The FTX Bankruptcy Flameout Won’t Burn Larry David or Influencer Marketing – IGWIIKI

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The Miami Heat are prying FTX’s logo off their arena. The University of California had to strip the cryptocurrency exchange’s mark off its football stadium, cutting short a 10-year, $17.5 million deal that FTX was paying in cryptocurrency.

Last week, FTX filed for bankruptcy and CEO Sam Bankman-Fried stepped down—his personal fortune obliterated. For more than a year before the collapse, however, FTX went on a publicity spree that promised $135 million to the NBA’s Heat for the naming rights to their arena. It signed deals with Mercedes’ F1 team and MLB. FTX also landed athlete endorsers Tom Brady, Gisele Bündchen, Shaquille O’Neal, Naomi Osaka, Shohei Ohtani, Stephen Curry, Trevor Lawrence, David Ortiz, Udonis Haslem and Shark Tank’s Kevin O’Leary.

FTX’s biggest splash came via Curb Your Enthusiasm star Larry David and his writing partner Jeff Schaffer teaming up for an FTX Super Bowl 2022 commercial that featured David being intractably (and ironically, given last week’s events) skeptical of cryptocurrency.

“God, they spent a lot on sports,” said Graham McKenna, CMO of sports and entertainment market research firm MarketCast. “Crypto was just massive in February—in advertising and sponsorships, at the Super Bowl—and now it’s completely tanking. It’s not like we’re talking about something that was three years ago.”

Yet those FTX-aligned athletes and celebrities are less likely to face reprisals for FTX’s collapse than the company and its leaders. Their diverse array of endorsements, lack of day-to-day involvement in the exchange, and own loss of income and equity will shield them from the worst fallout. They weren’t the only people who put their faith in FTX, though it’s unlikely that influencers will extend an unproven brand that degree of trust again. The relationship between influencers and companies may be permanently marred by FTX’s meltdown.

“I don’t think it’s a situation where Tom Brady, Shaquille O’Neal or Steph Curry’s image and reputation is going to be tarnished,” said David Spencer, co-founder and co-CEO of Talent Resources influencer-based digital marketing agency. “They’re not actively involved as marketers and partners, and those three athletes have created such a legacy that this becomes a blip on the radar. They’re so much bigger than one marketing campaign.”

How they got here

“Celebrities or endorsers are artists,” said Ted Chung, founder and chairman of the Cashmere culture and lifestyle agency. “At the end of the day, your audience doesn’t expect you to have a crystal ball on endorsements. The audience only expects that an endorsement furthered your artistic goals, financially or philosophically. We’re all smart enough to read between the lines.”

FTX’s audience also may go easy on endorsers based on their own experiences with the cryptocurrency market. 

When MarketCast conducted a blind study of fans of an NFL team in the Northeast, roughly 50% said they owned cryptocurrency. Another 40% said they were at least interested in it. A similar study of a West Coast NBA team found that 35% owned crypto, with 70% of that group investing $500 or more. In each case, fans were more receptive to crypto and would spend more on it than non-fans.

“A lot of people had questions around [cryptocurrency]: ‘Is it safe?’” said Lyndon Campbell, MarketCast’s corporate svp and general manager of sports, live events and brands. “Sports fans didn’t question it as much. They were much more ready to believe in it and trust it.”

That led celebrities and influencers to trust cryptocurrency-aligned companies. Megan McMahon, svp of celebrity and influencer at The Marketing Arm (TMA), said the FTX collapse will likely lead to more initial questions from celebrities unfamiliar with emerging technologies including cryptocurrency, Web3 and the metaverse.

While brands and influencers’ desire to do business with each other has been resilient during McMahon’s 20 years in the industry, she said this latest incident will lead to influencers doing more research and accepting fewer contrived “perks” like payment in cryptocurrency or an equity stake in the company.

“They’ll still continue to take the risk, because the reward can be very large on the back end,” she said. “But if I was Tom Brady’s agent, I’d want to make sure that that he’s getting paid for his work… and then he’ll take some equity on top of that.”

Preventing the next FTX

Celebrities, athletes and influencers—as well as the brands hiring them—have options to shield themselves from risk. Michael Heller, co-founder and co-CEO of Talent Resources, noted that his company typically works with brands with “established pedigrees” like Burger King, Dunkin’ and Neiman Marcus.

However, it’s also worked with cannabis and vaping brands, and paired them with celebrities. In each case, he and Spencer go through a company’s financial statement, ensure there are morality clauses in place on both ends, and look at the people behind the company making the request. When crypto firms came calling within the last year—promising large amounts of money for Talent Resources services—Heller and Spencer passed.

“In this situation, we as a company never really understood crypto and never really understood how to figure it out,” Heller said. “We’ve stayed out of any endorsement deals where they want to pay in crypto. It’s just not what we’re experts at.”

Heller and Spencer said they apply a few basic rules to each brand/influencer deal to ensure the best possible outcome. When pairing actress and philanthropist Eva Longoria with a medical equipment company, for example, they spoke with Longoria’s team and asked if they had any concerns about the deal. In case a company suddenly goes bankrupt or comes up short on cash because of a downturn in the economy, Heller and Spencer include a pay-for-play clause in the contract that negates the deal if their client isn’t paid up front.

Penalties for non-payment are written into the contract, as are a series of out clauses that let an influencer drop the deal if something goes wrong at a late stage. While Heller and Spencer believe some of the bigger names in the FTX stable may have been paid up front, they noted that the reputation a star brings into an endorsement is just as important as the contract that can bail them out of it.

“Their legacy really stands for what they’ve done outside of just this one marketing partnership,” Spencer said. “The consumer is educated and clear enough to understand and to know that it’s not a reflection on their personal life or professional career. This was an anomaly.”

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