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Inside the pay-for-post ICO industry
In a world where nothing can be trusted and fake news abounds, ICO and crypto teams are further muddying the waters by trying – and often failing – to pay for posts. While bribes for blogs is nothing new, sadly the current crop of ICO creators and crypto projects are particularly interested in scaling fast and many ICO CEOs are far happier with scammy multi-level marketing tricks than real media relations.
The worst part of this spammy, scammy ecosystem is the service providers. A new group of media organizations are appearing where pay-to-post is the norm rather than the rare exception. I’ve been looking at these groups for a while now and recently found a few egregious examples.
But first some background.
Oh yeah, Mr. Smart Guy? How do I get press?
Say you’re trying to publicize a startup. You’ve emailed all the big names in the industry and the emails have gone unanswered. Your product is about to flounder on the market without users and you can’t get any because, in perfect chicken-or-egg fashion, you can’t get funding without users and you can’t get users without funding. So isn’t it a good idea to pay a few dollars for a little press?
No.
And isn’t most PR just pay-for-post anyway?
No.
PR people are consummate networkers and are paid to reach out to media on your behalf and their particular set of skills, honed over long careers, are dedicated to breaking down the forcefield between the journalist and the outside world. They are your surrogate hustlers, dedicated to getting you more exposure. A good PR person is worth their weight in gold. They can call up a popular journalist and make a simple pitch: “This cool new thing is happening. Can I put you in touch?”
If a journalist’s mission is to afflict the comfortable and comfort the afflicted, a good PR person makes the comfortable look slightly afflicted in order to give the journalist a better story. Also, like velociraptors, they are tenacious and will follow up multiple times on your behalf.
A bad PR person, on the other hand, will cold-call hundreds of journalists and read a script that is half the length of Moby Dick. They produce little more than spam and their efforts begin and end with pressing the “Send” button. It’s also interesting to note that many bad PR people, of late, have found new life as ICO specialists.
Now meet the pay-for-post hucksters. As I wrote before, there is now a subset of the PR world that offers to get your press release or story on the top of various websites for the low, low price of between $500 and $13,000. For example, one set of hucksters created a small business selling posts on Harvard.edu by creating garbage WordPress blogs and posting press releases to increase SEO coverage. Further, I received a document that outlined the prices for placement in various blogs including this one. While it is impossible to buy a post on TechCrunch this way, it doesn’t stop many from trying.
What’s the difference between that price list and the job a PR person will do for you? The difference is trust. A pay-for-post huckster is dependent on convincing poorly paid freelance writers to add links and other dross to their posts in order to get a “placement.” I get requests like this almost every day and almost all the journalists I talked to reported the same.
Some entrepreneurs are savvy enough to avoid these scams. Even more aren’t.
“I’ve never paid since I think it’s almost always a waste of money but I’ve been offered this type of coverage many times,” said Rick Ramos, of HealthJoy.com. “The last offer was for Kathy Ireland’s Worldwide Business… A TV show that I’ve never heard of in my life. I’ve also been approached by niche publications like InsuranceOutlook and HealthCareTechOutlook that want $3,000 for a ‘reprint branding package.’ A quick Alexa.com search shows their rank as 1,725,207 and 1,054,501 globally. I think I get pitched at least every six months for one of these types of packages.
Unfortunately, many of these organizations hide their request for payment until the last minute. That said, how do you know when it’s someone selling pay-for-play vs. a real editor? It’s usually obvious.
“It’s usually pretty easy to sniff out based on their email blast. It’s pretty untargeted with no reference to what your company does or how it related to a story. Some people are up front about the payment but others want a ’15 min call to discuss.’ A quick LinkedIn search always shows them as a sales person versus a reporter or editor,” said Ramos.
It’s getting worse
This is a document I received from a company attempting an ICO. This sort of menu was quite uncommon until fairly recently when the “on-demand” economy melded with PR scammers. The completeness of the document is unique – you could feasibly plan your own PR efforts just by reaching out to journalists who work at all of these places. But you’ll also note that each spot has its own price, often in the low hundreds of dollars, which means that those spots are mostly pay-for-play anyway.
ICOLists by on Scribd
No PR company can promise coverage. In fact, many pay-for-play folks mention this in their communications, hiding it in plain sight. This snippet of text appeared in a contract for work from one of the pay-for-play providers. In short, you’re paying for something they cannot guarantee to get. Interestingly, the PR company below calls their product an IO – an insertion order – which is language used in ad sales. Further, they take great pains in explaining that it is almost impossible to achieve what they promise.
None of the pay-for-post folks I mentioned here would respond to my requests for comment.
Counter-point: Journalists are also at fault
Journalists should never expect money for coverage.
Yet many do.
“Lately I have worked on a number of blockchain technology pieces and I have encountered a wide variety of these asks,” said Brittany Whitmore, CEO at Exvera Communications. “A lot of the new, smaller blockchain-focused outlets seem to do a lot of pay-to-play, likely trying to capitalize on the ICO gold rush. The strangest request that I received was that the outlet would do a an article about the news for free but only if we paid them over $1,000 to promote the article with ads. I did not proceed.”
In one very detailed article on The Outline, Jon Christian explored this world and found that many writers received small sums for a single brand mention in a story, a sort of SEO flogging that rarely helps. He wrote:
An unpaid contributor to the Huffington Post, also speaking on condition of anonymity because, in his words, “I would be pretty fucked if my name got out there,” said that he has included sponsored references to brands in his articles for years, in articles on the Huffington Post and other sites, on behalf of six separate agencies. Some agencies pay him directly, he said, in amounts that can be as small as $50 or $175, but others pay him through an employee’s personal PayPal account in order to obfuscate the source of the funds. In a statement, Huffington Post said “Using the HuffPost Contributors Network to self-publish paid content violates our terms of use. Anyone we discover to be engaging in such abuse has their post removed from the site and is banned from future publication.”
The Huffington Post writer also described specific brands he’d written about on behalf of one of the agencies, which ranged from a popular ride-hailing app, to a publicly-traded site for booking flights and hotels, to a large American cell phone service provider.
“This is a classic example of payola,” he said of the brand mentions, invoking a term that’s been used to describe radio DJs who accept payments from record companies in order to play certain artists on the air.
Further, many influencers – folks who sell their Internet fame to the highest bidder – masquerade as journalists, asking for outrageous sums to flog an ICO on their YouTube channel or Instagram page. Pay-for-play services can also put out organic content like this in hopes of appearing in the news.
The rule of thumb? Paid posts and native advertising are not journalism. Ultimately, journalists who charge for coverage are marketers. No one at any reputable news organization will ask for cash but, sadly, there are a number of disreputable news organizations making the rounds.
ICO spamming/Don’t do it
All this still doesn’t answer the question: Should you pay-to-post?
“The short answer is no,” said Kevin Bourke of BourkePR. “I get asked all the time, and in fact, turned down another request just today. And I advise my clients to decline these offers as well.”
Pay-for-post disrupts journalism in a way that should be familiar and desirable to any modern-day entrepreneur. Middlemen are being knocked out everywhere and brands are approaching consumers from every angle including native ads in Instagram and Twitter. But the value of coverage – real coverage – from a journalists perspective is the opportunity to explain complex ideas to a ready audience. While posting a picture of a blockchain on Facebook and hoping for clicks is one strategy, explaining your views, opinions, and insights is far more important even if you approach it from a mercenary position.
“When you start paying for placement, you remove objectivity and credibility, and in my opinion, this is the reason you look for coverage of your company/products in the first place. That’s what influences readers/viewers. But I understand the temptation for startups. You come to believe that ‘all visibility is good visibility.’ I just can’t agree with that,” said Bourke. “I see the trend toward paid placements (now called sponsored content), paid awards and I can’t stand it – especially with the trade show awards in high tech. They’ve completely devalued the Best of Show awards in so many cases. Typically, only the big companies with budgets can afford them, so many of the smaller guys with no money but amazing products get left out. I understand that the publishing industry needs to figure out new revenue streams – these are very difficult times for them. But they need to figure out smarter business models and maintain the integrity of editorialized content, built on the opinions and perspectives of journalists and influencers.”
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Malta paves the way for a decentralized stock exchange
Malta AKA “Blockchain Island” has been making waves lately in the world of cryptocurrency and governance. Their latest move involves the crypto exchange Binance and the ICO builders at Neufund.
The plan is simple: Neufund will help MSX, the Malta Stock Exchange’s skunkworks, create tokenized securities. Binance has agreed to carry these securities on its own exchange, essentially creating a straight path to regulated tokens via the already regulated Malta Stock Exchange. In short, this enables Malta to become the first country to be able to offer tokens alongside traditional equities as well as an easy way to go public in multiple ways including via ICO.
The plan is still in the pilot stage. This year they will begin “the public offering of tokenized equity on Neufund’s primary market which may later be tradable on Binance and other crypto exchanges pending regulatory and listing approvals” said Neufund CEO Zoe Adamovicz.
“We are thrilled to announce the partnerships with Malta Stock Exchange and Binance, that will ensure high liquidity to equity tokens issued on Neufund. It is the first time in history, that security tokens can be offered and traded in a legally binding way. The upcoming pilot project will allow us to test the market’s reaction and realize the overall project idea in an environment with minimized risk.” said Adamovicz.
“We are delighted to welcome Neufund as our key partner in building a Blockchain-based exchange that is fully integrated with established financial markets. With the upcoming pilot project we become a worldwide pioneer in digital finance,” said Joseph Portelli, chairman of the Malta Stock Exchange.
This move is interesting in that it offers a parallel track to companies wishing to go public via token sales. While even the terminology isn’t completely hashed out in regards to the future of these systems, having a spot like Malta lead in the matter of token sales selling alongside equities is a solid decision. Malta is increasingly becoming the testbed for these sorts of experiments and, even if this is not yet a real project, it could create a turnkey solution for ICO launches on the island.
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Jina Choi, SF Regional Director of the SEC, is coming to Disrupt to talk ICOs and more
The Securities and Exchange Commission, the federal agency responsible for protecting investors and maintaining fair and orderly functioning of our securities markets, has 11 regional offices, including in Miami, New York, Boston and Chicago.
None has quite the workload as the SEC’s San Francisco regional office, where a major area of focus in recent years has been investor fraud in pre-IPO companies, particularly the many startups that in an earlier era would have either have gone public or else out of business, but which today linger as privately held outfits because there’s so much money sloshing around.
Among the companies to find themselves in the SEC’s sights in recent years is HR software outfit Zenefits and its founder, Parker Conrad; they were fined $1 million last October as part of a settlement over charges that they’d misled investors. In March, the online personal finance company Credit Karma also settled SEC charges; it had been accused of unlawfully offering securities to its employees — then failing to provide them with timely financial statements and risk disclosures.
Of course, the best-known SEC case to date has centered on the blood-testing company Theranos, which was charged with massive fraud in March, along with the company’s founder, Elizabeth Holmes, and its former president, Sunny Balwani.
Leading the charge in each of these cases and many more: Jina Choi, a graduate of Oberlin and Yale Law School who worked as a lawyer for the Justice Department in Washington before heading to San Francisco and the SEC’s enforcement division in 2000.
Five years ago, Choi was promoted to director of that office, where she has since overseen enforcement and examinations in Northern California and the Pacific Northwest, despite critics who believe the SEC should keep its eye on public companies alone. (“If no one is policing private markets, that’s a problem,” Choi said at a public forum in May.)
In an age of initial coin offerings, cryptocurrencies and mushrooming numbers of blockchain-related projects, Choi and her colleagues have their hands particularly full, so you can imagine how excited we are that Choi is coming to Disrupt to discuss some of those challenges, as well as the agency’s victories. We’re also looking forward to learning more about how decisions are made in Choi’s office and back in Washington.
If you’re interested in learning more about the SEC’s ever-evolving approach to Silicon Valley startups — and why you shouldn’t expect its interest to dissipate any time soon — you really won’t want to miss this conversation.
You can buy tickets to the show, taking place in San Francisco September 5th through September 7th, right here.
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ICO services: Lots of barnacles but no whales
Nearly every aspect of the current ICO market is pay-for-play or otherwise tainted. I do not paint the industry with such a broad brush lightly but this sort of chicanery hasn’t existed since the heyday of print media when journalists – myself included – took long, convoluted trips to distant headquarters where they enjoyed, as I wrote back in 2007, “suckling on the sweet teat of junket whoredom.”
As I said in this post on payola that briefly made waves a few months ago, payola is stupid and everybody should be able to see through it. But many can’t and that’s a big problem.
The ICO market is hot right now and there is money flowing from hand to hand in a torrent. One litigious company I spoke to took $10,000 to write a white paper and then returned a two page squib, refusing ultimately to refund a founder’s money. Another company, below, is sponsoring an all-inclusive trip to Seoul for a press conference. Other companies take $400,000 or more to manage your ICO, offering PR and services look to have been cobbled together in a rush yet promise millions in returns.
Any time there is a gold rush there are carpet baggers. Any time there is a bubble there are those who would take advantage of it. And anywhere there is a new, unregulated way to make – or raise – millions of dollars you’d better believe there is someone skimming.
Arguably not everyone knows the rules. They are, quite simply: don’t take free stuff in exchange for positive coverage and don’t take trips. Most tech journalists have a closet full of junk that needs to go back to manufacturers but they should never expect cash from a manufacturer to smooth things along. Junkets are dangerous primarily because they cloud a journalist’s judgment. You can imagine Syria sponsoring a fancy junket into its war zone to understand the extreme chilling effect and bias this would introduce.
Further, the other services – legal, PR, social media – that are cropping up in the market are taking a huge cut and often stand unchallenged. ICOs are hard work and very confusing. Instructions, to say the least, are unclear and anyone who has done one successfully – including this team that simulated and exit scam to send people to their ICO consultancy – is considered a global expert. It’s as if someone discovered a working Bloomberg terminal an abandoned building and then began telling everyone they could make them millions. It’s not that easy.
Ultimately these barnacles will be shaken off. TechCrunch was born out of the confusion of the second startup boom and, in turn, this created the modern VC industry, the modern pitch-off, and the accelerator. The good guys, so to speak, outnumbered the pay-for-play “incubators” and the rapacious investors and created what you see today: a tame but useful system for unlocking wealth. Now that that system has been supplanted – and make no mistake: VC is over – the new organism has its own parasites and none of them are particularly new.
This does not mean the current system is perfect. Angel funding is almost impossible to find outside of major cities. Team and a dream has been replaced by team and multi-million dollar revenue. VC has become a spectator sport and its practitioners are – or feel like – rock stars. There is plenty of nastiness in that business.
But crypto is a different beast entirely.
“Everyone I talk to in this space is corrupt,” railed one founder to me last week. He didn’t know where to turn so he did it all himself. It worked, but not without much trial and error.
Another founder is handing out legal documents his legal team produced for him because he was sick they cost so much. Given that the average equity investment in a startup requires one document and a handshake, to spend upwards of $100,000 for documentation galls. Add in an opaque, hype-filled market and a secretive investment class and you get an explosive mixture.
This will not lost. The barnacles will fall off. But until then it’s sad that such a promising technology will be tainted by the behavior of a few growth marketers who are using the techniques they learned selling penis pills to sell securities. Don’t expect financial authorities to cut these cheaters down, either. That can only be done by the market, a market that knows when enough is enough and that it shouldn’t cost dumb money to raise smart money.
You can’t pay for coverage. You shouldn’t charge to pitch. You shouldn’t make profit on wild inequity. But people will do these things and more and things will not change until the entire industry – from the founders to the service companies to the investors to the media – agrees to scrape them off.
Photo by Thomas Kelley on Unsplash
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Company raises $347K ICO, vanishes
A company called Confido raised a small ICO by selling special CFD designed to allow “safe and trustless cryptocurrency payments. According to ICODrops they raised their goal of about $400,000 and quickly disappeared, taking the cash with it. The site is currently a parked web server that points to nothing. The apparent founder and former eBay employee, Joost van Doorn, posted a message to… Read More
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Building a token sale is at once quite simple and quite complex. A number of issues crop up immediately, including, but not limited to, the need for an expensive team of lawyers, marketers, social media experts and an expensive crew to build your smart contract. CoinLaunch, a project by repeat entrepreneur Reuven Cohen, aims to reduce the complexity of at least one part of the process. Read More
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Dear Floyd Mayweather, you’re why the SEC exists
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