Mega Millions Buzz Leads To U.S. Online Lottery Sales Boom

August 15, 2022
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The excitement surrounding the recent climbing of the Mega Millions lottery jackpot to more than $1bn also brought new attention to online lottery sales.

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The excitement surrounding the recent climbing of the Mega Millions lottery jackpot to more than $1bn also brought new attention to online lottery sales.

Jackpocket, an online lottery courier that sells tickets in 12 U.S. jurisdictions, even surged to become the top downloaded mobile app in the Apple App Store’s list of free apps.

Peter Sullivan, the company’s CEO, said Jackpocket reached a single-day peak of about 450,000 daily downloads as the jackpot crossed the billion-dollar threshold in late July.

The winner of the $1.3bn jackpot drawing on July 29 was a single ticket sold at a Speedway gas station in Illinois. The jackpot was the second highest in the history of the drawing, and the third-highest lottery jackpot in U.S. history.

Jackpocket touted more than 114,000 winners of smaller prizes on the July 29 drawing alone.

“For a company, it was an amazing experience, because we've doubled our team since last year and a lot of people haven't been able to experience that jackpot moment,” Sullivan said in an interview with VIXIO GamblingCompliance.

“We get, we like to say, one Black Friday a year if we're lucky enough, when there's something big happening and there were so many people in the company that hadn't experienced that.”

He said the company had more than doubled the volume of sales of previous high drawings.

“There’s still learning to be had, we work closely with Google Cloud services, and they hadn’t seen volume like that from an application in a long time,” he said. “We were seeing people pounding the servers.”

“To be honest, we were praying for someone to hit that Friday,” he said with a laugh. “Because if it would have went up again, it would have been another obstacle to overcome, but at that point, the team had put in a bunch of extra nights, we had compensated people for overtime.”

“We were happy to see that, let’s put it that way.”

Under Jackpocket’s model, a player places an order for a certain ticket in a permitted state, and Jackpocket secures the ticket from a partner retailer, and sends the player the ticket’s serial number and a high-resolution scan of the front and back of the ticket, which is then stored in a safe.

Sullivan said the company expects to launch in four new states by the end of the month.

The company has lottery courier licenses in New York, where it first launched in 2015 as a test of the concept, and in New Jersey, and the Mega Millions craze has boosted interest from outside entities.

“It definitely moved the momentum of the company,” Sullivan added. “We've had so much interest since then, whether it's been for investment, whether it's been to partner or to even acquire potential businesses, it just got us national attention.”

In recent months, the company has announced a series of partnerships with professional sports teams as part of its marketing efforts.

“If you try to think of who's an influencer, or who has an audience in a certain jurisdiction, especially when you think about social media, it's really hard to find somebody that is the biggest influencer in Arkansas or Texas or Colorado,” he said. “Sports teams naturally have a geographic border built into it.”

One challenge for online lottery retailers, whether it be couriers like Jackpocket or state-run online lottery programs, is retention after the buzz of a massive jackpot goes down.

Sullivan said that the company had seen “above average” retention in the immediate aftermath of Mega Millions, but also noticed that although players may go away right after a jackpot is won, they tend to return for the next big jackpot whenever it comes around, with the sweet spot being around a $300m prize.

“Even though they may not be there for the next drawing, they will come back in the next few months, and that’s a really supporting prospect for the business.” Sullivan said. “We have that cool part of our business where churned users aren’t churned for good, they just need that big jackpot to come back.”

For some state lotteries, Jackpocket presents an imperfect solution, effectively outsourcing a product that lotteries believe could run themselves but in some cases are not permitted to do, whether it be for political opposition or other reasons.

“When you deal with the legislature and you're not able to get past the legislature, you look into the eyes of bizarre out of desperation,” said May Scheve Reardon, former director of the Missouri Lottery, during a panel discussion at the SBC North America conference in July.

“I was always so opposed to Jackpocket when they came into our space, and so now I'm here looking at Jackpocket,” she said.

Sullivan said he believes the Jackpocket product can be complementary to online lottery programs.

“Just because they have 10,000 retailers, they don’t stop at 10,001,” he said of state lotteries. “The more distribution is better, and here’s the difference, they have to pay for every user they acquire; let us pay for those users.”

“They’re learning that what multi-jurisdictional brands like FanDuel and DraftKings have done is going to be beneficial for the industry,” he continued, pointing out that Jackpocket can mount national campaigns and reach national partnerships that can reach that individual state lotteries cannot.

Reardon, who departed as lottery director at the end of July over disagreements with the state legislature regarding the lottery’s budget and inability to expand, also expressed concern over the lack of oversight lotteries have over couriers like Jackpocket, and the effect it could have on the online lottery sector on the whole.

“They’re one screw up from screwing everything up,” she said. “In Missouri, we're dealing with a lot of legislators who don't think that the state should be in the business of running a lottery, they really think that should be a third-party individual, they just don't want to be in charge of running a lottery.”

“It's this yin and yang of, well, we don't want to be in the business, we’ll destroy the business, but okay, let somebody else do the business, [even if] they might not do it as well as you do,” she continued. “If Jackpocket gets up and running in the state of Missouri, and they stumble, we all fall down.”

“We’re talking with them, and I said, what do these jobs look like?” Reardon added.

“How much do you pay that one kid to sit in the backroom to just keep hitting the button to print out the tickets, and by the way, those terminals were not really intended to print out those tickets, one after one, maybe one and then take some time off,” she asked. “We don't have any controls over that at all.”

In response, Sullivan said the company prides itself on compliance, and is audited by third parties, as well as becoming a member of the North American State and Provincial Lotteries Association (NASPL).

He also pointed out that state lotteries have vast networks of thousands of retailers that they try to maintain and have similar levels of oversight.

“A bodega that has cats, it’s not the most sanctioned place in the world,” he said. “I think the lotteries themselves partner every day with people that they have no oversight with, and not even the close manner of compliance requirements.”

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