Research showed that using images of smiling people in marketing materials can increase funds raised in an initial coin offering (ICO) by about $2.91 million. 

Smile Helps Raise 95% More Funds During ICOs

Professor Sinh Thoi Mai from the Hanken School of Economics published the results of a study titled “The Value of a Smile.” The paper analyzed the correlation between the use of images with smiling people and the amount of funds raised in an ICO. 

The study found that using visuals with a smile causes investors to have an irrational sense of “trust” in the project. Due to this, projects that use a “smile” attract 95% more funds during ICOs. The study analyzed 5,826 ICOs that attracted about $24 billion. On average, the financial performance of each project using the “power of a smile” was higher by about $2.91 million. 

The researcher notes that individual investors are more susceptible to the irrational influence of a “smile” than institutional investors. The following factors also contribute to this: 

  • incomplete disclosure of project information; 
  • the absence of a project code on GitHub; 
  • confusing official documents; 
  • ICOs conducted in countries with low levels of mutual trust between locals. 

The paper suggests that the trustworthiness induced by “smiles” has no effect on the real return on assets after an ICO. Moreover, “facial trustworthiness” can have rather a negative effect. The overestimated value of assets often leads to a quick sell-off post-ICO, causing the price of tokens of such projects to show mostly negative dynamics within three months after the start of exchange trading. 

One of the conclusions is that investors who are less technically savvy and have a shallow understanding of analyzing projects for investment tend to look for other “meaningful” indicators, such as a trustworthy smile in an image. 

CP Media prepared a “Checklist: Analyzing Crypto Projects for Investment” that will help investors pay attention to more meaningful indicators than a smile in a picture.

Author: Evgeny Tarasov
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