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Crypto crash leaves media companies with budget holes as advertising dries up

Source image: https://www.cnbc.com/2022/11/30/crypto-crash-may-leave-ad-supported-businesses-with-hole-in-budget.html

Sergino Dest of USA and Milad Mohammadi of Iran battle for the ball during the FIFA World Cup Qatar 2022 Group B match between IR Iran and USA at Al Thumama Stadium on November 29, 2022 in Doha, Qatar.

Matteo Ciambelli | Defodi Images | Getty Images

There were Super Bowl ads, arena sponsorships and celebrity endorsements. TV commercials landed during the nightly news. Money flooded onto Facebook, Twitter and TikTok.

Crypto companies were spending anywhere and everywhere.

Through October of 2022, crypto-related brands shelled out $223 million on ads in the U.S., up 150% from $89 million for all of last year, according to MediaRadar. Few were as aggressive as Crypto.com, which said in late 2021 it was committing $100 million to an ad campaign that would feature Matt Damon and run across 20 countries. The company is an official sponsor of the 2022 World Cup taking place in Qatar.

What the crypto industry giveth, it can taketh away.

The stunning collapse this month of cryptocurrency exchange FTX and founder Sam Bankman-Fried’s broader empire spells further trouble for ad-supported media businesses that had come to see crypto as a new growth engine with money to burn. And FTX is far from the only problem, as the contagion has been spreading for months.

Coinbase has lost over 80% of its value and the company cut 18% of its staff in June, when CEO Brian Armstrong admitted the business grew too quickly and stressed “the need to manage expenses.” Crypto.com has reportedly cut 40% of its workforce, eToro downsized by 10% and in July canceled a planned merger with a special purpose acquisition company, and BlockFi just declared bankruptcy.

“Crypto winter is a crypto advertising winter,” said Grant Harbin, CEO of performance marketing firm Headlight, which has worked with companies in the industry. “There’s probably very little consideration on scaling advertising budgets right now.”

In the third quarter of this year, the top crypto advertisers spent just $35 million on ads, according to MediaRadar, an 80% drop from the first quarter, which got a huge boost from the country’s single biggest sporting event — the Super Bowl.

The pullback in spending, which is expected to intensify given the industry’s deepening turmoil, is notable as ad-based companies face broader challenges from soaring inflation and fears of a recession. But while crypto represented a promising area for growth, it still makes up a tiny portion of the overall ad market.

Companies overall are expected to spend almost $89 billion on TV ads this year, across linear programming and connected devices, and close to $250 billion on digital ads, according to Insider Intelligence.

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Facebook (including Instagram), Snap, Twitter and TikTok combined are expected to pull in $57.1 million in ads from crypto exchanges this year, according to SensorTower. That’s about even with 2021 figures, though almost all of the spending last year was on Facebook and Instagram.

In Alphabet‘s third-quarter earnings call last month, the company blamed a slowdown in revenue growth in part on reduced ad spending by cypto companies and other financial firms. Google’s sales growth was the slowest for any period since 2013, other than one quarter during the Covid pandemic.

The spending roller coaster

SensorTower data shows a big spike in crypto ad spending on digital media around October and November of last year, as prices were peaking, and a steep drop after the first quarter of this year. In April, the crypto sell-off began in earnest, with bitcoin and ether each losing well over half their value over the next three months.

The Super Bowl created a spending splurge that the industry may never see again. A 30-second spot during the NFL’s grand finale in February cost an average of $6.5 million, and crypto was a huge theme.

Coinbase, Crypto.com, eToro and FTX spent a combined $54 million on Super Bowl ads, according to MediaRadar. Coinbase aired a 60-second commercial showing a bouncing QR code that, once scanned, led to a promotion offering $15 worth of free bitcoin to new users. FTX signed up Larry David for an ad, urging viewers not to miss out on crypto and declaring NFTs “the next big thing.” A version of “Fly Me to the Moon” played during eToro’s commercial.

Promotional costs weren’t limited to airtime.

In 2021, Crypto.com paid $700 million to put its name on the home of the Los Angeles Lakers for the next 20 years. FTX signed a 19-year deal worth $135 million with the NBA’s Miami Heat for naming rights to the team’s arena, partnered with the NBA’s Golden State Warriors and had its logo placed on uniforms worn by Major League Baseball umpires.

Miami-Dade County is now trying to get the FTX named scrubbed from the arena. Miami has become a major hub for the crypto industry, and in September FTX moved its U.S. headquarters there from Chicago. The company spread its wings in the city, sponsoring a three-day crypto weekend in May on South Beach called “FTX Off the Grid.”

Jordan Levy, a Miami-based venture capitalist, said that while other crypto companies have advertised in the city, FTX was on another level.

“None of them have as significant of a presence in Miami as Bankman-Fried and FTX,” said the managing partner of SBNY, formerly SoftBank New York. “They’ve tried to do some guerrilla marketing stuff that put them on the top of the food chain from perception perspective.”

The money FTX was spending now presumably goes to zero. According to SensorTower, the company’s online ad spending quadrupled this year to $13.3 million, with roughly half of that coming in the first quarter.

Crypto.com’s online ad spending plummeted from about $16.2 million in the first quarter to $1.6 million in the third, SensorTower said. And Gemini, the exchange owned by the Winklevoss twins, cut spending from $8.5 million the first quarter to $2,500 in the third.

Coinbase, the only major exchange that’s publicly traded in the U.S., said in its earnings report this month that its sales and marketing expense dropped 46% in the third quarter from the prior period to $76 million. The company attributed the decline to “our decision to reduce performance marketing, due to lower efficiency in this spend associated with softer crypto market conditions as well as savings associated with our headcount reduction.”

Coinbase didn’t respond to a request for comment.

A Crypto.com spokesperson said via email that the company’s $100 million campaign ran from October 2021 through February 2022. Since then, “we ran additional advertising as part of our marketing strategy, and we continue to focus on our global brand and sports partnerships,” the spokesperson said. That includes sponsorship of the World Cup.

Brad Michelson, eToro’s U.S. head of marketing, said the Israel-based investment platform will “actively adjust spend based on performance,” and plans to continue building its brand in the U.S.

“It’s no secret that the markets are in a pull-back phase, and our budgets are being reallocated accordingly,” Michelson told CNBC in a statement.

The crypto market has suffered downturns in the past, only to bounce back and attract even greater sums of cash and new entrants.

Joseph Panzarella, director of digital media and marketing at the Yeshiva University’s Katz School of Science and Health, said that even if the market starts recovering, the high-profile scandals of 2022 will force companies to take a more serious approach when promoting their offerings.

“What they came out with was like, ‘Hey, we’re going to stick it to the Fed,'” Panzarella said, referring to the industry’s focus on decentralization and its ability to function without the heavy hand of government. “I guess they have to eat a little crow and say something like, ‘Hey, we are now we’re now [open to] being regulated.'”

WATCH: FTX’s bankruptcy puts increased pressure on the ad market

FTX's bankruptcy puts increased pressure on the ad market

Source: https://www.cnbc.com/2022/11/30/crypto-crash-may-leave-ad-supported-businesses-with-hole-in-budget.html

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Two children and two adults survive after Tesla plunges 250 feet off California cliff

View from the helicopter during a rescue operation after a vehicle carrying two adults and two children went over a cliff in Devil’s Slide, San Mateo county, California, U.S., January 2, 2023, plunging hundreds of feet, according to the Department of Forestry and Fire Protection, in this still image obtained from social media video.

CHP – Golden Gate Division | Reuters

Two adults and two children were rescued from a Tesla that plunged 250 feet off a cliff Monday morning in San Mateo County, California, officials said. 

The car was traveling southbound on the Pacific Coast Highway when it went over the cliff at Devil’s Slide, south of the Tom Lantos tunnel, and landed near the water’s edge below, the Cal Fire San Mateo-Santa Cruz Unit said. 

The car flipped and landed on its wheels in the fall, CAL FIRE/Coastside Fire Incident Commander Brian Pottenger said. Witnesses saw the accident and called 911. 

As crews were lowered down, they were able to see movement in the front seat, through their binoculars, meaning someone was alive.

“We were actually very shocked when we found survivable victims in the vehicle. So, that actually was a really hopeful moment for us,” Pottenger said. 

Fire officials called for helicopters to help hoist the survivors to safety. As they waited, firefighters rappelled to the scene and rescued the two children.

Rescue teams are seen at the scene as a Tesla with four occupants plunged over a cliff on Pacific Coast Highway 1 at Devils Slide on January 2, 2022 in San Mateo County, California, United States.

Tayfun Coskun | Anadolu Agency | Getty Images

The California Highway Patrol shared video on social media showing helicopters lower first responders to the scene to extricate and rescue two adults inside. 

All four were hospitalized. The San Mateo Sheriff’s Office said the two adults suffered non-life-threatening injuries and the two children were unharmed.

It’s not clear what caused the car to go over the cliff. CHP is handling the investigation. 

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Tesla shares tumble more than 10% following deliveries report

Tesla vehicles are shown at a sales and service center in Vista, California, June 3, 2022.

Mike Blake | Reuters

Shares of Tesla dropped 13% on Tuesday morning, a day after the electric auto maker reported fourth-quarter vehicle production and delivery numbers for 2022.

Deliveries are the closest approximation of sales disclosed by Tesla. The company reported 405,278 total deliveries for the quarter and 1.31 million total deliveries for the year. These numbers represented a record for the Elon Musk-led automaker and growth of 40% in deliveries year over year, but they fell shy of analysts’ expectations.

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According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022, Wall Street was expecting Tesla to report around 427,000 deliveries for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.

Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. 

Some Wall Street analysts think Tesla’s deliveries miss spells trouble for the electric vehicle maker, but others see a buying opportunity for the company in 2023.

Baird analyst Ben Kallo, who recently named Tesla a top pick for 2023, maintained an outperform rating and said he would remain a buyer of the stock ahead of the company’s earnings report, which is scheduled for Jan. 25.

“Q4 deliveries missed consensus but beat our estimates,” he said in a Tuesday note. “Importantly, production increased ~20% q/q which we expect to continue into 2023 as gigafactories in Berlin and Austin continue to ramp.”

Analysts at Goldman Sachs said they consider the delivery report to be an “incremental negative,” and view Tesla as a company that is “well positioned for long-term growth.” Goldman reiterated its buy rating on the stock in a Monday note and said that making vehicles more affordable in a challenging macroeconomic environment will be a “key driver of growth.”

“We believe key debates from here will be on whether vehicle deliveries can reaccelerate, margins and Tesla’s brand,” the analysts said.

Shares of Tesla suffered an extreme yearlong sell-off in 2022, prompting CEO Musk to tell employees in late December not to be “too bothered by stock market craziness.”

Musk has blamed Tesla’s declining share price in part on rising interest rates. But critics point to his rocky $44 billion Twitter takeover as a bigger culprit for the slide.

Morgan Stanley analysts said they think the company’s share price weakness is a “window of opportunity to buy.”

“Between a worsening macro backdrop, record high unaffordability, and increasing competition, there are hurdles for all auto companies to overcome in the year ahead,” they said in a note Tuesday. “However, within this backdrop we believe TSLA has the potential to widen its lead in the EV race, as it leverages its cost and scale advantages to further itself from the competition.”

CNBC’s Lora Kolodny and Michael Bloom contributed to this report.

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Tesla makes China boss Tom Zhu its highest-profile executive after Elon Musk

Tom Zhu Xiaotong, Tesla’s current executive in charge of China, speaks as a new Tesla experience store opens on Aug. 18, 2015 in Hangzhou, China.

Visual China Group | Getty Images

Tesla’s China chief Tom Zhu has been promoted to take direct oversight of the electric carmaker’s U.S. assembly plants as well as sales operations in North America and Europe, according to an internal posting of reporting lines reviewed by Reuters.

The Tesla posting showed that Zhu’s title of vice president for Greater China had not changed and that he also retained his responsibilities as Tesla’s most senior executive for sales in the rest of Asia as of Tuesday.

The move makes Zhu the highest-profile executive at Tesla after Chief Executive Elon Musk, with direct oversight for deliveries in all of its major markets and operations of its key production hubs.

The reporting lines for Zhu would keep Tesla’s vehicle design and development — both areas where Musk has been heavily involved — separate while creating an apparent deputy to Musk on the more near-term challenges of managing global sales and output.

Tesla did not immediately respond to a Reuters request for comment.

Reuters reviewed the organizational chart that had been posted internally by Tesla and confirmed the change with two people who had seen it. They asked not to be named because they were not authorized to discuss the matter.

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Zhu and a team of his reports were brought in by Tesla late last year to troubleshoot production issues in the United States, driving an expectation among his colleagues then that he was being groomed for a bigger role.

Zhu’s appointment to a global role comes at a time when Musk has been distracted by his acquisition of Twitter and Tesla analysts and investors have urged action that would deepen the senior executive bench and allow him to focus on Tesla.

Under Zhu, Tesla’s Shanghai plant rebounded strongly from Covid lockdowns in China.

Tesla said on Monday that it had delivered 405,278 vehicles in the fourth quarter, short of Wall Street estimates, according to data compiled by Refinitiv.

The company had delivered 308,600 vehicles in the same period a year earlier.

The Tesla managers reporting to Zhu include: Jason Shawhan, director of manufacturing at the Gigafactory in Texas; Hrushikesh Sagar, senior director of manufacturing at Tesla’s Fremont factory; Joe Ward, vice president in charge of Europe, the Middle East and Africa; and Troy Jones, vice president of North America sales and service, according to the Tesla notice on reporting lines reviewed by Reuters.

Tesla country managers in China, Japan, Australia and New Zealand continued to report to Zhu, the notice showed.

Zhu does not have a direct report at Tesla’s still-ramping Berlin plant, but a person with knowledge of the matter said responsibility for that operation would come with the reporting line for Amsterdam-based Ward. Ward could not be immediately reached for comment.

Zhu, who was born in China but now holds a New Zealand passport, joined Tesla in 2014. Before that he was a project manager at a company established by his MBA classmates at Duke University, advising Chinese contractors working on infrastructure projects in Africa.

During Shanghai’s two-month Covid lockdown, Zhu was among the first batch of employees sleeping in the factory as they sought to keep it running, people who work with him have said.

Zhu, a no-fuss manager who sports a buzz cut, favors Tesla-branded fleece jackets and has lived in a government-subsidized apartment that is a 10-minute drive from the Shanghai Gigafactory. It was not immediately clear whether he would move after his promotion.

He takes charge of Tesla’s main production hubs at a time when the company is readying the launch of Cybertruck and a revamped version of its Model 3 sedan. Tesla has also said it is developing a cheaper electric vehicle but has not provided details on that plan.

When Tesla posted a picture on Twitter last month to celebrate its Austin, Texas, plant hitting a production milestone for its Model Y, Zhu was among hundreds of workers smiling on the factory floor.

Why China is beating the U.S. in electric vehicles

Allan Wang, who was promoted to vice president in charge of sales in China in July, was listed as the legal representative for the operation in registration papers filed with Chinese regulators in a change by the company last month.

Tesla board member James Murdoch said in November the company had recently identified a potential successor to Musk without naming the person. Murdoch did not respond to a request for comment.

Electrek previously reported that Zhu would take responsibility for U.S. sales, delivery and service.

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