What Is Cowboy Marketing?

Cowboy marketing is a slang term used to describe a situation in which a company is unaware that a marketer hired to produce legitimate opted-in email campaigns is actually using mass spam emails to promote the company's stock. This is a very unethical practice, since marketers are often compensated with stock options. This practice allows them to capitalize on the unfounded demand they create for the stock they are promoting without actually creating any real results.

Usually, companies create opt-in campaigns for marketing a security. A cowboy marketer will spam anyone with an email address.

Key Takeaways

  • Cowboy marketing is a slang term used to describe a situation in which a company is unaware that a marketer hired to produce legitimate opted-in email campaigns is actually using mass spam emails to promote the company's stock.
  • This practice allows them to capitalize on the unfounded demand they create for the stock they are promoting without actually creating any real results.
  • Usually, companies create opt-in campaigns for marketing a security; a cowboy marketer will spam anyone with an email address.

Understanding Cowboy Marketing

When a marketer values their own interest over those of its client, cowboy marketing can occur. Smart investors should not pay attention to spam emails and/or the stocks they promote. Buying these stocks will often result in losing money because once the stock's price rises, the unscrupulous parties involved will cash out (causing shares to plummet and leaving legitimate investors with losses). Whereas cowboy marketing used to primarily happen through cold calling on the telephone, now the practice occurs through sending sales emails.

Cowboy Marketing vs. Pump and Dump Scheme

A cowboy marketing situation is similar to the illegal scheme known as pump and dump. In a typical pump and dump, there are attempts to boost the price of a stock through false, misleading, or greatly exaggerated statements recommending a stock. Traditionally done through cold calling—and now on the internet—you can expect the persons behind this scheme to sell their positions after they have successfully hyped a stock to a significantly higher share price. As a result, the new investors will lose their money. The way that these fraudsters typically operate is to spread messages online enticing investors to buy a stock quickly based on claims about inside information.

Pump and dump schemes are illegal according to securities law and can be subject to significant fines

A pump and dump practice relies on communicating questionable information to spur artificial demand for a stock. Meanwhile, cowboy marketing is more geared towards generating demand through mass communication and promotion to boost interest from potential investors (all with the intent of enriching the rogue marketer in the process).