AFL, Crypto.com deal raises questions about brand purpose and duty of care

It is a much-heralded aphorism that when taxi drivers start offering you stock tips it's time to get out of the market. But what about when celebrities like Matt Damon start carnival-barking at you about cryptocurrencies?

This week's announcement from the AFL that it signed a $25 million five-year partnership with Crypto.com to be the major partner of both the 2022 premiership season and AFLW season, could raise uncomfortable questions about brands, values and purpose.

The fact that crypto.com was locking customers out of withdrawing their funds after suspicious activity was detected in the same week it announced the deal didn't help with the optics. The lock has now been lifted.

Crypto.com has been expanding its sponsorship deals aggressively in the sporting sector, with this being the first of its kind in Australia. Overseas, the crypto brand has partnered with the Formula 1, UFC, NBA team the Philadelphia 76ers and will take over the naming rights over of the iconic Staples Center to soon become the Crypto.com Arena.

The AFL meanwhile has a membership of over a million people, three-quarters of whom are old enough to trade crypto — but should they? And what duty of care does a brand like AFL have when introducing its audience to a new partner in such a volatile category?

After all, crypto is a speculative asset and it is unlikely that many, or indeed most of the AFL's members possess the sophisticated insight that professional traders would need to make sense of the emerging and opaque world of cryptocurrency.

That volatility has been on display over the last few months the market losing about 50 percent of its value (or $1.9T) since November peaks.

Both the AFL chief executive, Gillion McLachlan and co-founder and CEO at Crypto.com Kris Marszalek lauded the partnership claiming crypto is a “dynamic and emerging industry” and “this partnership will resonate well with all footy fans across the country”.

Perhaps, but cryptocurrency investment in Australia is largely unregulated, with several crypto-assets and other digital assets not classified as financial products.  

That contrasts with other risky investment classes often seen in the sports sector, such contract for difference (CFDs) platforms. For example, online trading platform TMGM is a sponsor of this year's Australian Open, having signed an initial deal in 2020. But unlike cryptocurrencies, CFDs have the sticky fingerprints of regulators like ASIC all over them.

Likewise, your financial planner is unlikely to be pushing you into crypto anytime soon.

In a statement to Digital Nation, the Financial Planning Association of Australia said, “As crypto is not a regulated investment product financial planners are unable to advise clients on whether or how to invest in it. Investors who wish to invest in crypto are not protected from any losses they may suffer.”

In a recent speech to the AFR Super & Wealth Summit, ASIC Chair Joe Longo said the implications for consumers investing in crypto is “potentially huge”.

He told attendees, “It is almost an article of faith that no one should invest in something they don’t understand. Who among us can say they really understand crypto-assets and cryptocurrencies?"

According to Longo, “Those here who are directly involved in the broader managed investments sector will understand the serious implications of investing without understanding. It is not an approach to be undertaken lightly.”

Brand purpose

Such deals then raise the wider questions of how brand managers should determine which potential partners align to brand purpose.

Jennifer Arnold, owner at Jennifer Arnold Consulting, is a marketing executive with a 20 year pedigree across a range of global technology brands.  

She told Digital Nation Australia that when looking at a sponsorship proposal, she assesses whether a company’s employees are prepared to be a brand ambassador for that particular sponsorship.

“Something I consider, particularly for a charity, event or sporting organisation, is whether it's something employees, customers and partners would want to support personally to provide experiences through the sponsorship, not just see the company logo.

“Also for them to be happy to be involved personally they need to feel all values are aligned - theirs, the company's and the sponsored entities,” she said.

Arnold said looking at a company’s brand purpose and brand values you have to understand their alignment.

“For instance, if you're all about making people's lives better then you want to make sure that a company that you're working with, whether that's a partner or a sponsor, is also in alignment so that their workforce practices and their manufacturing practices aren't going against that.

"The last thing you would want is somebody who has questionable ethical supply chain issues, for those issues to come up and do for your brand to be aligned to that. That initial alignment would be really critical," she said. 

Arnold also raises the issue of “walking the walk and talking the talk” of what your brand promises.

“Over the last few years as I was interviewing prospective employees, they were very interested in what our brand values were and then how did that play out in terms of how gender was treated within the company. For US employees, there were questions about do we support Black Lives Matter? In Australia, there are questions about indigenous support.

"It plays out not just from a customer perspective, but also from an employee perspective as to whether or not they personally want to be aligned with the company based on what the brand values are and whether or not they actually believe those brand values,” she added.

These brand deals no longer affect just the marketing team but also speak to reputational issues that are being discussed at board levels, Arnold said. 

“Brand purpose, brand values and brand vision are becoming much more board-level discussions. Making sure everything in the company whether that be their procurement, employment practices, or supply chain practices, are all in alignment with their brand purpose, brand value and brand promise they're making to their customers and their employees,” she said.

Your own values first

Rushenka Perera, Head of Marketing at SAP ANZ meanwhile described the filters marketers use to ensure a brand deal aligns with a company’s brand value and purpose.

Perera told Digital Nation, "The first, and perhaps most important, filter is to make sure that you establish your own values first. Don’t just go out looking for big sponsorships, as you may find that these don’t necessarily line up to the brand equity you want to build for your brand.

SAP is a major player in the world sports sponsorship supporting everything from basketball, football, car racing, tennis, sailing, equestrian and esports.

“Considering whether sponsorships would resonate with customers, and with employees, is also key. Ask yourself what value being tied to what a partner brings – do your key audiences see this as a good thing? Do they build brand equity in your business by association? Whose brand will benefit more and to what extent?,” she said.

Perera said it is essential for brands to have a purpose, something that speaks to who they are and what they represent.

“Establishing and promoting a clear, strategic purpose that is authentic to your business aids decision making. It helps you resonate with customers, gives employees something they can get behind, and helps build brand equity. Everyone wants to believe that they are contributing to something bigger than themselves and having a purpose can do just that,” she said.

Digital Nation Australia asked the AFL about how it arrived at its decision to partner with Crypto.com.

“After initially connecting with Crypto.com it became clear both the AFL and Crypto.com share a passion to progress the future of elite sport and technology. It is an exciting prospect to work together and drive further innovation throughout our industry. Our philosophy is to continue to partner with organisations that help us progress the game so that everyone has the opportunity to be part of Australian Football."

Digital Nation Australia has reached out to Crypto.com for comment.

(This article was updated on 24/1 to include the scale of crypto losses since November.)