Crypto downturn: How big is the impact on ad budgets?
Industry observers say the crypto sector’s bearish run has led to the sector adopting a cautious approach towards advertising spends
From actors Ranveer Singh and Ayushmann Khurrana to cricketer Dinesh Kartik, most crypto platforms have been roping in celebrities for their endorsements.
Therefore, it is no surprise that India has got close to 20 million crypto investors and investment in the sector touched $6.6 billion in May 2021 from $923 million in April 2020, as per a Bloomberg report.
However, all’s not well in the crypto market now with investors having to bear significant losses. Crypto tracking firm CoinMarketCap data shows that Bitcoin, called BTC, has fallen by 70% since reaching a record price.
It is being speculated that Bitcoin could stay below its all-time high of nearly $69,000 for the next two years. Other cryptocurrency prices have also suffered badly of late.
To make things further difficult for stakeholders, RBI Governor Shaktikanta Das recently said, “Cryptocurrencies are a clear danger. Anything that derives value based on make-believe, without any underlying, is just speculation.”
Industry observers say that a 30% tax on crypto trading income, absence of a law to regulate the market and overall market downturn have led to VC’s tightening their purse strings.
How has this impacted the ad spends of the industry?
To bring in a little context, there are more than 14,000 crypto coins in existence and several exchanges as well. The sector spends an estimated Rs 150-180 crore on advertising and much of the ad-spend is skewed towards digital and OTT platforms.
“Since crypto firms keep their funds in virtual currency form, their treasury has got lighter due to the slowdown. We are taking a cautious approach towards fresh hiring and advertising spends,” an industry insider said.
A CoinSwitch spokesperson also confirmed that crypto companies were tightening their ad budgets. "The current bear run has impacted equities, bonds, and other investment classes. Cryptos are no different. Volumes in the Indian crypto market have been following global trends. Whenever markets go through a bear phase, as is the case currently, belts need to be tightened. It is the same with the crypto sector. Companies will reassess budgets and spending, and that is quite apparent now."
Incidentally, crypto exchanges were earlier pumping a majority of their ad spends into big-ticket sports properties like IPL and the Cricket World Cup. But most stayed away from IPL 2022.
“Imposition of tax, speculations of a complete ban on the private virtual currency and talks of the RBI’s own virtual currency created a lot of negativity. As a result, crypto markets crashed and exchanges decided to remain away from IPL 2022,” an industry insider explained.
According to Preetham Venkky, President, 22feet Tribal Worldwide & Chief Digital Officer, DDB Mudra Group, crypto was just trying to establish itself as an alternative investment asset and this crash of bitcoin and other cryptocurrencies has raised serious legitimacy and questions about treating it as one.
“With this downturn, brand advertising with TV spends will come down while some of the spends will be directed specifically to performance marketing on digital. Most start-ups and companies in the space will try to weather the storm by cohort targeting performance media on digital. Don’t expect IPL sponsorships anytime soon,” Venkky noted.
It has been a while since crypto brands have paused their advertising owing to uncertain market conditions, says Shradha Agarwal, CEO and CO-Founder of Grapes.
“Overall, the crypto category has witnessed a gradual decline due to the recent guidelines issued by ad regulators. Brands are also cautious about spending a hefty amount on marketing, as nobody wants to be in a situation that backfires. Such factors have put constraints on ad spending. However, the disruption seems temporary and the sector will bounce back with time,” Agarwal noted.
Domino Effect on NFTs
Venkky opines that since all allied asset classes to crypto like NFT are pegged to cryptocurrencies there will be a domino effect in the NFT markets as well.
What’s important to note though, is that Web 3 is having its 2000 dot com bubble moment. Expect the technology to continue to change the future with a new set of start-ups who have learnt from the mistakes of the pioneers, Venkky noted.
The CoinSwitch spokesperson shared that the exchange has decided to continue making people aware of the virtual assets. “It is a very good time to effectively use various communication channels to enhance awareness and educate customers/users on cryptos so that they are better informed of the choices they make. Do-Your-Own-Research (DYOR) has been central to CoinSwitch's advertising and communications, and we will continue to do so.”
Agarwal agrees that the right knowledge must be disseminated to make the consumers aware about the sector.
“Crypto brands should revise their strategies for a better mass appeal. They should take this as an opportunity to come up with responsible marketing and educate the masses about cryptocurrency. There should be a thorough scanning of the content to avoid any over-promising and misleading ads. Making transparent ads with appropriate disclaimers is the way ahead for cryptocurrency,” Agarwal added.
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