“Crypto Twitter,” or CT for short, plays an incredibly important role within the industry–arguably, a far more significant role than in just about any other industry. Indeed, Twitter is the place where news breaks, where collaborations and partnerships are born, and–at times–where big egos battle.
As such, Twitter has facilitated the spread of information throughout the cryptosphere in many positive ways. Twitter has been used to quickly spread warnings about exit scams, hacked platforms, phishing sites, and other kinds of fraudulent behavior in the cryptosphere.
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(One example of this occurred earlier today:)
TLDR: @EtherDelta sale under scrutiny by China LE. Chinese Group purchased and issued a paper security offering to the public; then disappeared. #ExitScam https://t.co/3Y7YPKp0oe
— MΞRCΞR (@Mercerado) August 7, 2019
Tal agreed that throughout the process, honesty and transparency are extremely important: “transparency is key, and if a company suffered reputational damage due to malpractice, employee mistake, or a hack, then a statement detailing the chain of events, and an apology, is always a good first step.”
After the crisis has been dealt with, there are steps that companies can take to prevent similar incidents in the future: “in the long term, companies can also implement online reputation management (ORM) tactics including outreach to reporters, bloggers as well as engaging in new PRs in order to retake the Google Search Results Pages with favorable mentions,” Tal said. “However, this won’t make negative mentions go away entirely.”
Additionally, building a strategy and sticking to it is key. “Beyond that, a healthy dose of stoicism is required,” Tal said. “Any additional comment should be mediated through the company’s PR, assisted by the executive team. Companies cannot afford to have any representative imploding on an interview or misinterpreted in a crisis.”
Indeed, companies need to be careful not to compound one disaster onto another. “In certain extreme cases, crisis can go beyond a point of no return, where no comment would ever be satisfactory,” Tal remarked.
No stone can be left unturned
But what about smaller PR incidents?
Even if a bit of bad PR is relatively ineffectual in the immediate future, Tal explained that being proactive about addressing PR problems–even small-scale issues–can make a big difference further out. “While it may not look impactful in the short-term, user sentiment and brand sentiment is a game-changer in the long-term,” he said. “Doing well, or at least trying to – is usually ROI positive, and companies in the crypto space should be wary of whom they associate themselves with.”
Indeed, “while traders and consumers directly profiting off a product or a token may not be impacted on the spot, in the long-term, certain business opportunities may be sealed off forever for reputation-damaged companies, wanting to collaborate with high-end institutions who are wary of who they get in bed with.”
And negative press can be a sticky wicket when it comes to search results–”on an SEO-level, crises definitely stick and are there for anyone who invests in due diligence to view and to make up his [or] her own opinions.”
Who has the most to lose?
But certainly, not all kinds of crypto companies are created equal–therefore, certain types of companies may be more susceptible to reputational damage than others. According to Fields, this kind of viral spread of bad press is particularly bad for cryptocurrency exchanges.
“As the largest generators of revenue in the blockchain space, cryptocurrency exchanges stand to gain –– or lose –– the most with a sudden reputational shift,” she explained.“Centralized exchanges, in particular, rely upon trust from thousands or even millions of members to fill order books and maintain liquidity.”
Additionally, competition for users means that one exchange’s loss is another one’s gain: “the hypercompetitive environment for cryptocurrency exchanges has made the stewardship of any individual brand all the more critical; drop-off for one immediately becomes an opportunity for another.”
Tal echoed Fields’ sentiments: “exchanges and trading platforms, however, are by large much more prone to cyber-attacks and are more open to public scrutiny due to their consumer-centric nature, and as such, will often find themselves under the greatest reputational threat.”
He also explained that while the risk of reputational damage extends to “any company handling substantial amounts of user funds,” “exchanges are also ‘physically’ holding client funds on a regular basis, while processors are a ‘means to an end’ solution for facilitating capital transfers.”
What’s worse–when disaster strikes at an early stage, or later in the game?
The particular stage of development that a company is in can also play a role in how reputational damage can affect its future–depending on your perspective, reputational damage can either be worse for a company during its early days or once it is more well-established.
For Kyle Asman, partner at BX3 Capital, reputational damage is generally more severe in a company’s early days: “since they don’t yet have a built-upon reputation, early-stage companies face a much larger reputational risk. If one gets hacked on Day 1, it will be known as ‘the exchange that gets hacked.’”
On the other hand, though, a better-established company can’t play the “n00b” card when they make a mistake. “The more impressive a company’s repertoire is, the better story they’d make once they’re entangled in a crisis,” Orian Tal explained. To the same end, he explained that “smaller companies can often weather a crisis without a scratch, as building a story on their brand is just not worth a reporter’s time.”
”We have all the money we need… we can afford to lose money. But we can’t afford to lose reputation.” –Warren Buffet
Fields agree that larger companies may more quickly become fodder for the media: “The media primarily keeps tabs on large companies, so they are more likely to see coverage if they falter.”
However, she also pointed out that “early-stage companies may be at greater risk: as an industry that has seen many unqualified or malicious actors come and go, the blockchain space largely welcomes newcomers and then immediately subjects them to intense scrutiny.”
“During this period, companies in their early stages of growth must prove themselves to a wider community that is watching closely for signs of potential failure. It is therefore imperative to swiftly fix mistakes and to publicize corrective actions.”
Still, in Fields’ view, reputation becomes more valuable in correlation with a company’s size: “‘large companies are even more aware of damage to their reputations [than smaller ones,” she explained.
“In 2005, billionaire value investor Warren Buffett said of himself and Bill Gates: ‘We have all the money we need. While we’d like to have more, we can afford to lose money. But we can’t afford to lose reputation. Not a shred.’ Nothing has changed since then.”