Sweepstakes, Gaming Sites Hit the Jackpot

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The lure of winning big with seemingly little or no investment fuels the popularity of gambling, whether the gambler is taking a chance on the lottery, betting on a sporting event or cozying up to lady luck in a casino.

Thanks to the Internet, gambling devotees no longer need to make a pilgrimage to Las Vegas or Atlantic City, NJ, to get their fix. Sweepstakes and gaming sites, once novel, are now ubiquitous on the Web and have enjoyed strong enough patronage to put them on the virtual map fairly quickly.

As a result, e-businesses have begun to invest in "the house." A growing number of e-tailers and advertisers have turned to incentive-based sweepstakes and gaming sites with an eye toward building traffic. Cyber merchants can stand to gain visitors by developing relationships with these sites, but will this momentum lead to a bust?

Niche No More

Most major online sweepstakes and incentive-based gaming sites have experienced considerable growth during the past 12 months. While the number of people who actively use the Internet from home or work grew by 29 percent and 27 percent, respectively, from February 2000 to February 2001, traffic to the top 10 sweepstakes and gaming sites significantly outpaced those increases over that period.

Traffic to the top 10 sweepstakes and gaming sites increased nearly 87 percent in that time, and 64 percent more surfers frequented these sites from work. Traffic to most of these sites in 1999 was not significant enough to appear on the radar for measurement, so the boost in traffic that these sites have achieved since then is an accomplishment. The dynamics of driving traffic on the Web are becoming clearer, and one thing seems certain: When money talks, surfers listen.

E-businesses are taking advantage of the opportunities afforded by building relationships with sweepstakes and incentive-based gaming sites, particularly for luring more visitors to their sites. Trends show that online merchants are interested in wooing those who visit popular sweepstakes and gaming sites. As a result, these sites have become increasingly influential in driving eyeballs to e-business sites.

Because most sweepstakes and gaming sites are designed to encourage players to click on banner ads - some even require surfers to click on a banner ad to submit an entry - it is not surprising that sweepstakes and gaming sites boast click rates that are sometimes significantly higher than average. In December, the average click rate for top banners seen by U.S. users with at-home access to the Internet was an abysmal 0.4 percent. In contrast, the click rate for fastfreefun.com was nearly 15 percent, and jackpot.com boasted a click rate of 12 percent. Surfers at work appear to be less inclined to click on banner ads than those at home. Nonetheless, the click rates for at-work visitors to the top 10 sweepstakes and gaming sites exceeded the at-work average of 0.22 percent.

Although portals such as yahoo.com, aol.com and msn.com continue to drive significant traffic to e-commerce destinations, sweepstakes and gaming sites have proved to be a viable source of referral traffic as well. This trend was most evident last summer, when the dependence of top e-commerce sites on sweepstakes and gaming sites for referrals of at-home users nearly doubled from the beginning of the year.

In January 2000, 4 percent of referral traffic to top e-commerce destinations was from sweepstakes and gaming sites. That percentage grew to 7.7 percent in July 2000. The percentage of referrals from the top portals dropped slightly, from 50 percent to 46 percent, during the same period. As online businesses began to fall victim to the tumult that has rocked the digital economy, a mad dash for eyeballs was inevitable.

Driving traffic is not the only benefit offered by online sweepstakes and gaming sites. In exchange for a chance to win cash and other prizes, visitors to these sites are exposed to advertisements. On freelotto.com, users can enter a series of lotteries with possible winnings of up to $11 million every day. Visitors register (providing demographic information), select a series of numbers to play and click on one of four banner ads to submit the entry. Once users have registered, ads can be targeted to them based on their demographic profiles and interests, if they opted to disclose that information. In most cases, new players to these sites add to a rich repository of demographic data by entering basic information about themselves during the registration process, including specifics about their interests and lifestyles. This data can be valuable to e-tailers pushing targeted advertising.

Quantity vs. Quality?

Partnering with an online sweepstakes or incentive-based gaming site can be a successful strategy for increasing the number of visitors to an advertiser's site. However, the onus is on e-commerce sites to convert a high percentage of visitors into buyers and to retain those buyers. If online merchants are unable to turn their spending for these clicks into profit, the bottom-line cost can be disastrous, especially for e-tailers whose products are commodities and whose margins are high.

Quantity of eyeballs does not necessarily equal quality, and visitors do not necessarily become purchasers. Trends show that visitors referred from a sweepstakes or gaming site to another site tend to remain true to the gaming site. Surfers pulling a virtual slot machine arm are engaged in winning a prize. A player is not likely to abandon a gaming site during play to purchase an item at an affiliated e-commerce site. Merchants partnering with sweepstakes and gaming sites may pay a high price for traffic that does not consist of well-qualified sales prospects.

Sweepstakes and gaming sites have already lost some of their luster as e-commerce partners. The percentage of at-home traffic to top e-commerce sites referred by these sites declined to 4.4 percent in February. Online sweepstakes and gaming sites have proved adept at attracting surfers and driving traffic to partners' sites, but as more businesses fall prey to the dot-com shakeout, sweepstakes and gaming sites will have to prove that they can deliver traffic and that the quality of that traffic will be high.

The good news is that getting something for nothing has become a mantra among Web surfers. As long as sweepstakes and gaming sites can perpetuate the notion that getting rich quick can now mean getting rich in a single click, the doors to these virtual dream factories will not be closing anytime soon.

Note: All data contained in this article was provided by Nielsen//NetRatings.


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