Cannabis Startups and Investing Series

110799

Social cannabis startups: why they're necessary

Cannabis companies, and users, have an uneasy relationship with established social media

Innovation series by Steven Loeb
July 28, 2016
Short URL: http://vator.tv/n/4690

Note: The CannaVator accelerator, which includes a 10-week online and in-person program, is accepting applications until August 15, 2016 for its Fall 2016 cohort. More details about the program and how to apply here.

Few niche networks ever really made it big time. I can say that because if you just asked yourself to name a few vertically-focused networks, you'd probably scratch your head and come up empty. 

Yet if there is one vertical in which a dedicated social network could succeed, it may be in and for the cannabis industry. Not only is the cannabis industry large and growing, a social network in this industry may be a necessity, given that the large social networks' policies appear to be restrictive against cannabis companies that are seeking to market themselves. Who can blame them? Social networks are, after all, a significant source of customers. One study by VisionCritical showed that 43% of social media users report buying a product after sharing or favoriting it on Facebook.  

But what's a cannabis company to do when social networks aren't very receptive to their cause or product? To wit, recently Facebook and Instagram were accused of shutting down, or deleting, profiles that appear to be cannabis related.

Evan Horowitz, co-founder and CEO of cannabis business hub WeedClub, summed up what the prevailing attitude is about social media when it comes to the cannabis industry.

"I dont view it in terms of better or worse, it's been more of a constant. It's either they got you or they didn’t get you yet. They've always been hardline, and it's been arbitrary and capricious. There's no rhyme or reason," he said. "For example, you can show enormous puffs of smoke, but the minute you show a joint on someone's lips, that will get your page removed. That makes it hard to describe the way they police."

However, the networks themselves say that they aren't going after cannabis companies at all, and are just following their own standards when a page is flagged. 

Facebook's policies

"In order to maintain a safe environment on Facebook, we have Community Standards that describe what is and is not allowed on the service. Anyone can report content to us if they think it violates our standards. Our teams review these reports rapidly and will remove the content if there is a violation," a Facebook spokesperson told me when I reached out for comment.

This is what it says about the subject, in those community standardsunder the topic "Regulated Goods": 

"We prohibit any attempts by private individuals to purchase, sell, or trade prescription drugs, marijuana, firearms or ammunition. If you post an offer to purchase or sell alcohol, tobacco, or adult products, we expect you to comply with all applicable laws and carefully consider the audience for that content. We do not allow you to use Facebook's payment tools to sell or purchase regulated goods on our platform."

Basically, Facebook does not allow content that promotes the sale of marijuana regardless of state or country, including marijuana dispensaries. What it does allow is marijuana advocacy content as long as it is not promoting the sale of the drug. 

It also seems to be the case that Facebook isn't actively seeking out cannabis companies. They're just responding to users' reporting pages that are in violation of their policies. 

Olivia Alexander, founder of Cult Creative, a digital agency that helps to promote cannabis companies, also believes that there are many competitors of her clients that are flagging her content and reporting her pages to Facebook. She estimates some 50 pages of her content were removed, and that it only got worse once she was quoted in an article for Fortune in March, in which she spoke about Instagram deleting accounts, calling it "a war on legal cannabis.”

Back then she believed the social networks were targeting her accounts as well as cannabis in general. But now she told me, she blames the seemingly targeted attention to "trolls" and other companies in the cannabis space, and possibly even disgruntled former employees, who wanted to take down her clients.  

Brands pointing fingers

"I don't think there's a social media cannabis ban. I don't think there's a person sitting on Instagram deleting accounts," she said, explaining that she's working with Instagram to find out who's been targeting her pages. "This is coming from inside our own community, with brands trying to take out other brands." That is to say, it's not Instagram going and looking for violations in order to take pages down.

Yet if Alexander's pages weren't in violation, then Instagram or Facebook wouldn't have taken her pages down. You'd think a person would look at a page and see whether it violates its policies.  

Not so, says Alexander. Instagram will take down a page if it gets reported enough times. 

"There is no person checking. There’s just a way that Instagram works, that if your profile keeps getting reported, it is going to be deactivated, and until you can talk to a person you can't be judged," she said.

It should be noted that Instagram explictly states that this is not their policy, writing in its help section that, "The number of times something is reported doesn't determine whether or not it's removed from Instagram. We remove posts that don't follow our Community Guidelines, which you can review to learn more about our policies." 

Advertising on traditional social media 

There is one issue which has, without a doubt, hampered how cannabis companies are able to use social media: advertising, or the lack thereof. The classification of cannabis has led to major restrictions on the type of advertising that cannabis companies can do on the big networks, due to the risk potential of legal action.

"There can literally be a case against a company for accepting ad money for illegal products," said Alexander. "That's RICO, and they could be in big trouble if someone decided to make an example out of them."

RICO is the Racketeer Influenced and Corrupt Organizations Act, which allows the leaders of a organization to be tried for the crimes which they ordered others to do. So, if a Facebook employee were to take ad money for an illegal substance, numerous other employees could find themselves facing penalities.

Those restrictions on advertising are here to stay, and won't change until cannabis is no longer a Schedule I substance.

"Facebook is located in California, but people don’t understand that all these [social network] businesses are publicly traded, so they're not going to start accepting ad dollars from cannabis products," said Alexander. "Change has to come at a federal level before companies have any real right to spend money on advertising."

Those restrictions on advertising are one of the main reasons that cannabis-focused social networks, like MassRoots, have been founded, and have been able to prosper. Founded in 2012, MassRoots has over 775,000 users, 170 million user-to-user interactions, and 500 actively posting dispensaries. The company has no restrictions on what types of ads can be placed.

Those kind of restrictions "justifies and makes me feel good about what we’re doing," Darren Roberts, founder and CEO of High There, a social network for cannabis, told me. "That is why High There is needed. Even if cannabis were federally legal, there would still be major restrictions on other platforms about what you could and couldn't show."

"Instagram and Facebook have definitely not opened up the market to us to advertise, so really all we can do is grow out our social page and do it organically. Because they haven't given us an opportunity to advertise yet, MassRoots was able to grow by starting a social network for the cannabis community," said Steven Jablonski, co-owner of BudPubs, a cannabis lounge directory.

"Really, the only other way to promote and build yourself, other than shows like Hempcon, is to get local reach, or organic SEO through Google."

To Alexander, the inability to advertise on the big social media networks is cutting companies off from a potentially larger audience, and is detrimental to the space. 

"The problem with only cannabis networks is that people who already subscribe to those places all know what products they want. We can all keep fighting for the same bone or we can go out there and change the world," she said. 

"It doesn't satisfy me to sell to the same people. As a marketer, I'm passionate about this industry and what we’re doing. We have to have the intention of stepping out of our own community."

A social media strategy

Despite the issues that cannabis companies have on social media, everyone agrees on one thing: having a presence on traditional networks is absolutely crucial for legitimacy, and to grow their brand.

WeedClub, for example, controls the @420 account on Twitter, which has over 83,000 followers and engagement of 2.5 percent, which is higher than the typical Twitter account, and which is growing at 20 percent to 25 percent per month. The company also launched a weekly live streaming show on Facebook. 

"We need each other. There are 1 billion on Facebook, and 350 million on Twitter. You have to go where the people are. You can't clap your hands in a corner 10 miles away and expect to be heard," Horowitz said. 

"Social media is more effective than old fashioned TV ads. There is nothing more effective than having your brand ambassadors or clients spreading the gospel of how awesome your product or service is. Social impact is greater than anything you’d pay for, and it's completely essential."

That's especially true when trying to reach younger people who grew up on it. 

'You can't ignore it. If you have no coherent social media plan you definitely will not achieve your potential."

"Bottom line, in this day and age, no matter what business you are, you are going to have a Facebook page and you have to have a presence on Twitter. It's sort of a requirement," said Roberts. "That being said, in terms of advertising, they don’t boost any posts. Facebook is very restrictive about what you can and can’t do to try to promote yourself, or they'll suspend or kick you off."

"There isn't a company out there that isn’t strongly promoted socially. I'm not sure how else you would find out about it. There's only so much you can do with organic SEO on Google, and there’s no way to prop yourself up without a good social networking strategy," said BudPub's Jablonski.

With the big social media players able to control what cannabis companies can and cannot do, it seems like there might be a power imbalance between them. If that is the case, said WeedClub's Horowitz, "then they've earned it."

"When you have that many users, you make the rules. I don't resent them a bit of a corporate-type of feeling. When WeedClub becomes massive a multinational player like that I hope we can retain our company culture, and don’t forget why we got there, but I don't begrudge them that," he said.

The future of cannabis on social

The way things stand right now, the big social media players have an uneasy relationship with cannabis, mostly due to the regulatory environment. So, what happens if cannabis is legalized? Will those networks all of the sudden open themselves up to the cannabis industry?

The consensus on that seems to be a big fat, "no." According to Roberts, even if cannabis were legalized, it would still be treated the same way that Facebook and other networks treat other similar legal products.

"Facebook and Twitter have a huge audience but, at the end of the day, as legalization grows, the perspective of mainstream social networks won't. There will always be a significant amount of restriction in terms of marketing and advertising," he said.

"They are not going to create an opportunity, or a platform, to come to a place to discuss cannabis openly. Look at other things considered legal, like alcohol and tobacco. There are significant limitations on what you can do, even if it is legal. The policies at Facebook and Twitter are not cannabis friendly."

And even if they did, it probably wouldn't make much of a difference, said Alec Rochford, CEO and Co-Founder of Cannabis social network Duby, considering how little data they are actually able to collect about this specific vertical. 

"Users just aren’t sharing too much about what they like in this particular vertical, so there's not enough data on this type of consumer. Regular social networks, like Snapchat and Instagram, are too broad," he said.

Then there's the issue of most people not feeling comfortable necessarily sharing that they smoke cannabis on their Facebook page.

"For the cannabis enthusiast, who wants to share their love for cannabis, those platforms also aren't anonymous and that makes some people uneasy. Most of all, they don't want that stuff all over the Internet, which is why our network is anonymous and secure. Facebook is a person's family and friends and entire life, and they don’t want to mix cannabis with that. So there's not enough for those other businesses to analyze to make it productive."

Duby also sees a higher engagement rate than other social networks, with users spending an average of 20 minutes per day, and 25 minutes per day on Android. Twitter, by contrast, seeing 10 minutes per day. That gives a company like Duby the kind of information that a network like Twitter, or Facebook, wouldn't be able to get. 

Even though Rochford believes that the big networks will start allowing cannabis companies to start advertising within the next two years, "it won't affect us."

"We have the eyeballs every day, and more micro-analytics. We know more from cannabis perspective, instead of advertising in general, and we have the ability to advertise today, so I don't think it makes a difference to our strategy."

(Image source: lamarihuana.com)

Given that theres there holes - ad network pop up – community building own ways around traditional google or bring ad words – using social network – mantis network

 

Bigger ones is mansis – cannabis related wbsite, add to your website – eactly like google ad words advertise on someone’s page – get it per click – budpubs we run mantis on sub pages – a lot of cos, cloudvape, new brands popping up, leading the charge – bigger sites are switching to this ad network, bypassing traditional

 

Thats what helped massroots pop up – we cant advertise on FB or instagram or twitter – opens up opp for new business -

 

Duby

 

not going to getpromoted through normal routes – would be nice to see SN apsect open up – not going to catch all cannabis users

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