success-only’ basis.”
Who exactly is eligible to use affiliate marketing tactics in the crypto space? Yuval Halevi, traveler-turned-entrepreneur and co-founder of GuerrillaBuzz, told Finance Magnates that “if your company runs a marketing campaign, you can also use third-party publishers (affiliate marketers) to drive traffic or leads to your company landing page/product/services, et cetera.”
“To better understand the potential of affiliate marketing, just ask yourself: how many people are there on your marketing team or department? Now think about the possibility that in a successful affiliate marketing campaign, you can make hundreds of people work to promote your product and services while paying them on a ‘success-only’ basis.”
Therefore, this kind of marketing can be particularly useful for companies that have relatively smaller amounts of capital to spend on advertising. Sean Wingad, affiliate marketing expert and CEO of Fudge Labs, told Finance Magnates that this kind of cost-per-acquisition (CPA) model “allows for rapid growth with little financial commitment.’”
How effective is affiliate marketing in the crypto industry?
How common is affiliate marketing within the cryptocurrency space? “if you don’t already have an active affiliate program, you’re already behind in the game,” said Ofir Beigel to Finance Magnates.
Perhaps the most common use of affiliate marketing in the cryptocurrency space at the present moment is by exchanges who have used “referral programs” as a method to onboard more users as cryptocurrency trading volumes have fallen across the industry.
“Coinbase and Binance are two companies who’ve done a very effective job of affiliate marketing,” explained John Frigo, SEO Lead at My Supplement Store, to Finance Magnates. “Binance grew to be the largest cryptocurrency exchange almost exclusively because of their affiliate program, which gives the affiliate 20% to 40% of the trading fees of everyone they referred.”
Indeed, Binance tweeted in September that account holders who successfully onboarded other users could earn up to 40 percent commission.
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— Binance (@binance) September 20, 2019
The exchange also has a referral leader board, the “Binance Referral Rich List,” which shows its top performer has already earned over roughly 1,150 BTC in commissions (worth around $9.8 million at press time.)
Binance is definitely not the only exchange that offers affiliates a high premium for onboarding their “friends”–KuCoin’s affiliate program offers 50 percent of each referral’s trading fees to affiliates; BitMex told Bloomberg that its success “has been driven by organic growth, through word of mouth and our affiliate program,” which offers affiliates a percentage of commissions “depend[ing] on the Bitcoin turnover of the account’s referrals.”
The ethics of affiliate marketing in crypto
However, not everyone is a fan of the way that affiliate marketing is used within the cryptocurrency space.
Lex Sokolin, global financial technology co-head at ConsenSys, told Bloomberg that exchanges which use affiliate marketing are most often “motivating trading behavior and not just account opening behavior,” which he finds to be ethically questionable: “by getting a percentage, the referrer wants their friends not just to save, but to trade and to churn. This is why I think it is a poor incentive model and starts to approach multi-level-marketing.”
And of course, cryptocurrency’s association with multi-level marketing (MLM) schemes is still a major pain point for the industry in terms of PR. BitConnect, Bitcoin Funding Team, the My7Network, and other large-scale MLM schemes have cost the industry much in terms of its reputation.
This is why Kyle Asman, partner at BX3 Capital, told Finance Magnates that he “[doesn’t] believe that affiliate marketing has any role in financial products or services.”
“Affiliate marketing never tends to work out well when you are dealing with financial products. It is almost also associated with being some sort of scam or scheme,” he said, also pointing to the myriad fraudulent and unsubstantive ICOs that were marketed with affiliate programs and other performance-based marketing strategies in 2017.
”Most affiliate marketing programs are legit, the problem is that the scams get all the attention.”
However, Ofir Beigel said that most of the affiliate programs that he has encountered within the cryptocurrency space are above-board: “most of the affiliate marketing programs [in the cryptocurrency industry] are legit,” he said. “The problem is that the scams get all the attention, and therefore people think that all affiliate programs are scams.”
Still, Beigel admits that “there are a lot of scams out there as well,” but in his opinion, “they are easily spotted.”
What does a legitimate program look like? “A good affiliate program usually combines a good legitimate product with a win-win-win scenario for both the company, the user, and the affiliate. A good example is Coinbase’s affiliate program, where if I bring a new customer on board they get $10 free in Bitcoin, the company gets a new user, and I get an affiliate commission.”
High-quality, ethical affiliates are key
Companies who decide to use affiliate marketing must also be conscientious about exactly who is promoting their product or service. “The power of good affiliates (also known as ‘super affiliates’) is undeniable in bringing quality traffic to your business,” explained Ofir Beigel to Finance Magnates.
How can companies attract these “super affiliates”? Beigel said that to begin with, companies who “don’t have the time to set up your own affiliate program can use third-party services to set it up and manage it.” Beyond that, a company should make sure that rewards for marketers “attractive enough” and that platforms “are not losing money” on their programs.
“If those two points are set up correctly, you should easily be able to attract high-quality affiliates,” he said.
The importance of attracting these “high-quality affiliates” can not be underestimated–just as good affiliates can boost a company’s reputation and onboard new users, so too can a poor-quality affiliate bring negative associations to a brand.
”Affiliates usually do whatever they please.”
John Frigo explained to Finance Magnates that while “a good affiliate marketer will only promote products and service which they have personally used or tried and ones which they believe in. However, “for many, it just turns into a money grab and [affiliates will] promote anything to make a buck,” he said, adding that “this is what we saw with BitConnect and characters like CryptoNick, CryptoChick, Ryan Hildreth, and others.”
The risk here, of course, is that a company could have an affiliate who has promoted a number of scams (i.e., BitConnect) also promoting their product–an association that may not be very flattering.
Indeed, “affiliates usually do whatever they please,” Beigel said. However, there are methods of keeping affiliate marketers within certain ethical standards: “it’s important to establish certain guidelines for your affiliates, so they don’t ‘contaminate’ your brand,” he said.
Additionally, “if a certain affiliate crosses the line of terms that he signed up for, you can always withhold his commission as a sort of punishment.” However, “having said that, from my experience, most successful affiliates are actually pretty ethical,” Beigel added.
For ethical affiliate marketers that can do the job well, the business can be very rewarding: “anyone can become an affiliate marketer; however, it’s not for everyone,” Beigel explained.
“Becoming a good affiliate marketer, especially in a competitive space like crypto, requires a lot of dedication, hard work, and a specific ‘X-factor’ to stand out above the competition.”
“f you do manage to become successful, it’s indeed a very profitable occupation to have. One that allows for a very attractive work-life balance, with a lot of challenges and interest.”