Google on Wednesday said it will stop serving ads for cryptocurrencies and related content in June.
The ban includes but is not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice.
Google also will bar aggregators and affiliates from serving ads for cryptocurrencies and related content.
Facebook adopted a similar policy earlier this year when it began prohibiting ads for binary options, initial coin offerings, and cryptocurrency on the grounds that they frequently were associated with misleading or deceptive promotional practices.
Following the Google announcement, bitcoin prices dropped 9 percent to a one-month low of US$8,252.39. They dropped 12 percent when Facebook declared its ban.
Not for Retail Investors
Because of the complexity of cryptocurrency products, consumers may need to be protected from themselves, as Google and Facebook appear to be doing, suggested Josh Crandall, CEO of NetPop Research.
“This is a very speculative space, and people are being taken advantage of,” he told the E-Commerce Times. “People are jumping into this like it’s gambling, so Google is trying to protect consumers.”
Speculative investments like cryptocurrencies really aren’t suitable for retail investors, said Daniele Bianchi, an assistant professor of finance at the University of Warwick.
“The Google ban will limit the exposure of the cryptocurrency market to retail investors, which do not necessarily have sufficient instruments to judge and evaluate the risk they can be exposed to investing in cryptocurrencies,” he told the E-Commerce Times.
One particularly complex virtual money product is the initial coin offering, or ICO, which is similar to a stock’s initial public offering, or IPO, but in place of shares, an investor gets cryptocurrency tokens.
ICOs recently have come under increased scrutiny from federal regulators because they believe it’s too easy for investors to get ICOs confused with IPOs.
“People believe they’re getting stock, not a crypto token,” said Carolina Abenante, founder of NYIAX, an advertising exchange.
Some ICOs are packaged in a way that makes them look like an IPO, she told the E-Commerce Times.
Although Google shouldn’t be an arbiter of risk, it should pay attention to potential regulatory trends, Abenante maintained. “At this point in time, they should be restricting themselves because there’s enough noise in the environment that says there will be restrictions on this.”
Good PR Move
There may be motives other than consumer protection driving Google’s cryptocurrency ad ban.
“Google is looking after and tending to the health of online ads overall,” Netpop’s Crandall said.
“While it could be making money from these speculative cryptocurrency providers, it’s more concerned about the long-term health of the online advertising ecosystem,” he noted.
“It doesn’t want consumers to react in a negative way to all online ads because they were taken advantage of by one for cryptocurrency,” Crandall said.
The ban is a smart public relations move by Google, noted John Carroll, a mass communications professor at Boston University.
“It’s smart to try to get out in front of any fraudulent advertising that might emerge in this category,” he told the E-Commerce Times.
Google also may be reacting to growing suspicions among consumers about big tech companies, Carroll suggested.
“All the controversy swirling around tech companies lately has made the public increasingly skeptical about the effect these companies have had on society,” he said.
Signs of that were evident in a recent reputation poll released by the Harris organization, Carroll noted, which showed Google dropping from No. 8 to No. 28 in the ranking.
“This seems to be a preemptive move to avoid the kind of publicity that could attach to Google and Facebook because of the unpredictability and unreliability of the cryptocurrency market,” he observed.
Despite the large declines in cryptocurrency prices following the Google and Facebook announcements, it remains to be seen whether the ad bans will have a lasting impact on the virtual money market.
“I don’t think it’ll hurt the cryptocurrencies,” said Jeffrey Carr, managing director of Reel Holdings.
“They’ll find other ways to get the word out that don’t require paid advertisements, which aren’t necessarily the best way to run a marketing campaign anyway,” he told the E-Commerce Times.
The ban isn’t likely to have much impact on Google either.
“Perhaps Google will lose some ad revenues,” Warwick’s Bianchi said, “but nothing that will affect Google profits or market share in a major way.”