Google recently announced its plan to ban online advertisements related to cryptocurrencies – including ads for everything from ICOs to exchanges and wallets. Facebook announced a similar ban in January.
With the two largest online advertisers seemingly condemning cryptocurrencies, prices dropped and investors around the world panicked. Is this the start of a wider crackdown? Does this spell the end for cryptocurrencies?
This is, on the surface, a blow for the crypto community (especially after a tumultuous few weeks.) But dive a little deeper and the implications of the ban might not be what you expect.
If we look beyond the melodramatic headlines, Google appears to be making a smart move which will be beneficial in the long-run.
Google discovers one weird trick – scammers hate them!
It’s important to note that the ban is targeting risky financial products in general and is not exclusively focused on cryptocurrencies. This also covers ads related to CFDs (contract for difference), binary options (which have an all or nothing payoff), trading advice and similar products. Experienced investors don’t tend to take advice from ads and these products are too risky and deceptive to be marketed to the general public.
The majority of crypto related ads are not for legitimate products and services. As bitcoin is new and largely misunderstood, scammers are using it as their latest lure. Many people have only heard of crypto as a get rich scheme – and scammers know that.
You’ve probably seen dozens of ads promoting obvious scams or making misleading claims. Local mums are no longer just discovering how to magic away wrinkles or burn belly fat – now they’re also discovering one weird trick for turning £5 into £1 million, or they’ve found ‘the next bitcoin!’ One Reddit user on r/cryptocurrencies aptly described these predatory ads as ‘total garbage’.
At the moment, there really isn’t enough protection for consumers. Many crypto companies are run by people with no relevant financial experience and without regulation or security certification. Adverts intentionally target those who may not understand what they’re getting themselves into, but are enticed by the promise of instant wealth.
Hopefully, this ban will cut back on the number of scammers and opportunists using bitcoin as a vehicle for their schemes. Scamcoins, jokecoins, get rich quick schemes, ICOs with no actual product (or even a white paper) and the like only give bitcoin a bad reputation and harm legitimate companies.
But of course, Google announced this as a blanket ban on anything related to cryptocurrencies (and a few other financial products.)
Isn’t this going to harm legitimate, fully regulated companies?
In the short term, possibly. But this probably isn’t the devastating blow it sounds like.
Is the Google ban less important than it seems?
Let’s be honest. Most people have an ad blocker these days – especially in the demographic most interested in cryptocurrencies. You’re probably using one right now, even if you turn it off for certain sites. Ad blockers have become necessary at times, precisely because Google and other ad providers haven’t done enough to protect users from predatory or just outright annoying ads.
Secondly, there isn’t much evidence to indicate that ads have played a significant part in the rise of cryptocurrencies.
Remember the first time you heard about bitcoin? It was most likely from a friend or family member, or on social media, or in a news article and not from an ad. It’s not like Satoshi Nakamoto ran Facebook ads to promote bitcoin in the first place either.
In general, traditional advertising is becoming less and less important. We’re seeing a growing number of successful subscription funded sites which do away with advertising.
Because ads just don’t work like they used to. Even if you don’t have an ad blocker, you most likely have ‘ad blindness’ – you don’t notice them anymore and never intentionally click on them. This has led many sites and companies to use increasingly intrusive or deceptive in a bid to earn enough revenue. And this only pushes more people to use ad blockers.
So ads are less important. Building something that’s good enough to spread through word of mouth and positive press coverage is more important.
Encouragingly, several Reddit users working for legitimate crypto-related companies have reported that it’s not going to be a blanket ban. Google is aiming to allow fully regulated companies to earn a certification and continue advertising. While this has not been publicly confirmed by Google, it seems probable.
Why did the announcement cause a price drop then?
The price of any asset largely depends on the price investors expect it to be in the future. Not on the asset itself. This is easy to forget. If investors think an event like this is going to cause a price drop, they’ll start selling off their holdings – which floods the market and causes a price drop. It’s all about perception.