Decoding Sponsorship Strategies for Cryptocurrency Providers
It is increasingly common to see digital solutions invented to replace physical versions of objects. The photograph was replaced by the digital photo. The letter was replaced by the email. In a world where nearly everything has gone paperless and digital, our money could be next. Even digital versions of currency ("Cryptocurrency"), for example Bitcoin, are emerging in the marketplace and are vying to serve as potential replacements for physical money.
Like all new technologies, time will tell if they deliver a meaningful solution to consumers and become commonly adopted OR if they ultimately become a niche product that fades away in time. In any case, crypto currency brands must work to garner brand awareness and also to educate consumers on their purpose/benefit. Sponsorship is one channel available to these brands to achieve their objectives.
What is Cryptocurrency?
Cryptocurrency is a form of exchange just like any other currency (dollars, yen, euros, etc.). However, unlike regular currency, it is virtual and not held in the vaults of a bank. Rather, it is shared on peer-to-peer networks allowing users to send and receive money to each other at any time without a restriction on borders or time. At the time this blog was published, one Bitcoin (the first created cryptocurrency in 2009 and easily the most recognized form of crypto currency) traded for $288.98 in Canadian dollars. Similar to traditional forms of currency, Bitcoins can be exchanged for other currencies and can be used to purchase basic goods and services wherever merchants accept them as a method of payment.
However, the cryptocurrency movement is relatively niche. With new technology there is always an adoption phase where strictly early-adopters use it.
To speed up cryptocurrency’s adoption process and transition the product from one being used by solely tech-savvy innovators to one with mass market acceptance, the general public needs to be aware and educated on this new form of currency. To achieve this reach, cryptocurrencies have been using sponsorship as a vehicle.
Why Currencies like Bitcoin Invest in Sponsorship?
Cryptocurrency companies face three primary objectives in sponsorship:
1. To drive awareness and familiarity for cryptocurrencies as an alternative currency: Many new brands or technologies have leveraged sponsorship to build a general sense of mass familiarity. Seeding their brands into the minds of mass public will allow these brands to build up trust which will have a positive impact towards their long-term acceptance.
2. To build goodwill amongst consumers by connecting with them over a shared passion: Like many other brands that invest in sponsorship, demonstrating support of a consumers passion point will help these new brands to establish their values and brand personality while generating goodwill.
3. To seek business development opportunities by becoming an accepted method of payment at sponsored events and festivals: New products and services often rely on trial to generate more broad scale adoption. Leveraging sponsorship can provide these brands with opportunities to demonstrate the benefits of using their product in a way that also provides benefits in an area that their consumer cares deeply.
Case Studies: Bitpay & College Sports
Bitpay is a payment solutions provider to merchants looking to accept bitcoin. They are headquartered in Atlanta, Georgia and are one of the largest payment solution providers of bitcoin in the world. In June of 2014, Bitpay reached an agreement with ESPN Events to sponsor a college bowl game taking place in St. Petersburg. As a sponsor, Bitpay received not only signage, but integration into the event which was set up to accept ticket and merchandise purchases through bitcoin. Sponsorship fees were also paid to ESPN Events through bitcoin, authenticating the partnership.
Rather than branding the game with the Bitpay name, Bitpay decided to name it the “Bitcoin St. Petersburg Bowl” due to the fact that the currency was still foreign to the majority of the population. Bitpay also saw a large crossover in demographics as most bitcoin users were young, tech-savvy males, aligned to the college football fans. Bitpay received high visibility as the viewership of the game was up 157% in from the previous year. During the broadcast three bitcoin related ads were shown including one from title sponsor Bitpay.
In addition to their College Bowl game presence, Bitpay also has a relationship with Georgia Tech and their athletic facilities. It was announced last October that Bitpay would be providing bitcoin solutions to Georgia Tech’s football stadium and basketball arena. Georgia Tech became the first university in the world to integrate bitcoin payments into their stadium concessions. By becoming the first university to accept bitcoin, Georgia Tech was able to promote their image as a technologically advanced institution.
Other bitcoin services have entered into sponsorship. San Francisco bitcoin company Coinbase partnered with MLS’s San Jose quakes to provide bitcoin payment solutions to their new stadium. Also Bitcoin Brands sponsored UFC fighter Max Holloway during his main card fight last August televised on Fox Sports 1.
Case Study: Dogecoin & Nascar
Dogecoin, a competing digital currency, has also invested in sponsorship to help build awareness and education. On the social media website Reddit, the dogecoin community came in contact with the NASCAR community and came up with the idea to sponsor NASCAR driver Josh Wise. Through crowdfunding, $55,000 USD worth of dogecoin was raised to sponsor Wise during a race at the Talladega Superspeedway. When the original idea to sponsor a NASCAR driver was submitted to Reddit, the community all thought it would be a great way to raise awareness about dogecoin through sponsorship.
Properties to Watch:
Given its reach and relevance, sport has been the property genre most heavily invested in amongst cryptocurrency brands. However, with such advanced technology at play, brands like Bitcoin may be best served to invest in events and activities where there are likeminded people likely to use cryptocurrency. Some potential properties that may present a strategic fit for cryptocurrency brands include:
1. eSporting events: MKTG discussed eSport, the competiiion of organized online video games, on the blog recently and discovered that they are a young tech-savvy crowd. Using an eSport event to promote cryptocurrency could merge the similar demographics and create a natural fit.
2. Celebrity Endorsers: Cryptocurrency can be a confusing topic for consumers. Partnering with an individual such as an athlete or Hollywood personality might be able to humanize a cryptocurrency organization by providing it with a recognizable face. While no celebrities have been leveraged as a brand ambassador to date, Bitpay has integrated with 50 Cent to collect payment on a past album.
3. Sports that skew towards a high-income audience: In addition to consumers, cryptocurrencies target business owners/decision-makers who can opt to accept new payment methods at retailers or through e-commerce. Sports with a fanbase whose percentage of business owners/high-income individuals over-index the general population such as Golf and Tennis. B2B tech companies like IBM have deployed this strategy in the past seeking to target business influencers.
4. Consumer Electronic Shows: Consumer electronic shows showcase the latest innovations from tech brands. The crowd at these events attend to see the latest technology from the worlds biggest brands. By showcasing a new form of payment, a cryptocurrency brand could reach a captive audience.
Key Takeaways for Sponsors:
Cryptocurrency is still in a Wild West stage of its life cycle. As different currencies (and different providers) compete for market leadership, expect more of these organizations to invest in brand-building activities such as sponsorship. Cryptocurrency brands can win in sponsorship by understanding:
1. Branding alone won’t close the gap: Cryptocurrency brands must activate in order to educate consumers on the benefit of the product. Educating the masses on a new form of payment that many will find complicated is a large task.
2. All for one, one for all: Cryptocurrency companies face a dynamic where they must not only promote their company but also their industry. Cryptocurrency providers have the opportunity to promote their currencies (ie: Bitcoin) versus their individual brands (ie: Bitpay) in order to drive long-term acceptance.
3. Playing in the big leagues: The payments category is a crowded one, with large players like Visa and MasterCard spending massive dollars in sponsorship. A focused and innovative investment strategy is required to breakthrough.