Influencers play a key role in driving interest in, and engagement with, token sales but they must be approached with caution.
Influencer marketing is a big business. Networks such as LinkedIn, Facebook, Twitter and Instagram are powerful social selling platforms for individuals that have built an audience and then partner with brands to sell products to their followers.
The ICO space is no different, and influencers are often added to the board of token sale companies in return for tapping into their network to generate interest around, and investment in/participation with, the business undertaking the ICO.
Why ICO influencers are needed:
In this complex space, ICO influencers are valuable assets from which people and potential investors/participants can obtain information about the company going through the token sale, and the ICO process itself.
Traditionally, people would look to mainstream news and media outlets to understand markets and learn about the current state of play. In the crypto space, however, there is a lack of clear, concise and trustworthy information available.
Influencers bridge this gap by providing answers to complex technical problems that people may struggle to get their heads around. They may need to set up different wallets for tokens; some might not be easy to find on exchanges; there might be a fork in the code.
Influencers can answer all of these questions and more, and they are considered to be trusted experts by their followers.
Influencers also help to overcome advertising restrictions. Google, Facebook, Bing and YouTube all prohibit ads for ICOs. Given the reach and exposure of these platforms and networks, token sale companies must find a way to unlock them and influencers hold the key.
The problems with ICO influencers:
But herein lies the problem with influencers. Because they are so effective at engaging large groups of people and making them comfortable with crypto’s often intimidating and confusing world, they are a critical tool for ICO companies and they know it.
Most now offer their services to ICO companies in exchange for monetary compensation, often paid through a combination of cash and tokens. This is so prevalent that in some people’s minds, influencers are nothing more than keyboards for hire.
If an influencer is receiving compensation for endorsing a product then their advice can no longer be considered independent or honest. Rather than thought leaders passing on their knowledge to their community, influencers become an advertising tool that gives investors questionable value.
Influencers must also tread carefully when it comes to promoting a token that could be considered a security, as there are some regulatory consequences of doing so.
Section 5 of the Securities Act of 1993 requires full and fair disclosure of all material information for an investor to make an informed investment decision, including information about the issuer’s financial condition, management and many other details.
In the USA, for example, failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.
Influencers making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.
The SEC has said it will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.
What to look for in an influencer:
In the crypto world, where transparency is often lacking, it can be tough to work out which influencers are promoting a product/token sale based on their belief in its promise and which ones are waxing lyrical simply because they are being paid to do so.
For investors, participants and the wider public, having access to truly independent advisors of ICOs who provide genuine views and assessments on companies will prove to be vital in building trust in the space.
Some influencers understand the sector and the products and technologies being launched, and do provide an unbiased assessment and commentary. But too often their voices are drowned out by other less honest influencers.
Having ICO influencers that give genuine and unbiased opinions on projects is crucial for investors and participants, as well as the token sale companies themselves and the wider ICO sector.
Independent assessment gives a project a solid foundation to build a successful, long-term business that will give value to customers, investors and participants alike.