Executive Summary: Since the cost of goods for crypto company tokens is so low, they have a powerful pricing advantage that can be used to dominate online advertising channels.
If you’re a crypto company and raised money in an ICO (initial coin offering)…here is what to do to elevate investor confidence. You keep your investors calm by showing honest irrefutable growth within a master plan. This is why a company like Amazon can keep losing money every year, yet the stock price marches higher as investors keep pouring profits back into it; Amazon leadership knows how to tell the story of market domination and monopolization.
A cryptocurrency is a network. You are building a network from scratch, this is no easy task. Your job now is to get users onto your network. You need to focus on signups, downloads, etc…
Post-ICO crypto companies should think about…
- What metric can I make the Key Performance Indicator (KPI) for my project?
– The number you care the most about, and use it to show current status and growth to investors.- ie: Active users is a great metric, or even email signups or wallet downloads, something actionable that shows that the user interacted with your project.
- What is each action worth to you?
– Figure out how much each one of those email signups, wallet downloads or other action is worth to you. There are a number of ways to calculate this, for example in an ecommerce situation you can figure out how many people signed up for your email newsletter went on to purchase products. Then calculating the average order size and margins you can figure out roughly how much you make each time someone signs up for the email newsletter. So, once this is calculated then you know that you can spend $x amount and break even building your network.
Ecommerce Action Worth Example:
I get 1000 email newsletter signups from a facebook ad.
Of those 1000 signups, 50 go on to buy my products.
The average amount the 50 people spent is $100 per person = $5000 total sales
Let’s assume my margins are 25% (so I mark up products 25%).
From $5000 in sales I make $1,250 in profit (25% margin assumption)
So, for every 1000 email signups I make $1,250 in profit = $1.25 per signup
Ecommerce Conclusion:
I’m willing to spend up to $1.25 per email signup as I know that I will break even AND be gaining users. Hence, I can leverage the “network effect” long term with referral programs and other incentivized ways to create an army of brand advocates. This is a neutral marketing plan, where you are breaking even but gaining market share. In the supermarket industry this is similar to a “loss leader” business model. Where you loss money on a popular item like a gallon of milk…but getting people into the store is the goal because you know that they are going to buy more then milk and the profits on other items will be equal or greater then the loss on the milk.
Crypto Action Worth Example:
I get 1000 email newsletter signups from a facebook ad.
Of those 1000 signups, 50 go on to invest in my token sale.
The average amount the 50 people spent is $100 per person = $5000 total sales
Let’s assume my margins are 95% (meaning I have only a 5% cost on creating tokens).
From $5000 in sales I make $4,750 in profit (95% margin assumption)
So, for every 1000 email signups I make $4,750 in profit = $4.75 per signup
Crypto Conclusion:
In the crypto example the margins are sky high because there isn’t a product your selling, the creation of crypto is virtually free, so you can pay way more for traffic because you don’t have fixed costs.
So when an ICO issues 100,000,000,000 coins and are selling 80% and keeping the 20%…I say use the 20% to build the community. Give this all away using referral programs, bounties, and other gamification based systems to keep increasing your KPIs.
