Who did Polkadot spend the 40 million dollars in promotional fees on?

Author: Jac, BlockBeats

On June 29, members of the Polkadot community released the Polkadot treasury operation report for the first half of 2024, revealing that the treasury has spent a total of $87 million. If the current spending rate continues, these reserves will only last the treasury for another two years.

To the community's surprise, Polkadot spent $37 million solely on promotional expenses, which accounted for a significant portion of the treasury's expenditures. Among these, advertising costs reached $21 million, including $10 million for sponsorships, $4.9 million for marketing and PR firms, and $4 million for digital advertising. Event expenses totaled $7.9 million, which included $4.5 million for event expenditures, $3.9 million for business development, and $3.2 million for media production.

In response, BlockBeats obtained relevant receipts for Polkadot's marketing activities and summarized its budget allocation for the first half of the year.

KOL Investment Disaster: Fake Followers, Content Manipulation, Bot Accounts

From the partial statistics released on the Polkadot Market Bounty website, it appears that KOLs accounted for a large share of Polkadot's marketing activities, exceeding half of the overall budget. The KPI data from content placements suggests that these KOL campaigns seemed effective, with total content views exceeding 15 million, total likes surpassing 570,000, and total replies reaching 60,000.

In the first quarter, Polkadot's KOL promotional activities included four "Evox promotional activities" targeting North America and three "Lunar promotional activities" for Europe, with an average KOL budget of around $300,000 per promotional activity, lasting generally for 30 days. The Evox activities involved approximately 30 to 40 KOLs, while the Lunar activities had significantly fewer, around 15 KOLs. Additionally, there was a community account, Dot Army, with a single budget of $15,000.

However, after BlockBeats conducted an in-depth investigation into the actual quality of these content placements based on the KOL list, it was found that most of these so-called "Content Creators" were engaging in "gaming the system," with many KOLs inflating their follower counts, promotional content, and replies, resulting in inflated costs.

For example, the KOL with the X user handle @DeFiExpertise has only 25 followers, yet their YouTube channel boasts over 70,000 subscribers. Upon inspection, it was discovered that they had posted fewer than 10 videos, and the account had been active for less than three months. If calculated simply based on the release date of the first video, the channel's registration or activity coincided exactly with the start of the Evox activities.

Another KOL with the handle @CriptoMindYT has 12,000 followers, but their follower list shows little overlap with regular crypto Twitter users. A look at their followers reveals that most are bot accounts. Additionally, this account primarily focuses on "custom KOL" content related to Polkadot, and aside from a few retweets of Polkadot Army and Polkadot's official Twitter content, most of their tweets have around 200 views.

Moreover, the KOL with the handle @SharkyCoins has a content style and operation nearly identical to @ApeCryptos, posting dozens of meaningless short phrases daily and retweeting each other's posts, raising suspicions that such KOL accounts may originate from the same bot account studio. Another account, @MaxGanes, also focuses on mass-producing tweets, having posted over 100,000 tweets, generating nearly 20 illogical tweets daily with AI-generated images.

Some KOLs promoting "evergreen" content promote 20-50 targets in a single tweet. There are even many "one-off KOLs," such as @DegenHardy and @TheCrypomist, which were still on the KOL list in April but had been deactivated by the time of writing, while accounts like @CryptoEmily had already changed their names…

Interestingly, the budget item specifically listed as "DOT Army" includes an "official community account" and about 30 KOL service packages, with a single fee of $15,000 per month. The community account Dot Army often has tweets with extremely high engagement, such as a tweet on June 30 regarding "DOT ETF," which garnered 110,000 views. However, upon checking the account's details, it was found to have only around 200 followers. Connecting this to previous points reveals that these high-engagement tweets are primarily retweeted by the "listed KOLs." Moreover, over 90% of the accounts in their KOL service package show "none of the people you follow are following."

In addition to crypto Twitter, Polkadot's KOL promotions also focus heavily on YouTube channels, but many of the YouTube channel hosts in the promotional scenarios often misalign with the crypto user demographic. For instance, the German YouTube channel MilkRoad, which was promoted in the first half of the year, primarily covers general investment topics and is largely unrelated to the crypto industry, with most videos receiving only a few hundred views. Content about Polkadot and DOT tokens awkwardly gets inserted into these videos, with four-month video views totaling less than five hundred.

In May, they even chose to promote through a Marvel Snap game channel, which is completely unrelated to crypto, with the explanation on the bill being "precisely targeted high-net-worth audience."

Surprisingly, Polkadot's governance and foundation seem not to care much about the ineffective spending in their KOL budget. After the first quarter's KOL promotional activities, they even raised the KOL budget for the second quarter, with a single KOL promotional activity budget reaching $600,000 between May and June. However, it is evident that the new promotional plan has submitted more detailed reports to governance regarding specific traffic assessments and requirements for KOLs.

Additionally, it is clear that Polkadot's KOL investments are primarily targeted at the European and American markets, with significant spending, while there is virtually no investment targeting the Asian market. BlockBeats reported last September that the Polkadot Chinese community PolkaWorld had to suspend operations for half a month after its proposal for official funding was rejected. Shortly before that, Polkadot launched a new governance framework, OpenGov, but PolkaWorld believed that the new treasury management mechanism led to many long-term contributors and organizations' funding applications being repeatedly rejected, forcing them to leave the Polkadot ecosystem. It now appears that governance efficiency may only be one aspect of the problem.

"Logo Obsession" and "Media VIP"

In addition to KOL promotions, media placements and platform displays also account for a significant portion of the budget, categorized on the Market Bounty website as "PR" and "website integrations." Furthermore, Polkadot seems to have some "spending quirks," allocating exorbitant budgets in unexpected areas, leaving many puzzled.

In media PR spending, The Block's exorbitant fees immediately catch the eye. A few research reports and sponsored articles, along with one billboard maintenance, cost $138,000, which included a $12,000 "management fee." Other crypto media outlets such as Decrypt, Defiant, and Cryptoslate were bundled into PR services, with payments executed by a governance entity called Community Project, which charges a 10% management fee, with each PR promotion costing around $150,000.

Some PR promotions directly allocated funds to Community Project but clearly specified requirements: arrange for 75 articles and 18 different channels for content distribution, spending $100,000. Additionally, there was a media PR fee of $150,000 from Chainwire without specified service content.

Moreover, Polkadot seems particularly fond of logo displays, having spent on exclusive dynamic logo display services on two major crypto price websites, Coingecko and Coinmarketcap. The cost for a six-month exclusive logo dynamic display on Coingecko was $50,000, while Coinmarketcap charged a relatively higher fee, with two years of logo dynamic display and management fees totaling nearly $480,000, averaging twice the cost of Coingecko.

Although this change has indeed caught attention, it has had little effect on the intrinsic appeal of DOT itself. Two months ago, someone asked on X, "Why does only Polkadot's token logo on Coinmarketcap turn into a pink flame?" The top comment was, "So what? Would you buy a coin for a GIF?"

The logo displays in podcast videos are also quite extravagant, with just eight episodes of two podcast programs costing $110,000.

In addition to these "conventional advertising channels," some perplexing expenditures were also noted in Polkadot's budget bills. For example, through the PR intermediary Future, they spent $20,000 to enhance Polkadot's brand awareness on the PC hardware website Tom's Hardware.

Another budget item involved printing the Polkadot logo on European private jets, with a promotional expense of $180,000 planned for "six months of continuous logo exposure on a fleet of European private jets," justified as "highly targeted brand promotion and awareness-raising activities for high-spending demographics"…

In comparison, advertising screens at Singapore and Zurich airports seem relatively reasonable, but even so, the costs are still quite high, with just one advertising screen in a terminal at Singapore airport costing $189,000.

This inflated pricing is also reflected in Polkadot's event sponsorship fees. For instance, Polkadot spent $50,000 on sponsorship for a Web3 event in Vietnam a few months ago. In contrast, the platinum sponsorship during the Ethereum Black Mountain EDCON was around $50,000, which also provided the opportunity to negotiate with Vitalik in a VIP room.

Interestingly, since Polkadot's budget expenses are generally settled in DOT, but the receiving parties usually price in USD, fluctuations in coin prices often lead to a line item in Polkadot's budget bills labeled "price adjustment," which typically amounts to $100,000.

KOL Manipulation and Exploitation: Have You Considered This Business?

Is Polkadot really that naive? Anyone with clear eyes can understand this intelligence tax, yet Polkadot continues to blindly throw money at it. Odaily reported yesterday that the Polkadot community believes "the greatest value of Polkadot lies in its treasury." In reality, the crypto space is not short of pathways for project operation and marketing.

Regarding Polkadot's exorbitant budget, there are claims within the community that "big players are draining the treasury." Although unverified, there are indeed cases in decentralized governance projects and organizations where mechanisms are exploited to profit from the treasury. Previously, when researching the Nouns community, Rhythm learned that some community members managed to get their high-priced but low-cost and low-benefit promotional proposals approved by flattering DAO initiators and major Nouns holders. In the Rook DAO case, arbitrageurs directly controlled the protocol treasury by purchasing large amounts of tokens, staging a "Baowan dispute" in the crypto space.

"There may exist drawer agreements between KOLs and the foundation or individual team members, which has been the case since the last cycle," a source familiar with crypto market promotion told BlockBeats. Although large projects like Polkadot typically undergo public governance, many small project foundations consist of only a few people, and many decisions are made directly by the CEO, providing ample opportunities for decision-makers to exploit.

However, in Polkadot's case, it seems somewhat challenging for individuals to complete such "under-the-table transactions," as proposals, votes, and foundation disbursements are all publicly visible. Nevertheless, this does not prevent the community's governance from "acting foolishly," as today's crypto market, centered around Twitter, is indeed filled with intelligence taxes and exploitative players.

For instance, the KOL account mentioned above shows no flaws in terms of follower count, tweet views, and interaction levels. If it weren't for the gaps in the follower list, ordinary people would hardly notice that this is a batch of fake accounts. "These accounts are generally written by a studio, then mass-produced, and they manage to make the browsing, replying, and liking appear very genuine," a former employee of a KOL studio told BlockBeats, stating that with the advent of AI tools, it has become even more challenging to discern the authenticity and quality of KOL promotional content.

However, many times, small projects opt to outsource to studios out of necessity. According to feedback from an experienced individual, when small projects negotiate with top KOLs, either the KOLs are uninterested or demand exorbitant prices, making it difficult to reach an agreement. Additionally, information spreads quickly among KOLs; once a team secures one KOL, others quickly learn and demand the same price. However, to achieve effective results from a single TGE, at least 100 to 150 KOLs must be engaged, making it easy for projects without sufficient resources to fail negotiations and resort to outsourcing.

Nonetheless, there are alternatives. Jesse (@Jesse thecook69), who specializes in KOL promotions, told BlockBeats that many projects initially did not seek KOLs but focused on building their communities, ultimately achieving good organic spread. Additionally, manual screening can be employed to verify and supervise the studio's promotional work, with the most effective method being to check the KOL's follower list and comment sections to see if they are primarily bots. "Or you can find reputable and reliable agencies, as some mainstream media and top KOLs have their own KOL matrices, which generally have clear pricing and won't rip you off," Jesse said.

However, whether one can identify fake accounts is one thing; whether one is willing to identify them is another. A source informed BlockBeats that from KOL promotions to foundation market reports, there exists a feedback mechanism accountable to higher-ups. PR firms or KOL studios, upon receiving tasks, need to submit satisfactory promotional data reports to the project parties or foundations, while the project parties need to prove to VCs that they are "still doing work." This leads to the effectiveness of promotions not being genuinely included in the accountability system. In some cases, after hiring a head for the Asia-Pacific market, the head may outsource promotional work to studios for fake reports, "and sometimes, the data reports generated by fake accounts look better and are cheaper than those from serious KOLs, so if the head hires KOLs who genuinely promote, they might have to explain to the foundation why their data isn't as good as others'."

"Many project parties don't want to do the work; they just want to extract money from the treasury. I know of some projects that only started seeking promotion after being warned by exchanges to delist, but in such cases, they don't actually care about the real effectiveness, as serious spending can't be traced," a knowledgeable individual told BlockBeats. In fact, in some cases, KOLs are merely tools for the team to drain the treasury. According to insiders, sometimes the KOL metrics may directly come from VC investors, "and often, exchanges, retail investors, and even fund LPs end up being the ones taken advantage of. Of course, LPs don't care about losing that little money."

Whether it's the VC's exorbitant FDV valuation or the project's sky-high promotional budget, many issues that have long existed in the crypto market have recently erupted in the context of a declining market. Jesse told BlockBeats that often the responsibility does not lie with individuals, "not everyone wants to do evil; it's just that the system is so foolish that it gives everyone an incentive to exploit." Clearly, the market is entering an adjustment period, which may not be a bad thing; after all, "popping the pimple" might be a necessary step before the onset of a new bull market.