Cryptocurrency is the fastest-growing sponsorship category in sports advertising for a reason.
The crypto industry adds immense value for leagues, franchises and athletes worldwide. In turn, leagues, franchises and professional athletes are looking to connect with younger audiences, like GenZers and millennials, an elusive and critical demographic for the sports industry that crypto has in spades.
And so, sports and crypto tie-ups are a win-win.
Simon Yu is CEO of StormX, a crypto exchange that sponsors the Portland Trail Blazers U.S. professional basketball team. This article is part of CoinDesk's "Sports Week."
Meeting people where they are
Globally, sports sponsorship is a $40 billion industry. More than $3 billion has been spent on sports sponsorships in the past year alone – increasingly by crypto firms.
It may not seem like an obvious place for audience overlap, but crypto brands are using the massive reach of sports to grow awareness of a relatively new industry. Through sponsorships – such as Sam Bankman-Fried's FTX exchange's logo on baseball umpire shirts and in ads during the Super Bowl – brands can meet people where they are.
The crypto industry is seeking to humanize what can feel like a complex and intimidating technology to the average person just getting started. When a recognizable athlete endorses a product, whether it's Wheaties cereal, Gatorade sports drinks or a pair of shoes, consumers are more inclined to try that brand.
For people already using that product, their decision feels validated and, in so doing, brand loyalty increases. In fact, celebrity endorsement can cause the value of stocks to rise and increase sales by about 4%.
Winning back a lost generation
Likewise, attracting young viewers is mission critical for the major sports leagues. GenZers, having grown up during the past 15 years with a smartphone in their hands and continuous internet connection, are the prototypical digital native. They are avid gamers, social media users and crypto enthusiasts.
But only 23% of Gen Z said they were passionate sports fans. Comparing this with the 42% of millennials, 33% of Generation Xers, and 31% of baby boomers, it's obvious why the GenZ category is such an important one for the sports industry. They are the future.
GenZers are more likely to believe that crypto is the future. In fact, 94% of crypto buyers are in the Gen Z/millennial cohorts. They inherently understand the digital world and that a digital currency native to the internet, such as crypto, is inevitable. They see the old way as just that, past its prime and outdated.
In other words, by associating themselves with crypto through these partnerships, the sports industry is signaling they "get" the younger generation. It's a way for them to on-board the next fan base that is so critical to the industry's future success.
And athletes are doing the same. Too many pros to count are using crypto in new and creative ways as to grow and monetize their personal brands. They're using social tokens, launching non-fungible tokens and signing ad deals with the hottest crypto firms.
For crypto brands, the sports industry provides the opportunity to deliver a wider audience within the demographic that digital asset players in the space want to reach. When in sponsorship deals, they can be extremely effective in building and retaining customer interest, loyalty and trust. This type of trust building happens incrementally.
Of course, sports sponsorships don't come without vocal and vituperative critics. But that's to be expected.
Crypto is criticized for its environmental impact, and for the retail speculation that sometimes hurts small-time traders. Sports teams are sometimes called out for contributing to the mania around crypto investing.
Mark Cuban, the billionaire trader, crypto enthusiast and owner of the Dallas Mavericks basketball team, responded to this in an interview with The Athletic.
"Facebook, Amazon and Apple have lost more in market cap than the entire crypto market. A ton of tech companies have lost 80% or more of their value. I don't see anyone questioning sponsorships by those companies," Cuban said. He has a point.
Moreover, although it's not perfect, leagues and franchises do vet potential advertisers (i.e., reviewing company financials, conducting character assessments of those in leadership and more). At the end of the day, both parties want to ensure that they will have long-term, mutually beneficial partnerships.
In some sense, criticism of crypto-sports tie-ups is proof these sponsorships are working. They are a catalyst for a conversation, a crypto ice breaker. Like any nascent technology, there is a learning curve. That curve might be a little steep but it's a natural process.