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Jon Brosio

Jon Brosio

2 years ago

You can learn more about marketing from these 8 copywriting frameworks than from a college education.

More on Marketing

Joseph Mavericks

Joseph Mavericks

2 years ago

You Don't Have to Spend $250 on TikTok Ads Because I Did

900K impressions, 8K clicks, and $$$ orders…

Photo by Eyestetix Studio on Unsplash

I recently started dropshipping. Now that I own my business and can charge it as a business expense, it feels less like money wasted if it doesn't work. I also made t-shirts to sell. I intended to open a t-shirt store and had many designs on a hard drive. I read that Tiktok advertising had a high conversion rate and low cost because they were new. According to many, the advertising' cost/efficiency ratio would plummet and become as bad as Google or Facebook Ads. Now felt like the moment to try Tiktok marketing and dropshipping. I work in marketing for a SaaS firm and have seen how poorly ads perform. I wanted to try it alone.

I set up $250 and ran advertising for a week. Before that, I made my own products, store, and marketing. In this post, I'll show you my process and results.

Setting up the store

Dropshipping is a sort of retail business in which the manufacturer ships the product directly to the client through an online platform maintained by a seller. The seller takes orders but has no stock. The manufacturer handles all orders. This no-stock concept increases profitability and flexibility.

In my situation, I used previous t-shirt designs to make my own product. I didn't want to handle order fulfillment logistics, so I looked for a way to print my designs on demand, ship them, and handle order tracking/returns automatically. So I found Printful.

Source

I needed to connect my backend and supplier to a storefront so visitors could buy. 99% of dropshippers use Shopify, but I didn't want to master the difficult application. I wanted a one-day project. I'd previously worked with Big Cartel, so I chose them.

Source

Big Cartel doesn't collect commissions on sales, simply a monthly flat price ($9.99 to $19.99 depending on your plan).

After opening a Big Cartel account, I uploaded 21 designs and product shots, then synced each product with Printful.

Source (the store is down to 5 products because I switched back to the free plan)

Developing the ads

I mocked up my designs on cool people photographs from placeit.net, a great tool for creating product visuals when you don't have a studio, camera gear, or models to wear your t-shirts.

I opened an account on the website and had advertising visuals within 2 hours.

Source

Because my designs are simple (black design on white t-shirt), I chose happy, stylish people on plain-colored backdrops. After that, I had to develop an animated slideshow.

Because I'm a graphic designer, I chose to use Adobe Premiere to create animated Tiktok advertising.

Premiere is a fancy video editing application used for more than advertisements. Premiere is used to edit movies, not social media marketing. I wanted this experiment to be quick, so I got 3 social media ad templates from motionarray.com and threw my visuals in. All the transitions and animations were pre-made in the files, so it only took a few hours to compile. The result:

I downloaded 3 different soundtracks for the videos to determine which would convert best.

After that, I opened a Tiktok business account, uploaded my films, and inserted ad info. They went live within one hour.

The (poor) outcomes

Image by author

As a European company, I couldn't deliver ads in the US. All of my advertisements' material (title, description, and call to action) was in English, hence they continued getting rejected in Europe for countries that didn't speak English. There are a lot of them:

I lost a lot of quality traffic, but I felt that if the images were engaging, people would check out the store and buy my t-shirts. I was wrong.

  • 51,071 impressions on Day 1. 0 orders after 411 clicks

  • 114,053 impressions on Day 2. 1.004 clicks and no orders

  • Day 3: 987 clicks, 103,685 impressions, and 0 orders

  • 101,437 impressions on Day 4. 0 orders after 963 clicks

  • 115,053 impressions on Day 5. 1,050 clicks and no purchases

  • 125,799 impressions on day 6. 1,184 clicks, no purchases

  • 115,547 impressions on Day 7. 1,050 clicks and no purchases

  • 121,456 impressions on day 8. 1,083 clicks, no purchases

  • 47,586 impressions on Day 9. 419 Clicks. No orders

My overall conversion rate for video advertisements was 0.9%. TikTok's paid ad formats all result in strong engagement rates (ads average 3% to 12% CTR to site), therefore a 1 to 2% CTR should have been doable.

My one-week experiment yielded 8,151 ad clicks but no sales. Even if 0.1% of those clicks converted, I should have made 8 sales. Even companies with horrible web marketing would get one download or trial sign-up for every 8,151 clicks. I knew that because my advertising were in English, I had no impressions in the main EU markets (France, Spain, Italy, Germany), and that this impacted my conversion potential. I still couldn't believe my numbers.

I dug into the statistics and found that Tiktok's stats didn't match my store traffic data.

Looking more closely at the numbers

My ads were approved on April 26 but didn't appear until April 27. My store dashboard showed 440 visitors but 1,004 clicks on Tiktok. This happens often while tracking campaign results since different platforms handle comparable user activities (click, view) differently. In online marketing, residual data won't always match across tools.

My data gap was too large. Even if half of the 1,004 persons who clicked closed their browser or left before the store site loaded, I would have gained 502 visitors. The significant difference between Tiktok clicks and Big Cartel store visits made me suspicious. It happened all week:

  • Day 1: 440 store visits and 1004 ad clicks

  • Day 2: 482 store visits, 987 ad clicks

  • 3rd day: 963 hits on ads, 452 store visits

  • 443 store visits and 1,050 ad clicks on day 4.

  • Day 5: 459 store visits and 1,184 ad clicks

  • Day 6: 430 store visits and 1,050 ad clicks

  • Day 7: 409 store visits and 1,031 ad clicks

  • Day 8: 166 store visits and 418 ad clicks

The disparity wasn't related to residual data or data processing. The disparity between visits and clicks looked regular, but I couldn't explain it.

After the campaign concluded, I discovered all my creative assets (the videos) had a 0% CTR and a $0 expenditure in a separate dashboard. Whether it's a dashboard reporting issue or a budget allocation bug, online marketers shouldn't see this.

Image by author

Tiktok can present any stats they want on their dashboard, just like any other platform that runs advertisements to promote content to its users. I can't verify that 895,687 individuals saw and clicked on my ad. I invested $200 for what appears to be around 900K impressions, which is an excellent ROI. No one bought a t-shirt, even an unattractive one, out of 900K people?

Would I do it again?

Nope. Whether I didn't make sales because Tiktok inflated the dashboard numbers or because I'm horrible at producing advertising and items that sell, I’ll stick to writing content and making videos. If setting up a business and ads in a few days was all it took to make money online, everyone would do it.

Video advertisements and dropshipping aren't dead. As long as the internet exists, people will click ads and buy stuff. Converting ads and selling stuff takes a lot of work, and I want to focus on other things.

I had always wanted to try dropshipping and I’m happy I did, I just won’t stick to it because that’s not something I’m interested in getting better at.

If I want to sell t-shirts again, I'll avoid Tiktok advertisements and find another route.

Ivona Hirschi

Ivona Hirschi

2 years ago

7 LinkedIn Tips That Will Help in Audience Growth

In 8 months, I doubled my audience with them.

LinkedIn's buzz isn't over.

People dream of social proof every day. They want clients, interesting jobs, and field recognition.

LinkedIn coaches will benefit greatly. Sell learning? Probably. Can you use it?

Consistency has been key in my eight-month study of LinkedIn. However, I'll share seven of my tips. 700 to 4500 people followed me.

1. Communication, communication, communication

LinkedIn is a social network. I like to think of it as a cafe. Here, you can share your thoughts, meet friends, and discuss life and work.

Do not treat LinkedIn as if it were a board for your post-its.

More socializing improves relationships. It's about people, like any network.

Consider interactions. Three main areas:

  • Respond to criticism left on your posts.

  • Comment on other people's posts

  • Start and maintain conversations through direct messages.

Engage people. You spend too much time on Facebook if you only read your wall. Keeping in touch and having meaningful conversations helps build your network.

Every day, start a new conversation to make new friends.

2. Stick with those you admire

Interact thoughtfully.

Choose your contacts. Build your tribe is a term. Respectful networking.

I only had past colleagues, family, and friends in my network at the start of this year. Not business-friendly. Since then, I've sought out people I admire or can learn from.

Finding a few will help you. As they connect you to their networks. Friendships can lead to clients.

Don't underestimate network power. Cafe-style. Meet people at each table. But avoid people who sell SEO, web redesign, VAs, mysterious job opportunities, etc.

3. Share eye-catching infographics

Daily infographics flood LinkedIn. Visuals are popular. Use Canva's free templates if you can't draw them.

Last week's:

Screenshot of Ivona Hirshi’s post.

It's a fun way to visualize your topic.

You can repost and comment on infographics. Involve your network. I prefer making my own because I build my brand around certain designs.

My friend posted infographics consistently for four months and grew his network to 30,000.

If you start, credit the authors. As you steal someone's work.

4. Invite some friends over.

LinkedIn alone can be lonely. Having a few friends who support your work daily will boost your growth.

I was lucky to be invited to a group of networkers. We share knowledge and advice.

Having a few regulars who can discuss your posts is helpful. It's artificial, but it works and engages others.

Consider who you'd support if they were in your shoes.

You can pay for an engagement group, but you risk supporting unrelated people with rubbish posts.

Help each other out.

5. Don't let your feed or algorithm divert you.

LinkedIn's algorithm is magical.

Which time is best? How fast do you need to comment? Which days are best?

Overemphasize algorithms. Consider the user. No need to worry about the best time.

Remember to spend time on LinkedIn actively. Not passively. That is what Facebook is for.

Surely someone would find a LinkedIn recipe. Don't beat the algorithm yet. Consider your audience.

6. The more personal, the better

Personalization isn't limited to selfies. Share your successes and failures.

The more personality you show, the better.

People relate to others, not theories or quotes. Why should they follow you? Everyone posts the same content?

Consider your friends. What's their appeal?

Because they show their work and identity. It's simple. Medium and Linkedin are your platforms. Find out what works.

You can copy others' hooks and structures. You decide how simple to make it, though.

7. Have fun with those who have various post structures.

I like writing, infographics, videos, and carousels. Because you can:

Repurpose your content!

Out of one blog post I make:

  • Newsletter

  • Infographics (positive and negative points of view)

  • Carousel

  • Personal stories

  • Listicle

Create less but more variety. Since LinkedIn posts last 24 hours, you can rotate the same topics for weeks without anyone noticing.

Effective!

The final LI snippet to think about

LinkedIn is about consistency. Some say 15 minutes. If you're serious about networking, spend more time there.

The good news is that it is worth it. The bad news is that it takes time.

Guillaume Dumortier

Guillaume Dumortier

2 years ago

Mastering the Art of Rhetoric: A Guide to Rhetorical Devices in Successful Headlines and Titles

Unleash the power of persuasion and captivate your audience with compelling headlines.

As the old adage goes, "You never get a second chance to make a first impression."

In the world of content creation and social ads, headlines and titles play a critical role in making that first impression.

A well-crafted headline can make the difference between an article being read or ignored, a video being clicked on or bypassed, or a product being purchased or passed over.

To make an impact with your headlines, mastering the art of rhetoric is essential. In this post, we'll explore various rhetorical devices and techniques that can help you create headlines that captivate your audience and drive engagement.


tl;dr : Headline Magician will help you craft the ultimate headline titles powered by rhetoric devices

No alt text provided for this image

Example with a high-end luxury organic zero-waste skincare brand


✍️ The Power of Alliteration

Alliteration is the repetition of the same consonant sound at the beginning of words in close proximity. This rhetorical device lends itself well to headlines, as it creates a memorable, rhythmic quality that can catch a reader's attention.

By using alliteration, you can make your headlines more engaging and easier to remember.

Examples:

"Crafting Compelling Content: A Comprehensive Course"

"Mastering the Art of Memorable Marketing"


🔁 The Appeal of Anaphora

Anaphora is the repetition of a word or phrase at the beginning of successive clauses. This rhetorical device emphasizes a particular idea or theme, making it more memorable and persuasive.

In headlines, anaphora can be used to create a sense of unity and coherence, which can draw readers in and pique their interest.

Examples:

"Create, Curate, Captivate: Your Guide to Social Media Success"

"Innovation, Inspiration, and Insight: The Future of AI"


🔄 The Intrigue of Inversion

Inversion is a rhetorical device where the normal order of words is reversed, often to create an emphasis or achieve a specific effect.

In headlines, inversion can generate curiosity and surprise, compelling readers to explore further.

Examples:

"Beneath the Surface: A Deep Dive into Ocean Conservation"

"Beyond the Stars: The Quest for Extraterrestrial Life"


⚖️ The Persuasive Power of Parallelism

Parallelism is a rhetorical device that involves using similar grammatical structures or patterns to create a sense of balance and symmetry.

In headlines, parallelism can make your message more memorable and impactful, as it creates a pleasing rhythm and flow that can resonate with readers.

Examples:

"Eat Well, Live Well, Be Well: The Ultimate Guide to Wellness"

"Learn, Lead, and Launch: A Blueprint for Entrepreneurial Success"


⏭️ The Emphasis of Ellipsis

Ellipsis is the omission of words, typically indicated by three periods (...), which suggests that there is more to the story.

In headlines, ellipses can create a sense of mystery and intrigue, enticing readers to click and discover what lies behind the headline.

Examples:

"The Secret to Success... Revealed"

"Unlocking the Power of Your Mind... A Step-by-Step Guide"


🎭 The Drama of Hyperbole

Hyperbole is a rhetorical device that involves exaggeration for emphasis or effect.

In headlines, hyperbole can grab the reader's attention by making bold, provocative claims that stand out from the competition. Be cautious with hyperbole, however, as overuse or excessive exaggeration can damage your credibility.

Examples:

"The Ultimate Guide to Mastering Any Skill in Record Time"

"Discover the Revolutionary Technique That Will Transform Your Life"


❓The Curiosity of Questions

Posing questions in your headlines can be an effective way to pique the reader's curiosity and encourage engagement.

Questions compel the reader to seek answers, making them more likely to click on your content. Additionally, questions can create a sense of connection between the content creator and the audience, fostering a sense of dialogue and discussion.

Examples:

"Are You Making These Common Mistakes in Your Marketing Strategy?"

"What's the Secret to Unlocking Your Creative Potential?"


💥 The Impact of Imperatives

Imperatives are commands or instructions that urge the reader to take action. By using imperatives in your headlines, you can create a sense of urgency and importance, making your content more compelling and actionable.

Examples:

"Master Your Time Management Skills Today"

"Transform Your Business with These Innovative Strategies"


💢 The Emotion of Exclamations

Exclamations are powerful rhetorical devices that can evoke strong emotions and convey a sense of excitement or urgency.

Including exclamations in your headlines can make them more attention-grabbing and shareable, increasing the chances of your content being read and circulated.

Examples:

"Unlock Your True Potential: Find Your Passion and Thrive!"

"Experience the Adventure of a Lifetime: Travel the World on a Budget!"


🎀 The Effectiveness of Euphemisms

Euphemisms are polite or indirect expressions used in place of harsher, more direct language.

In headlines, euphemisms can make your message more appealing and relatable, helping to soften potentially controversial or sensitive topics.

Examples:

"Navigating the Challenges of Modern Parenting"

"Redefining Success in a Fast-Paced World"


⚡Antithesis: The Power of Opposites

Antithesis involves placing two opposite words side-by-side, emphasizing their contrasts. This device can create a sense of tension and intrigue in headlines.

Examples:

"Once a day. Every day"

"Soft on skin. Kill germs"

"Mega power. Mini size."

To utilize antithesis, identify two opposing concepts related to your content and present them in a balanced manner.


🎨 Scesis Onomaton: The Art of Verbless Copy

Scesis onomaton is a rhetorical device that involves writing verbless copy, which quickens the pace and adds emphasis.

Example:

"7 days. 7 dollars. Full access."

To use scesis onomaton, remove verbs and focus on the essential elements of your headline.


🌟 Polyptoton: The Charm of Shared Roots

Polyptoton is the repeated use of words that share the same root, bewitching words into memorable phrases.

Examples:

"Real bread isn't made in factories. It's baked in bakeries"

"Lose your knack for losing things."

To employ polyptoton, identify words with shared roots that are relevant to your content.


✨ Asyndeton: The Elegance of Omission

Asyndeton involves the intentional omission of conjunctions, adding crispness, conviction, and elegance to your headlines.

Examples:

"You, Me, Sushi?"

"All the latte art, none of the environmental impact."

To use asyndeton, eliminate conjunctions and focus on the core message of your headline.


🔮 Tricolon: The Magic of Threes

Tricolon is a rhetorical device that uses the power of three, creating memorable and impactful headlines.

Examples:

"Show it, say it, send it"

"Eat Well, Live Well, Be Well."

To use tricolon, craft a headline with three key elements that emphasize your content's main message.


🔔 Epistrophe: The Chime of Repetition

Epistrophe involves the repetition of words or phrases at the end of successive clauses, adding a chime to your headlines.

Examples:

"Catch it. Bin it. Kill it."

"Joint friendly. Climate friendly. Family friendly."

To employ epistrophe, repeat a key phrase or word at the end of each clause.

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Dr. Linda Dahl

Dr. Linda Dahl

2 years ago

We eat corn in almost everything. Is It Important?

Photo by Mockup Graphics on Unsplash

Corn Kid got viral on TikTok after being interviewed by Recess Therapy. Tariq, called the Corn Kid, ate a buttery ear of corn in the video. He's corn crazy. He thinks everyone just has to try it. It turns out, whether we know it or not, we already have.

Corn is a fruit, veggie, and grain. It's the second-most-grown crop. Corn makes up 36% of U.S. exports. In the U.S., it's easy to grow and provides high yields, as proven by the vast corn belt spanning the Midwest, Great Plains, and Texas panhandle. Since 1950, the corn crop has doubled to 10 billion bushels.

You say, "Fine." We shouldn't just grow because we can. Why so much corn? What's this corn for?

Why is practical and political. Michael Pollan's The Omnivore's Dilemma has the full narrative. Early 1970s food costs increased. Nixon subsidized maize to feed the public. Monsanto genetically engineered corn seeds to make them hardier, and soon there was plenty of corn. Everyone ate. Woot! Too much corn followed. The powers-that-be had to decide what to do with leftover corn-on-the-cob.

They are fortunate that corn has a wide range of uses.

First, the edible variants. I divide corn into obvious and stealth.

Obvious corn includes popcorn, canned corn, and corn on the cob. This form isn't always digested and often comes out as entire, polka-dotting poop. Cornmeal can be ground to make cornbread, polenta, and corn tortillas. Corn provides antioxidants, minerals, and vitamins in moderation. Most synthetic Vitamin C comes from GMO maize.

Corn oil, corn starch, dextrose (a sugar), and high-fructose corn syrup are often overlooked. They're stealth corn because they sneak into practically everything. Corn oil is used for frying, baking, and in potato chips, mayonnaise, margarine, and salad dressing. Baby food, bread, cakes, antibiotics, canned vegetables, beverages, and even dairy and animal products include corn starch. Dextrose appears in almost all prepared foods, excluding those with high-fructose corn syrup. HFCS isn't as easily digested as sucrose (from cane sugar). It can also cause other ailments, which we'll discuss later.

Most foods contain corn. It's fed to almost all food animals. 96% of U.S. animal feed is corn. 39% of U.S. corn is fed to livestock. But animals prefer other foods. Omnivore chickens prefer insects, worms, grains, and grasses. Captive cows are fed a total mixed ration, which contains corn. These animals' products, like eggs and milk, are also corn-fed.

There are numerous non-edible by-products of corn that are employed in the production of items like:

  1. fuel-grade ethanol

  2. plastics

  3. batteries

  4. cosmetics

  5. meds/vitamins binder

  6. carpets, fabrics

  7. glutathione

  8. crayons

  9. Paint/glue

How does corn influence you? Consider quick food for dinner. You order a cheeseburger, fries, and big Coke at the counter (or drive-through in the suburbs). You tell yourself, "No corn." All that contains corn. Deconstruct:

Cows fed corn produce meat and cheese. Meat and cheese were bonded with corn syrup and starch (same). The bun (corn flour and dextrose) and fries were fried in maize oil. High fructose corn syrup sweetens the drink and helps make the cup and straw.

Just about everything contains corn. Then what? A cornspiracy, perhaps? Is eating too much maize an issue, or should we strive to stay away from it whenever possible?

As I've said, eating some maize can be healthy. 92% of U.S. corn is genetically modified, according to the Center for Food Safety. The adjustments are expected to boost corn yields. Some sweet corn is genetically modified to produce its own insecticide, a protein deadly to insects made by Bacillus thuringiensis. It's safe to eat in sweet corn. Concerns exist about feeding agricultural animals so much maize, modified or not.

High fructose corn syrup should be consumed in moderation. Fructose, a sugar, isn't easily metabolized. Fructose causes diabetes, fatty liver, obesity, and heart disease. It causes inflammation, which might aggravate gout. Candy, packaged sweets, soda, fast food, juice drinks, ice cream, ice cream topping syrups, sauces & condiments, jams, bread, crackers, and pancake syrup contain the most high fructose corn syrup. Everyday foods with little nutrients. Check labels and choose cane sugar or sucrose-sweetened goods. Or, eat corn like the Corn Kid.

Bob Service

Bob Service

3 years ago

Did volcanic 'glasses' play a role in igniting early life?

Quenched lava may have aided in the formation of long RNA strands required by primitive life.

It took a long time for life to emerge. Microbes were present 3.7 billion years ago, just a few hundred million years after the 4.5-billion-year-old Earth had cooled enough to sustain biochemistry, according to fossils, and many scientists believe RNA was the genetic material for these first species. RNA, while not as complicated as DNA, would be difficult to forge into the lengthy strands required to transmit genetic information, raising the question of how it may have originated spontaneously.

Researchers may now have a solution. They demonstrate how basaltic glasses assist individual RNA letters, also known as nucleoside triphosphates, join into strands up to 200 letters long in lab studies. The glasses are formed when lava is quenched in air or water, or when melted rock generated by asteroid strikes cools rapidly, and they would have been plentiful in the early Earth's fire and brimstone.

The outcome has caused a schism among top origin-of-life scholars. "This appears to be a great story that finally explains how nucleoside triphosphates react with each other to create RNA strands," says Thomas Carell, a scientist at Munich's Ludwig Maximilians University. However, Harvard University's Jack Szostak, an RNA expert, says he won't believe the results until the study team thoroughly describes the RNA strands.

Researchers interested in the origins of life like the idea of a primordial "RNA universe" since the molecule can perform two different functions that are essential for life. It's made up of four chemical letters, just like DNA, and can carry genetic information. RNA, like proteins, can catalyze chemical reactions that are necessary for life.

However, RNA can cause headaches. No one has yet discovered a set of plausible primordial conditions that would cause hundreds of RNA letters—each of which is a complicated molecule—to join together into strands long enough to support the intricate chemistry required to kick-start evolution.

Basaltic glasses may have played a role, according to Stephen Mojzsis, a geologist at the University of Colorado, Boulder. They're high in metals like magnesium and iron, which help to trigger a variety of chemical reactions. "Basaltic glass was omnipresent on Earth at the time," he adds.

He provided the Foundation for Applied Molecular Evolution samples of five different basalt glasses. Each sample was ground into a fine powder, sanitized, and combined with a solution of nucleoside triphosphates by molecular biologist Elisa Biondi and her colleagues. The RNA letters were unable to link up without the presence of glass powder. However, when the molecules were mixed with the glass particles, they formed long strands of hundreds of letters, according to the researchers, who published their findings in Astrobiology this week. There was no need for heat or light. Biondi explains, "All we had to do was wait." After only a day, little RNA strands produced, yet the strands continued to grow for months. Jan Paek, a molecular biologist at Firebird Biomolecular Sciences, says, "The beauty of this approach is its simplicity." "Mix the components together, wait a few days, and look for RNA."

Nonetheless, the findings pose a slew of problems. One of the questions is how nucleoside triphosphates came to be in the first place. Recent study by Biondi's colleague Steven Benner suggests that the same basaltic glasses may have aided in the creation and stabilization of individual RNA letters.

The form of the lengthy RNA strands, according to Szostak, is a significant challenge. Enzymes in modern cells ensure that most RNAs form long linear chains. RNA letters, on the other hand, can bind in complicated branching sequences. Szostak wants the researchers to reveal what kind of RNA was produced by the basaltic glasses. "It irritates me that the authors made an intriguing initial finding but then chose to follow the hype rather than the research," Szostak says.

Biondi acknowledges that her team's experiment almost probably results in some RNA branching. She does acknowledge, however, that some branched RNAs are seen in species today, and that analogous structures may have existed before the origin of life. Other studies carried out by the study also confirmed the presence of lengthy strands with connections, indicating that they are most likely linear. "It's a healthy argument," says Dieter Braun, a Ludwig Maximilian University origin-of-life chemist. "It will set off the next series of tests."

Marco Manoppo

Marco Manoppo

2 years ago

Failures of DCG and Genesis

Don't sleep with your own sister.

70% of lottery winners go broke within five years. You've heard the last one. People who got rich quickly without setbacks and hard work often lose it all. My father said, "Easy money is easily lost," and a wealthy friend who owns a family office said, "The first generation makes it, the second generation spends it, and the third generation blows it."

This is evident. Corrupt politicians in developing countries live lavishly, buying their third wives' fifth Hermès bag and celebrating New Year's at The Brando Resort. A successful businessperson from humble beginnings is more conservative with money. More so if they're atom-based, not bit-based. They value money.

Crypto can "feel" easy. I have nothing against capital market investing. The global financial system is shady, but that's another topic. The problem started when those who took advantage of easy money started affecting other businesses. VCs did minimal due diligence on FTX because they needed deal flow and returns for their LPs. Lenders did minimum diligence and underwrote ludicrous loans to 3AC because they needed revenue.

Alameda (hence FTX) and 3AC made "easy money" Genesis and DCG aren't. Their businesses are more conventional, but they underestimated how "easy money" can hurt them.

Genesis has been the victim of easy money hubris and insolvency, losing $1 billion+ to 3AC and $200M to FTX. We discuss the implications for the broader crypto market.

Here are the quick takeaways:

  • Genesis is one of the largest and most notable crypto lenders and prime brokerage firms.

  • DCG and Genesis have done related party transactions, which can be done right but is a bad practice.

  • Genesis owes DCG $1.5 billion+.

  • If DCG unwinds Grayscale's GBTC, $9-10 billion in BTC will hit the market.

  • DCG will survive Genesis.

What happened?

Let's recap the FTX shenanigan from two weeks ago. Shenanigans! Delphi's tweet sums up the craziness. Genesis has $175M in FTX.

Cred's timeline: I hate bad crisis management. Yes, admitting their balance sheet hole right away might've sparked more panic, and there's no easy way to convey your trouble, but no one ever learns.

By November 23, rumors circulated online that the problem could affect Genesis' parent company, DCG. To address this, Barry Silbert, Founder, and CEO of DCG released a statement to shareholders.

  • A few things are confirmed thanks to this statement.

  • DCG owes $1.5 billion+ to Genesis.

  • $500M is due in 6 months, and the rest is due in 2032 (yes, that’s not a typo).

  • Unless Barry raises new cash, his last-ditch efforts to repay the money will likely push the crypto market lower.

  • Half a year of GBTC fees is approximately $100M.

  • They can pay $500M with GBTC.

  • With profits, sell another port.

Genesis has hired a restructuring adviser, indicating it is in trouble.

Rehypothecation

Every crypto problem in the past year seems to be rehypothecation between related parties, excessive leverage, hubris, and the removal of the money printer. The Bankless guys provided a chart showing 2021 crypto yield.

In June 2022, @DataFinnovation published a great investigation about 3AC and DCG. Here's a summary.

  • 3AC borrowed BTC from Genesis and pledged it to create Grayscale's GBTC shares.

  • 3AC uses GBTC to borrow more money from Genesis.

  • This lets 3AC leverage their capital.

  • 3AC's strategy made sense because GBTC had a premium, creating "free money."

  • GBTC's discount and LUNA's implosion caused problems.

  • 3AC lost its loan money in LUNA.

  • Margin called on 3ACs' GBTC collateral.

  • DCG bought GBTC to avoid a systemic collapse and a larger discount.

  • Genesis lost too much money because 3AC can't pay back its loan. DCG "saved" Genesis, but the FTX collapse hurt Genesis further, forcing DCG and Genesis to seek external funding.

bruh…

Learning Experience

Co-borrowing. Unnecessary rehypothecation. Extra space. Governance disaster. Greed, hubris. Crypto has repeatedly shown it can recreate traditional financial system disasters quickly. Working in crypto is one of the best ways to learn crazy financial tricks people will do for a quick buck much faster than if you dabble in traditional finance.

Moving Forward

I think the crypto industry needs to consider its future. This is especially true for professionals. I'm not trying to scare you. In 2018 and 2020, I had doubts. No doubts now. Detailing the crypto industry's potential outcomes helped me gain certainty and confidence in its future. This includes VCs' benefits and talking points during the bull market, as well as what would happen if government regulations became hostile, etc. Even if that happens, I'm certain. This is permanent. I may write a post about that soon.

Sincerely,

M.