Eric Siu breaks down FTX's $32 billion collapse and what it reveals about marketing gone wrong. The exchange spent heavily on celebrity endorsements and brand building while ignoring financial discipline and long-term channels like SEO. The failure shows why leverage, overexpansion, and skipping due diligence can destroy even a company that looked unstoppable.
Today we are going to talk about how FTX's $32 billion failure actually has marketing and business lessons that you can take away. So first and foremost, at a high level, what happened was FTX, one of the top crypto exchanges in the world, well, people started to realize that they didn't have enough assets to help cover their liabilities. And very quickly people started to withdraw money from the exchange and they ran out of liquidity. They didn't have enough collateral to back things up. And so they had to bankrupt within a span of 7 days. This is life-changing money, very significant money, and a lot people are going to get screwed here. You know, people talk about Bernie Madoff back in the day, the Ponzi scheme stuff. Let's go ahead and talk about the marketing lessons here. So number 1, money talks. Think about the top investors that they've gotten. You think about the top influencers that they ended up working with, and you think about the brand deals that they've gotten done. And what they did really well was they were able to raise a lot of money. That's the first thing. Basically last year, I think it did like a billion in profit or something like that. So it was very profitable and things were working out really well. Number 2 is the trends, right? And so when it's trending, it's going to tend to do better, right? Which is why you see a lot of news sites, they tend to do well because they're attacking trending topics. It's kind of the same thing when you are creating a business in a very hot market. So when you have a trending type of business, your category is trending and people are just throwing money, there's a lot of liquidity in the market, then what happens is you feel like you're unstoppable, right? Now number 3 is what gets measured gets managed. And the guy that helped with the unwinding of Enron, right now he's the CEO of FTX, and he's like, there's no financial accounting, there was a lot of negligence, there's a lack of financial discipline basically. Right? And so the same thing happens with marketing too. If you're not measuring, you can't manage. How are you going to know if you're getting better or not if you're not measuring, right? And you say, well, you know, we have this gut feeling or whatever. Like, you don't really know. And so what happened was that because there was a lack of financial discipline, they actually ended up overspending on brand, which leads me to my next point. So brand marketing works, influencer marketing works. So they worked with Tom Brady, Shaq, Kevin O'Leary, Steph Curry. What ends up happening is you overspend on brand, but then it's not marketable, and then you start to become arrogant about this as well, right? And so from my understanding, you know, FTX got a little arrogant. Thought that they understood everything about marketing. The next piece I want to talk about, they bought politicians as well. And so SBF is known for contributing to the Democratic Party. Basically, the $40 million that he put in, he's considered the second largest donor to the Democratic Party, which is why he's kind of getting protection right now. Like, the New York Times wrote a puff piece about him, the Forbes website wrote a puff piece about him. So it just goes to show that money talks, everyone has a number. This whole FTX debacle, if it shows me anything, it just shows that anybody can be bought. Basically, this is a text message of SBF talking to a Vox reporter. And so those of you that are just listening, this is the Vox You were really good at talking about ethics for someone who kind of saw it as a game with winners and losers. So, SBF is saying, yeah, hehe, I had to be. It's what reputations are made of to some extent. I feel bad for those who get effed by it, by this dumb game we woke Westerners play where we say all the right shibboots and so everyone likes us. It just goes to show that buzzwords, right? See, he knows attacking the right words, saying the right things, and talking to the right people, it's gonna get him what he needs, right? So, he understands that's how the game is played. He can bend the truth, right? And so, the Vox reporter says, You tweeted out some stuff. We never invest your deposits. That was BS, right? It was factually accurate. That's what SBF is saying. The reporter is like, wait, but like their deposits were totally not there. Or do you mean technically it was Alameda? SBF basically just says, correct. In this case, it gets very clear that it's fraud, right? But people will spin things if it fits their narrative, right? So this kind of goes into storytelling a little bit. Like the story he's telling himself is like, oh yeah, you know, factually it was correct. And so the story you tell yourself matters because that's the story that you're going to tell everyone else. And he actually believes this to be true. The wording that you use, the people that you're talking to, the trending topics that you're attacking, those things all matter. And so the next thing I want to talk about is that from a marketing standpoint, they actually underinvested on their SEO. That in itself shows you that when you're doing marketing, you want to build some assets for the long term, and you also want to understand that paid stuff, a lot of it is short-term, right? Because, you know, algorithms can change, business models can change, right? And that's not to say that SEO can't change, but you want to diversify your channels once you start to get one really working. That way you can try to maximize everything because everything kind of all plays together at the end of the day. So a couple other points here: doing your due diligence. And so the investors didn't do enough due diligence. They're just like, hey, this guy's on TV all the time. This guy has a lot of money, seems legit. And probably most of the time that works. But in this case, not enough due diligence was done. If you're going to make a hire or if you're going to acquire something or if you're going to invest in a marketing channel, I think you have to ask yourself, is this a hell yes or a hell no? And if it's not, then don't do it. The other thing I want to add to is SBF bit off more than he could chew. You know, why did you have to take leverage? Why did you have to open a fund as well? And why did you have to try to buy and save all these other companies at the same time? Why did you launch this token in a take collateral against this money that you printed, right? When you're doing your marketing, not trying to go after every single channel initially, maybe starting off on one and get it working really well and then start to double and triple down on that one. And then you can start to diversify into other areas. Same thing with business. Apple started with a computer before they got into phones, got into iPads and things like that. It's a sad story, but it's a cautionary tale and you can actually learn a lot from a marketing and business perspective. So let me know in the comments what you think I might have missed here. And I actually have this other video for you if you want to grow faster, if you want more marketing lessons from my friend Cody Sanchez, who's growing really fast. on social right now. She's gonna talk about how she gets over 10 million views a month on her media company, Machine. So you can check that out. And that being said, we will see you later. Bye.
