Jackpot ...

Interesting concept on the sweepstakes/on-line marketing campaign. As this pans out, there will be more attention focused on this company:

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Rewards site bets it can lure online shoppers
Jackpot to offer sweepstakes, ads, discounts, charity


Boston Globe story
By Carolyn Y. Johnson

Jackpot Rewards, an online smorgasbord of shopping rewards, sweepstakes, charity, and classified ads, launches today, backed by $16.7 million from star investors including Boston ad executive Jack Connors, former Fidelity fund manager Peter Lynch, and Clough Capital Partners chief executive Chuck Clough.

Sharing profits with charitable groups appealed to investor Jack Connors.

The Newton company offers services that play on basic human motivations - people crave discounts and windfalls, but also want to help others. Paying a $3 weekly membership fee at JackpotRewards.com gives people access to discounts at hundreds of online retailers, including Apple, Barnes & Noble, and Best Buy. And Jackpot has pledged to give half of its profits to children's charities.

Membership enters people into a thrice-weekly online sweepstakes for a shot at $100 million or more; people who qualify are also entered into a weekly sweepstakes that has a guaranteed payout of $1 million.

Barry Parr, media analyst at JupiterResearch, said the company could face significant challenges. Sweepstakes often attract people who are more interested in the payout than the core business, he said, and in general it is difficult to convince consumers to pay to subscribe to services online, where people are used to getting things free.

"I do think this raises questions about have you completely thought your business model through," Parr said. "In general, sweepstakes have gotten kind of an unsavory reputation."

But the company has a slate of high-profile, successful investors.

"I understood the concept; I also understood the risk - this is not for the faint of heart, this is not easy money, this is not a guaranteed payback . . . it is what it is, it's a sweepstakes," said Connors, who cofounded Hill, Holliday, Connors and Cosmopulos. He said he was persuaded by the idea, but also by a business model based around giving 50 percent of profits to charity. "If this thing works, that's a very big number."

Laws prohibit illegal lotteries in which people must pay a price to win a prize, but Jackpot allows people to enter the sweepstakes without buying a membership by sending in a postcard.

Still, Edgar Dworsky, a former assistant attorney general of consumer protection in Massachusetts who now runs ConsumerWorld.org, questioned several aspects of the website. Since Jackpot only makes money from membership fees, Dworsky said that it appeared the website might "cross into the line of gambling. The attorney general or state treasurer may need to look at this to see if, in essence, they have found a way to sell lottery tickets."

Dworsky gave the company credit for providing people a way to enter without paying a fee to keep its sweepstakes legal, but expressed concern that the website could spawn copycats, pushing the online sweepstakes envelope. "It's still a gambling game, no skill involved presumably," Dworsky said. "It just leaves a bad taste in my mouth."

People can enter the sweepstakes as often as they want by mail. The idea behind Jackpot is that people will be attracted by its shopper discount program. Members who visit participating retailers earn cash back on purchases each month, similar to the way some credit cards allow customers to earn cash back on purchases.

The company needs 300,000 members to be sustainable, according to Jim Miller, chief executive of Jackpot. But the vision for the market opportunity is much larger, with tens of millions of consumers shopping online each year. According to JupiterResearch, half of all people online enter a sweepstakes at least once a month.

"We think we're breaking new ground and taking a lead in the idea of companies giving back," said Miller, who said the company was born in a brainstorm among philanthropists about how to raise money for charities.

Dan Rosenfeld, a spokesman for the Massachusetts State Lottery Commission, said that online sweepstakes "have little or no effect on our overall business." The general health of the economy, or even gas prices, have had more of an effect on the lottery than online sweepstakes competition, he said.

Carolyn Y. Johnson can be reached at cjohnson@globe.com.