GPWA Times - Issue 21 - May 2012

There is no evidence that Internet lottery sales do cause a slump in retail sales, but the state lotteries are cautious about up- setting their influential retail partners. This is causing U.S. state lotteries not to embrace Internet sales channels as quickly as might have been expected. But lotteries are also being put under pressure to grow sales so that more funds can be raised for charitable causes or public works. The Australian company Jumbo Lotteries runs the lottery website OzLotteries.com, which enables players to buy tickets for a range of Australian lottery games. OzLot- teries already has an affiliate program in place. The program pays 5 percent of gross spend (i.e., lottery ticket purchase) rather than net spend and there is no neg- ative commission. The nature of lottery games does mean that affiliate commissions have to be struc- tured slightly differently from how they are structured for other gambling games. The lottery is a high-volume, low-spend form of gambling. Lottery games have a mass-market appeal and, on average, cus- tomers have a lower spend compared to other forms of gambling. Lottery players, however, do tend to have a much longer active life than other types of gambling accounts because of the ease of play, the ever-present dream of a life-changing jackpot win, and the regular smaller wins and “near misses” that help sustain player interest. (See figure I) The great benefit of lottery games for affil- iates is that they have a wide demographic appeal. The U.K. Gambling Commission, for example, found that 59 percent of the British population had played the Nation- al Lottery. (See figure II) But the nature of the lottery does mean that there is not the frequency of oppor- tunities to play compared to the likes of bingo and casino. A lottery draw game might have two or three drawings per week. Lotteries have worked on increas- ing the opportunities to make a purchase, with smaller jackpot daily draw games as well as online instant-win games that are available to the customer at any time. State lotteries are often restricted in the marketing activity they can undertake. In many cases it is not possible for them to offer sign-up bonuses or incentives to play. This is obviously in stark contrast to the iGaming sector, which is reliant on sign-up bonuses as a means of attracting new customers. Taking into account all of the factors outlined above, a commission structure based either on CPA or gross tickets sales is perhaps the most attractive setup for a lottery affiliate scheme. Lotteries do have excellent potential for creating compelling content for affili- ates’ sites. Of course, there is the steady stream of results to publish and there are near limitless possibilities for discussion and analysis of the numbers drawn: “hot” and “cold” numbers, frequency of draw for certain numbers, auspicious dates/ numbers, etc. In addition, there is the chance to promote new games that are launched with increasing frequency by lotteries. There is also the opportunity to run lifestyle articles either profiling jack- pot winners who are featured in the press or discussing how you would spend a large jackpot. For example, GBGC produces a table showing how many houses an £8 million jackpot win would buy over time to demonstrate how lotteries have to offer ever-bigger jackpots to maintain players’ interest. (See figure III) In addition to state-run lotteries there are also a number of private firms running online lotteries. The German-listed com- pany Tipp24 is a very interesting example, with a number of lottery-related strands to its business. It is active in the U.K, Ita- ly, Germany and Spain. Tipp24 also has its Lotto Network service, which provides a white-label lottery net- work for its B2B clients. Similarly there is the EuroLotto.com, which offers a dai- ly jackpot of €25 million, owned by the Swedish gaming company Cherry. As certain gaming products mature (and even wane in the public interest), opera- tors and affiliates are looking to diversify into new areas. Lotteries are never going to be able to offer the rewards that were seen at the height of the poker boom. But Internet lotteries in many regions are still in their infancy and, if state operators are prepared to use affiliates and offer a prac- tical commission structure, they represent a growing market with the potential to provide a reliable income to affiliates. Lorien Pilling is head of research for Global Betting and Gaming Consultants, a specialist, international consultancy based in the Isle of Man. 43 Lotteries offer winning ticket