As Crypto.com stamped its name on Los Angeles’ main sports arena, crypto exchange chief Kris Marszalek said the $700 million deal marked “the moment cryptocurrencies . . . crossed the abyss to the mainstream”.
The renaming of the LA Lakers National Basketball Association team’s home in November opened the floodgates for a series of multimillion-dollar marketing deals and partnerships between cash-rich digital asset companies and sports franchises that can deliver millions of potential customers.
Rival exchanges Coinbase, Crypto.com and FTX this year bought Super Bowl ads that reportedly cost $7 million for just 30 seconds of airtime. The home of NBA team Miami Heat is now FTX Arena — part of a 19-year deal for the exchange led by Sam Bankman-Fried, and Coinbase became the “exclusive cryptocurrency platform partner” for the NBA and WNBA in October.
“It’s almost like buying real estate in California,” said Haider Rafique, chief marketing officer at OKX, a crypto exchange that recently signed a sponsorship deal with Premier League club Manchester City FC. He said the rush for “overpriced” sponsorships has come because crypto companies have lots of cash to burn, “or at least all of them have been at the top of the market for the last year.”
Six months after the Crypto.com Los Angeles coup, the exuberance in the virtual asset markets has subsided. The deal almost came on top of last year’s surge in crypto prices. An investor who bought Bitcoin, the largest cryptocurrency, on the same day as the deal would have lost nearly half their money.
Still, the love affair between esports and crypto appears to be a perfect fit, as franchises can reach a wider audience within the demographic that digital asset players are trying to reach. “It’s a way to really reach their audiences. The traditional sports watcher syncs very well with the crypto holder or the mainstream early adopter,” said Shailesh Lakhani, Managing Director of Sequoia Capital in India.
Crypto.com, which inked a World Cup sponsorship deal with Fifa in March, said the exchange’s user base has grown to more than 50 million from 10 million in February 2021.
Lou Kovacs, president of marketing in North America at advertising and talent agency Octagon, estimates that crypto firms’ marketing spend on sports sponsorships has grown from $25 million to $50 million in 2020 to more than $600 million last year. without TV commercials.
The marketing rash has raised concerns among regulators and consumer groups that inexperienced investors may be encouraged to put their money in digital tokens they don’t understand. “It takes a lot of intellectual calories to understand this [crypto] Company,” said Quentin Thom, co-head of crypto due diligence firm Perform Due Diligence Services.
Thom compared the crypto marketing wave to previous promotions from now-controversial industries. “It’s the cigarette boom again. They have millions of fans who will be using crypto, and [a sports franchise] might end up taking a reputational risk of being associated with bad actors, but there’s also a financial risk for all your fans,” he said.
Spanish soccer star Andrés Iniesta was scolded by the country’s regulator last year after participating in a paid influencer campaign for cryptocurrency exchange Binance along with three other soccer players.
US boxer Floyd Mayweather, NBA Hall of Famer Paul Pierce and social media influencer Kim Kardashian were named in a lawsuit in January alleging they helped set the price of the token EthereumMax as part of a scheme that enriched its supporters at the expense of ordinary investors. The token’s backers dispute the claims.
As part of the broader shift towards crypto-related content, sports franchises have also embraced fan tokens.
In December, the Advertising Standards Authority in the UK said that Premier League side Arsenal FC broke marketing rules with “irresponsible” advertisements for its token, which allows holders to participate in official club decisions. The club said they take their responsibilities in terms of advertising to fans “very seriously”.
Rich Kleiman and basketball champion Kevin Durant, co-founders of tech investment startup Thirty-five Ventures, were early investors in Coinbase in 2017 and expanded their relationship in December. Kleiman said consumers and celebrity supporters alike have a responsibility to conduct their due diligence on emerging markets and products.
“Obviously, when athletes approach these deals — and any deal — it’s new and alien to a lot of people [a need] for further education,” he says. “There’s no such thing as ‘let me get into crypto, roll the dice and hope I’ll be a multi-millionaire’.”
Ronan Evain, chief executive of Football Supporters Europe, a prominent supporters group, pointed to the risks of “an unregulated financial product”. He said teams and players backing crypto assets are “significantly irresponsible” as such connections aim to “build the legitimacy of the product for an audience not necessarily familiar with it.”
But Kleiman said the current volatility in the crypto markets hasn’t shaken her confidence in the industry.
Crypto.com said it “remains fully committed to its sports sponsorship.”
“We are well funded and these are multi-year contracts that will continue to play a critical role in our mission to accelerate the global cryptocurrency transition,” the company added.
Kovacs said the surge in marketing spend is typical of lifecycles in other industries, such as during the dot-com boom and the rise of fantasy and sports betting in the US, when companies offering new products or services spend their advertising dollars on mass production spend. Market industry like sports. Eventually, these marketing booms go into “curb” as companies move from creating awareness to a more targeted strategy, but crypto hasn’t reached that stage yet.
“I don’t think we’re seeing anything like that right now,” he said. “It could be driven by some of the decline [cryptocurrency] Worth but more likely it’s powered by. . . They tend to focus more on specific areas to invest in.”
Still, some sports teams are still watching from the bench, waiting to see if crypto becomes a sustainable part of their industry.
“We don’t think we have to be first to market,” said a manager at an English Premier League football club. “Everyone is just nervous about the sector because it’s huge, valuable and unknown. We approach with caution.”