Following Wikipedia Referral marketing is "the method of promoting products or services to new customers through referrals" and they are widely used in the crypto scene. But do they really help to get more attention to crypto in general or are they just a way spread products without a guarantee of sustainability?
To determine something from the outset, I am writing this from the perspective of a normal consumer and not of a business owner or social influencer. Just a user like most of us are.
As already mentioned they are widely used in crypto, and it does not matter if it is an exchange (Binance, Bittrex,...), wallet provider (Atomic,...), nearly every faucet and also projects like publish0x are providing referral links for their customers to earn a small bit of the revenue their referred user create. The idea for the companies behind is simple, to give the consumer an incentive to recommend the service to others while gaining (more) revenue. Important to note is, that normally no one should pay 'more' fees, that's what the promise is. "You won't earn less/pay more, you just support my channel", you often hear that phrase from social influencers in one form or another. And I mean, in general, it is not wrong, but also not the total truth. But I will come back to that point later.
However, who benefits most from this? In my eyes, the companies in the first place, shortly afterwards also the influencers. Depending on their outreach they can build up huge referral networks, giving themself the possibility to earn a big amount of passive income. And if you look up the links they share you will see, 90% of them are ref links. But don't get me wrong, that is not bad in general, they also invest a lot of time and should also get the possibility to monetize their content.
But to get to the point what I want to say, I see two big problems:
People are sharing products which aren't sustainable, just to earn more money through referrals.
Companies aren't just throwing the money out of the window, the referral bonuses have to derive from somewhere. And in the end, every customer will finance the referral payments
To start with the first aspect, many products are just being shared because of their referral earnings. Maybe they aren't even good/working, but people share them because they want to earn additional money through the referral system. In the worst-case, all this will end up in a Ponzi scheme. When it comes to earning a lot of money many peoples brain is turning off, and with referrals, they will then start to share and promote those scams to others. Because the website operator promises high bonuses. That those promises are only empty promises is something many only realize when it is too late. And the fact that they may even have friends and relatives involved doesn't make it better.
To continue with my second point, where does that money come from? The owner of those businesses will surely not pay on top to finance the referral system. As result, the own way to finance a referral system and earn the equivalent amount of money as without referral system the only way is to increase the fees/lower the earnings. Just think about that, wouldn't a faucet be able to pay out more, if there would not be a referral system? Or an exchange which could take fewer fees as they don't need to pay referral bonuses?
In my eyes referrals aren't really an advantage for the normal domestic customer. In fact, it is a marketing tool for companies and is also a good way for the scammer to build up their scam. When promoting something, with a referral you should always think about the following question "Would you share that product also if it would not have a referral system?".
What do you think about that? Do you have another opinion? Please share your thoughts in the comment, I am very interested in what others are thinking.