Sweepstakes SCAMS

February 17th, 2012

The phrase “buying a pig in a poke” is a common English expression meaning that something is sold or bought without the buyer knowing its true nature or value, especially when buying without inspecting the item beforehand. (Wikipedia)

The expression is a perfect description of the experience many newcomers face upon entering the complex world of sweepstakes promotions. Hundreds of would-be entrepreneurs enter the market bright-eyed and bushy-tailed, with a wallet full of cash and delusions of grandeur. Like Dorothy in Oz, these unfortunate, trusting souls are quickly “educated” by a university of fast-talking used-car salesmen peddling hope.

In this article we will point out the FOUR most common traps to which newcomers in the Sweepstakes industry fall prey. We will explain in simple terms how to recognize these pitfalls, how to avoid them, and how to dramatically increase your odds of launching a successful business.

Let’s get started.

Here’s a quick “cheat sheet” – with more details below.

1. Understand the basic definition of a sweepstakes promotion.
2. Sweepstakes entries have no cash value until revealed.
3. Sweepstakes must offer a free method of entry and a way to instantly revel entries.
4. Trust your instincts!

1. A sweepstakes requires NO CONSIDERATION. This is a kindergarten-level, basic sweepstakes definition. The fact that we even have to mention this is a sad testament to the scams we have seen on the market. Simply put, one CANNOT purchase a sweepstakes entry. Purchasing a sweepstakes entry is, in fact, a contradiction in terms. The common name for the kind of sweepstakes that allow you to “purchase entries” is GAMBLING!

Just as McDonalds sells hamburgers and gives away a FREE sweepstakes entry with the purchase, ALL sweepstakes must sell a legitimate PRODUCT (not sweepstakes entries), and then GIVE the sweepstakes entry away for FREE.

Some systems that claim to be sweepstakes machines accept money and then award sweepstakes entries–but no product. A few common names for these systems include: Poker Machines, Eight-Liners, Cherry Masters, and Pot of Gold machines. In nearly every jurisdiction these systems have been ruled to be illegal gambling (even if they are misrepresented as a “Sweepstakes”).

Recently one of our distributors called and explained that he tried out a competing “sweepstakes” (note the quotes) company. Upon giving the cashier $10, he was handed a receipt. At the bottom of the receipt the following was printed: YOU HAVE PURCHASED $10 IN SWEEPSTAKES ENTRIES. Wow!! It is inconceivable that a company that manufactures a “sweepstakes” product could possibly be so ignorant as to actually PRINT this on the receipt.

Another major sweepstakes parlor software company sent out an announcement to all of its operators today (I received a copy of it). This was discussing the way their jackpot works. It reads “A cost of 2 cents per spin is added for the Community Jackpot. For example, if a player is playing at the 25 cents level it will cost them 27 cents per spin…” WHAT!? It costs them 25 cents per spin!? Wow!! Once again, we have a clear and blatant misunderstanding of the difference between sweepstakes and GAMBLING. If you PAY for a spin, it’s a SLOT MACHINE.

We predict that anyone who has anything to do with such software, from developers to distributors, to business owners and operators will soon find themselves facing heavy prosecution for illegal gambling. And they will lose.

2. Sweepstakes entries HAVE NO VALUE until they are revealed.

When you purchase a cheeseburger at McDonalds you are given a free sweepstakes entry. Common sense dictates that it would be ludicrous to ask to redeem that entry without first revealing whether or not it is a winner. What is the legal value of a sweepstakes entry that has not been revealed? ZERO. Legally that entry MUST NOT have a value and CANNOT, therefore, be redeemed or purchased back by the company that gave it away for free.

How does this translate into an electronic promotional sweepstakes “revealer” game? When you receive entries for purchasing a product, those entries must be designated ENTRIES. These unrevealed entries CANNOT legally be “redeemed” or “cashed out” for money. Any system that allows this is breaking the law–it is GAMBLING.

Once these entries have been revealed, they will have a value. This value must be displayed in a SEPARATE location, which is usually labeled “WINNINGS”. Thus, any legitimate electronic sweepstakes promotion MUST display TWO SEPARATE FIELDS–one for ENTRIES and one for WINNINGS. If only one field is displayed from within the live game, it is unmistakably GAMBLING.

(Note: our DEMO games grant unlimited free entries and have no winnings. Thus, the demo only has a FREE GAME column. Our LIVE games have both required columns–ENTRIES and WINNINGS as shown in the image above.)

3. Sweepstakes must have a FREE method of entry and should have a way to INSTANTLY REVEAL the results. Notice on the McDonalds Monopoly game the “NO PURCHASE NECESSARY” disclaimer. This is not a joke–omitting this rule can completely invalidate the sweepstakes and make it illegal. Ideally, this method should be easy to understand and easy to use. Mailing in an entry form is probably okay–but is not the best solution.

Our Totem units accept coupons, which can be handed out by the business owner. These coupons are exactly the same size as US currency and, for all intents and purposes, act like a $1 bill. This free coupon (no purchase necessary) gives the customer 1 free “credit” (or 100 sweepstakes entries). These coupons can also be used in conjunction with other product sales. For example, a bar owner may run a promotion “buy a burger and fries and get 3 free coupons for sweepstakes”.

Another test of a true sweepstakes is the ability to instantly reveal all sweepstakes entries. Upon playing the live game, you should find an option to reveal all sweepstakes entries instantly without using the entertaining reveal option. Slot machines make you spin the wheels. Sweepstakes give you the option to reveal your entries immediately.

4. At last, we will close with perhaps the most important rule to avoid being swindled by the bottom-feeders in the industry. TRUST YOUR INSTINCTS!

If it feels fishy–it probably is! Use common sense. Pay attention. Don’t be afraid to call a few different companies or to do additional homework. A sweepstakes company that believes in its product will only make money if YOU make money. It will not demand that you buy expensive hardware from the company or “proprietary” technology up front. It will not propose “flat monthly fees”, which require you to pay on an ongoing basis whether or not you make any money. Flat fees in the sweepstakes industry are a sure sign of a scam. (They may sound good on paper–until you don’t make much money and end up paying an exorbitant bill while keeping very little money for yourself)

Don’t take legal advice from anyone who is not an attorney. Many salesmen who have no clue about law (much less sweepstakes law) will happily preach to you about why it’s legal in your city–all in an effort to persuade you to write them a check. These are probably the same “experts” who print “you have purchased $10 in sweepstakes entries” at the bottom of their receipt!

Any legitimate company will answer its phones, return calls promptly, has a professional recording or answering service if nobody is in the office, has a website that displays its games and its pricing, and won’t send you email messages from aol, gmail, hotmail, or other “free” email accounts, but from the actual business (such as “sweepscoach.com”). On a related note, examine the URL of the company. Does it appear that the company is trying to misrepresent itself? Many are. Be careful. Is it a free, “make your own website” hosting site–this screams of unprofessionalism. Don’t fall for it.

NEVER pay cash for sweepstakes equipment. NEVER pay with Western Union (this is as much of a “red flag” as an email from someone in Nigeria claiming they need your help to get money into the US)

If there are no pictures of the games on the site–the company isn’t legitimate; real sweepstakes companies have real games. If you can’t play the games on the company site, the games are not web-based (regardless of any excuses or song and dance given to you by the salesmen). If the demo of the games displays the brand of a company other than the one contacting you, the salesman is a “middle man” (especially if the salesman has an email address that’s not the same as the brand displayed on the games). Wisdom dictates that you contact the legitimate company to verify that the person selling you the system is an authorized distributor of their games.

Most of these warnings, one would think, are common sense. But you would be surprised at how many people get duped. This industry is just a hop-skip-and a jump away from gambling. Unfortunately, it sometimes attracts a few unsavory characters. Don’t let them fool you.

In conclusion; be alert! Take the time to learn about the business. Pay attention. Shop around. Understand the industry before you make a purchase. We hate getting calls from people who have been taken advantage of by sleazy salesmen and, unfortunately, it happens far too often. And whatever you do… don’t buy “a pig in a poke”!

Posted in Sweeps General, Sweepstakes Legal | Comments Off

Credit-Based Accounting System

October 25th, 2011

One of the most significant features of our sweepstakes platform is the unique way that accounting is handled. The system uses what we call The Credit System. This system provides an enormous advantage over every other sweepstakes platform on the market. The accounting system is such a significant feature that we refer to it as one of the Three Pillars that support the PromoGames Sweepstakes Platform.

To review, these THREE PILLARS include:

  1. A Web-Based Sweepstakes Platform
  2. The Credit-Based Accounting System
  3. A Multi-Tiered Distribution System

The credit system is briefly explained in another article on our site about Product Licensing. The purpose of this article is to drill down with a more thorough explanation of our proprietary credit-based accounting system and point out why it is such a huge advantage over any other method of accounting and payment.

The CREDIT SYSTEM uses a STANDARD INVENTORY MODEL. As you compare this accounting method to that of any standard product in a store, you will find the model SIMPLE, STRAIGHTFORWARD, and INTUITIVE.

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EXAMPLE: Let’s say that you are a Business Owner selling Snickers bars. And let’s assume that you buy Snickers bars from your candy Distributor for 60 cents each. Let’s also assume that you sell Snickers bars to your customers for $1 each. Finally, let’s assume that you have 100 Snickers bars in your store (inventory). I know this is starting to sound like a bad word problem, but bear with me.

If a customer walks into your store and purchases 10 Snickers bars, how much money will you have in your cash register?
Answer: $10

How many Snickers bars are missing from your inventory?
Answer: 10

How many Snickers bars do you have left?
Answer: 90

How much money did it cost you to purchase the 10 Snickers bars you just sold?
Answer: $6 (10 candy bars x 60 cents each = $6)

What was your profit on those Snickers bars?
Answer: $4 (you charged $10, but paid $6 = $4 profit)

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Thus, for every Snickers bar that disappears from your inventory, $1 will show up in your cash register. And for every $1 that shows up in your cash register, 40 cents of that is considered to be “profit” because Snickers bars cost you 60 cents each.

This is EXACTLY the same process that the credit-based accounting system uses. In this model, a Snickers bar would represent a credit. 10 credits (or Snickers bars) missing from the system (your store) = $10 in your cash register.

NOTE: a store owner will never SELL sweepstakes entries, or credits. When a customer purchases $1 worth of Internet time or other product, the customer receives 1 FREE sweepstakes credit.

Bonus Question: If you had 100 credits in your account (credit pool) and a customer came to your store and purchased $10 worth of product (Internet time) and was given “free credits”, how many credits do you have left?
Answer: 90 Credits

You can see that when 10 credits are missing from your credit pool, $10 shows up in your cash register. THERE WILL ALWAYS be a ONE to ONE RELATIONSHIP between DOLLARS and CREDITS! One credit missing from your pool of credits = $1 in your cash register.

Let’s move on to the next level of understanding. When a customer receives sweepstakes entries, we know that pretty soon that customer might “REDEEM” some of those entries to receive prizes or cash. Let’s walk through that now by going back to our example with Snickers.

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The customer purchased 10 Snickers bars for $10. But after getting out of the store he has an epiphany and realizes that nobody can possibly eat that many Snickers bars–so he wants to RETURN some of them. He walks back into your store and says “I changed my mind–I only want 5 of them, not 10″. (Let’s ignore laws about returning food products for now; just go with it). He hands you five of his Snickers bars and you return $5 back to him.

How many Snickers bars do you now have in inventory?
Answer: 95 (you had 90 but got 5 of them back)

How much money have you made now (gross)?
Answer: $5 (you had $10 because you sold 10 candy bars, then got 5 candy bars back and paid $5 back to the customer)

This is precisely what happens if a customer REDEEMS for cash. Two things occur at this point.

  1. The credits (Snickers bars) move BACK into your pool of credits (inventory). Note: these will be sold again to the next customer!
  2. You pay the customer $1 each for those credits (Snickers bars).

You can see that there is STILL a ONE to ONE RELATIONSHIP between DOLLARS and CREDITS. THERE WILL ALWAYS be a ONE to ONE RELATIONSHIP between DOLLARS and CREDITS! One credit missing from your pool of credits = $1 in your cash register.

Thus, your pool of credits becomes your inventory. If you start with 1,000 credits, you will always end up with $1,000 when your pool pool of credits is at zero (no credits left).

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Now let’s add the Distributor into the equation. Distributors usually OWN the Internet Kiosk and can, therefore, charge Business Owners more (because Business Owners don’t have to purchase the Kiosk). Usually a Distributor charges a Business Owner between 60-70 cents per credit. In this case, let’s call it 60 cents per credit.

Let’s continue with our previous example. When the Business Owner needs more Snickers bars (or Credits), he will contact the Distributor to buy them.

How much does the Business Owner pay the Distributor to purchase 100 Snickers bars (or credits)?
Answer: $60 (60 cents x 100 Snickers bars = $60)

How much does the Distributor pay to the Manufacture to buy the 100 Snickers bars (or credits)?
Answer: $30 (30 cents x 100 Snickers bars = $30)

How much money does the Distributor make when the Business Owner purchases 100 Snickers bars (or credits)?
$30 ($60 to the Distributor by the Business Owner less $30 paid by the Distributor to the Manufacture

Why doesn’t the Business Owner simply go directly to the Manufacture to purchase Snickers bars (or credits) and “cut out” the Distributor?
Answer: Because the Manufacture doesn’t sell Snickers bars (or credits) directly to Business Owners. Distributors can’t purchase 100 Snickers bars but are more likely to purchase 100,000 Snickers bars at a time.

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Let me explain why this method is so convenient for business owners and distributors. If you are a business owner and your supply of credits (or Snickers bars) is getting low, what do you think you should do? Obviously you must purchase more credits (or Snickers bars) from your distributor. How often will you do this? As often as it takes! Normally a business owner will purchase credits about once / month. Sometimes a store will go through more Snickers bars (or credits) than expected. If this happens, the store owner will call the distributor sooner than expected to purchase more Snickers bars (or credits). However; the business owner never has to receive invoices or “pay bills” for Snickers bars consumed.

NOTE: ALL of the profit made from selling a Snickers bar (or other products associated with sweepstakes credits) belongs to the business owner–every penny of it! This is because he has already paid for the Snickers bar. Of course, the Business Owner will likely want to use some of that money to purchase more “inventory” in order to have enough Snickers bars on his shelf (or credits in his credit pool) to supply future customers.

As a Distributor, you never need to invoice the stores that are using your sweepstakes platform (whether it be a sweepstakes Internet cafe or a business with an Internet kiosk / sweepstakes Totem). When the business owner runs low on “inventory” (Snickers bars on the shelf or credits in the credit pool), he contacts his distributor and purchases more. Although our web-based platform allows real-time reporting on performance (allowing access from smart phones, laptops, or anything with an Internet connection), the Distributor NEVER has to send an invoice to a business owner. If the store runs out of Snickers bars, it can’t sell any more Snickers bars. If it runs out of credits, nobody can participate in the sweepstakes.

To make this even more simple, we have a convenient “alert” system that allows Distributors to receive a notification (email or SMS) when available credits at one of their accounts, or stores, drops below a pre-defined threshold!

POP QUIZ: When the Business Owner has $2,000 in his Internet Kiosk, how much of that money is due to the Distributor?
Answer: None of it! The money belongs to business owner. However; the Business Owner will likely use some of that money to purchase more credits!

As you can see from the “Pop Quiz” answer, Distributors don’t need to worry about invoicing business owners or about collecting money due to them. Distributors usually give the cash box key for the Internet Kiosk to the business owner! Instead of being “bill collectors”, Distributors become “order takers”. Here at SweepsCoach we have filled both of these roles and believe me when I tell you that being an “order taker” is much more fun than being a “bill collector” and chasing people trying to collect payments!

SUMMARY:

The credit system for sweepstakes platform management eliminates the need for invoicing and for driving around collecting money from machines or Business Owners. Business Owners collect the money and pay Distributors in whichever way is most convenient (bank deposits, checks, etc). The Business Owner never owes the Distributor any money and the Distributor never owes the Manufacture any money. Whatever your role you play in the distribution process, you receive your money before you deliver your product. This means you will never be a “bill collector”. The system is accurate, it saves time, it reduces risk, and is SIMPLE, STRAIGHTFORWARD, and INTUITIVE.

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Below is a simple diagram that outlines the flow of credits in the credit system (compliments to Max, one of our fantastic Distributors, for creating this cool visual!)

STEP 1: Usually the Distributor gives some credits to the Business Owner to start. When a Distributor purchases an Internet Kiosk (sweepstakes Totem), it comes with 1,000 credits. We recommend that Distributors give some (or all) of those credits to the business owner. This is represented by the “1,000 Credits” at the top left-hand side of the diagram.

STEP 2: Customers purchase $1,000 worth of products, which consumes 1,000 credits. There will be some payouts (which means credits go BACK to the Business Owner’s pool of credits). However, once all 1,000 credits are consumed the Business Owner will have exactly $1,000.

STEP 3: The Business Owner keeps some of the money as profit. In this diagram, the business owner is keeping 40% of the money generated and paying 60% (or 60 cents per credit) to the Distributor.

STEP 4: The Business Owner purchases 1,000 more credits from the Distributor. In this case, the Distributor receives 60% of the revenue, or $600. Remember, some of this will be used to purchase more credits (it’s not all profit to the Distributor).

STEP 5: The Distributor purchases credits from SweepsCoach. Distributors pay 30% (or 30 cents per credit), so 1,000 credits cost the Distributor $300. Profit to the Distributor in this case is $300 for every 1,000 credits that move through the system. ($600 paid to Distributor by Business owner for 1,000 credits less $300 paid by Distributor to SweepsCoach for 1,000 credits = $300 profit to Distributor)

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Promo Games, USA

June 10th, 2011

Promo Games is one of the foremost pioneers in the field of sweepstakes promotions. Originally based in Europe, Promo Games has been deploying sweepstakes promotional marketing products (sweepstakes machines) since around the year 2,000. Interestingly, this was four or five years before similar promotional platforms were developed in the Americas.

Eventually the US market developed sweepstakes promotional platforms which are now frequently deployed in Internet cafe “parlors”. Although the technologies display many similarities, including their adherence to sweepstakes promotional compliance laws, there are a few fundamental differences between all other sweepstakes platforms in the US market and the Promo Games sweepstakes platform. At a high level, there are three technological “pillars” that make the PG solution unique:

1. Web-based sweepstakes
2. Credit-based accounting
3. Multi-tiered distribution system

The more you learn about the intricacies of the sweepstakes promotional industry, the more significant these three differentiating features become. For a more in-depth discussion of these topics feel free to tune in to one of our upcoming live Webinars.

Promo Games first entered the American market in 2010. Having dominated the European sweepstakes market, the company decided to launch its platform in the US. Promo Games contacted SweepsCoach, the largest independent US-based sweepstakes promotional marketing and consulting group, to help distribute the Promo Games platform. Together SweepsCoach and Promo Games Europe formed the brand PromoTek Games.

As SweepsCoach developed the US market and deployed PromoTek games, the relationship between Promo Games and SweepsCoach solidified. In 2011, SweepsCoach became the Promo Games USA office, supervising and training all US PromoTek distributors and managing the affairs and strategic direction of Promo Games throughout the nation. SweepsCoach is Promo Games USA, the owner of the PromoTek brand and the Promo Games promotional sweepstakes platform in the US.

SweepsCoach / Promo Games is expanding rapidly across the Americas. We are actively searching for qualified partners and distributors to help deploy what we consider to be the most advanced sweepstakes platform in the world. The list of official SweepsCoach / Distributors is growing as we struggle to keep up with the volume of customers calling to get the PromoTek games. Contact us now to get involved!

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“Matching” – Bad Math!

May 31st, 2011

Once your Internet cafe sweepstakes business is launched you’ll want to promote it. How do you get people through the doors to buy your products and play your sweepstakes games?

There are lots of ways to attract customers to your business. Many of them have great results–but some of them do not work well. A few can even damage your business. The purpose of this article is to focus on one particularly destructive marketing technique known as “matching”.

“Matching” is a marketing ploy devised in mid 2010. Nobody can be absolutely certain where it first started because a few general regions began using it at about the same time. We began to hear reports of this technique coming from Columbus and Cleveland Ohio and also Spring Hill, Florida. Here’s how it works. Generally when customers purchase $20 worth of product (let’s say workstation time, or Internet time), they are given 20 free sweepstakes credits (or 2,000 “entries). Well, what “matching” does is gives the customer an additional 5 credits (5,000 free entries) for each $20 worth of product purchased.

Thus, if a customer purchases $15 of product, the customer gets 15 free credits. But if the customer purchases $20, he receives 20 free credits PLUS 5 additional free “bonus” credits.

At face value this sounds clever. What could possibly be wrong with this promotional technique? In areas with lots of competition–several competing sweepstakes Internet cafes–this could truly give an edge to the store implementing this giveaway promotion. When the competition is merely giving customers 20 credits for a $20 purchase, giving 25 credits for a $20 purchase sounds very attractive to customers!

Now let’s pick it apart.

The first problem with this tactic is one of legality. Without getting into a boring rant about technicalities of sweepstakes law, suffice it to say you cannot offer 1 credit for each dollar spent unless you spend MORE dollars, at which point you get “bonus” free entries. Our attorneys have advised us that even though this is a common practice in some areas it breaks sweepstakes laws.

The second problem with “matching” breaks down to simple math. Whoever came up with this technique either wasn’t very handy with a calculator or underestimated the intelligence of customers. Every significant internet sweepstakes software pays out around 90% (most in the 91-94% range). This is the “prizing percentage”. It’s simple math–and if you lower the percentage below about 90 your customers will leave. For an excellent article explaining the concept of prizing percentage (or payout ratio), read this article.

This article explains that the prizing percentage is the amount you would expect to pay out to a customer if that customer played through every entry ONLY one time. As an example; if a customer spent $10 for products she would receive 10 free sweepstakes credits. Then, if she played (or “revealed”) those credits only one time and did not purchase any additional products to get more credits, she would (statistically) end up with $9–or 90%. However; very few customers will every play ONLY one time. Most customers continue to purchase additional product–ending up keeping closer to 50%. This customer would likely continue buying product and revealing entries (or playing sweepstakes games) until she had about $5 in prizes left. Thus, your “hold” is about 50% and your payout ratio is 90%.

Back to our example. What happens with the payout ratio is 90% and you give customers 25 credits after they spend $20? It doesn’t take a rocket scientist to figure out that 90% of 25 is $22.50. Thus, if a customer comes into your store, spends $20, and gets 25 credits, you are in an extremely precarious situation. If that customer plays the sweepstakes games ONE time (reveals entries once) and then immediately redeems all prizes, you will be giving away $2.25. Matching follows the same logic as the business owner who says; We’re going to lower the price of our product to below OUR cost–we’ll lose some money in the short run but make up for it with volume!

Now; this was not a big problem a year ago when the tactic first hit the streets. Most customers didn’t figure out that they had “the upper hand” if they played only one time and then redeemed (cashed out). But customers are smarter than that. They caught on. What’s worse–the regions where this ploy is the most common are also the areas with a lot of competition. To meet competitors’ marketing promotions, most businesses copied this “matching” concept from each other until it was extremely common in some areas. Everyone is doing it!

The stage is now set for the perfect storm! Groups of sweepstakes-savvy customers rove like parasites from one unwitting internet sweepstakes store to another sponging freebies. Customers spend $20 to get 25 credits at one store–often getting free food and drinks while they do it (because many sweepstakes Internet cafes offer complimentary food). The customers slowly play through their entries ONE time, knowing they have math on their side. While revealing entries (playing sweepstakes games), they enjoy free drinks and a hot dog. When they are done they should mathematically be up about $2.25. They finish their drink, cash out to get their free $2, and hop in their car to scoot off to the next sweepstakes Internet parlor. In areas with many competing internet cafes they will have a very short drive to “target number two”.

Lather, rinse, repeat. Groups of customers who have figured out how to “beat the system” are flitting around gathering up free food, free drinks, and a few bucks at every stop at the expense of business owners. YIKES!

Let’s finish by examining a success story. Recently one of our clients was using this matching concept. He called us complaining about revenue and payouts. We checked his payout ratio, which was at about 90% (just right). Then we realized he was using matching promotions. We quickly educated him on the folly of this marketing practice. At first he was concerned about losing customers if he discontinued the matching. “All of my competition is doing it!”

Eventually he followed our advice. A few weeks later he called us back. He reported that his overall business had slightly decreased. Some customers left, never to return. But guess which customers left? That’s right… the first customers to head for the door were those opportunists who had been bleeding him dry! Although overall revenue slightly declined, PROFITS increased significantly. So what about those customers he lost? GIVE THEM TO THE COMPETITION! We didn’t want them anyway.

We have received more than one phone call from less-experienced business owners with Internet sweepstakes games. They lament their losses and usually, in their ignorance, erroneously blame the payout ratio. Over time, more and more of their customers catch on to this “easy money” scheme. Our answer is always the same–DO NOT GIVE AWAY EXTRA FREE ENTRIES! Matching is a BAD idea. Our attorneys tell us it’s breaking the law, and our calculators tell us it’s breaking your bank. Can we possibly be more clear? “Matching” is a LOSING PROPOSITION!

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What is a TOTEM?

April 19th, 2011

A Totem is defined as “a monument or distinctive symbol” and plays a role in our American heritage. When it comes to sweepstakes games, our TOTEM technology is one-of-a-kind in the industry. The PromoTek Totem unit leverages the advantages of a web-based sweepstakes system, providing an extremely profitable “Internet Kiosk” that can be placed just about anywhere. Similar to an ATM or a video game machine, the PromoTek sweepstakes Totem stands alone and has a bill acceptor. Customers insert money into the Totem to purchase Internet access time on the kiosk. After purchasing Internet time they can surf the Internet until their time runs out. When customers make a purchase, they are also given FREE entries into a sweepstakes. They can then reveal the sweepstakes entries at the Totem unit, which shows the sweepstakes results by simulating slot machines, keno, or poker. Here’s a video about Totems. You can also see several different pictures of our Totems in our gallery.

Sweepstakes Internet cafes are popping up all over the place across the country–even where casinos are illegal. Entrepreneurs are rushing into this highly profitable industry as local law enforcement scrambles to understand the concept. This model has been taking place in the US since about 2006 and although it is controversial, in nearly every case it has been proven to be perfectly legal. The truth is that when attorneys and law enforcement thoroughly analyze the system they are almost always forced to admit, “It looks like a duck, it quacks like a duck, but… somehow it is NOT a duck!” Although the concept invokes questions from some, there is one thing that nobody anywhere can argue–this business is EXTREMELY profitable!

Dozens of companies have tried to develop sweepstakes software games to get a “piece of the action”. Only one of these has had the technical expertise to develop a sweepstakes offering that is completely web-based. Among dozens of other benefits, the web-based platform allows the PromoTek games to operate in stand-alone Totem units. Because the product is web-based, you do not need to purchase an onsite server or Point of Sale for each location. With any other sweepstakes product, the cost of the SERVERS will range from $3,000 – $10,000. With PromoTek, the servers are unnecessary because they are “in the cloud” (online). This means you don’t need to buy them–which is a huge cost savings!

The Sweepstakes Totem is revolutionary in this industry because it is MUCH more profitable than its counterpart, a “standard computer in a sweepstakes room”. Allow me to explain. The “standard” model in the US for the past several years has been to open a business with 30 – 100 sweepstakes revealer terminals. We call this a “sweepstakes parlor”. To launch this business model, the owner or investor must sign a lease (usually 3-5 years), hire employees, pay a monthly electric bill, pay insurance, provide free food or snacks to customers, and cover a long list of additional expenses. Ongoing “upkeep” costs in a sweepstakes parlor range from $5,000 / month to as much as $50,000. You need to bring in a LOT of revenue to cover that cost!

Let’s compare this with the Sweepstakes Totem distribution model. When you place a Totem in your business (bar, convenience store, etc.), you don’t have to sign a lease or pay extra rent. You don’t have to hire extra employees. You don’t have to give customers free food when they come in to play. As you can see–your expenses are negligible. If you are placing a Totem in a pre-existing business, the incremental operating cost is almost zero!

Now here’s the best part–on the average Sweepstakes Totems generate at least FOUR TIMES as much money as a standard sweepstakes terminal in a sweepstakes parlor (with many terminals). This significant difference in revenue is the result of two factors. 1) Different customers play at a Totem unit than play in a sweepstakes parlor. Parlor customers come in with $10 or $20 and want to be entertained for several hours. Their bets are small as they try to maximize their playing time. On the other hand, the average Totem customer wants to spend 5-10 minutes while walking out of a bar. This customer burns through $10 or $20 in minutes instead of hours. 2) The Totem unit has a built-in bill acceptor. Instead of walking to the cashier to buy more Internet time and get more sweepstakes entries, the customer simply inserts the money directly into the Totem unit.

Totems bring in four times as much money–without the operating costs!

Have we mentioned the fact that you don’t need an expensive onsite technician to install the Sweepstakes Totem units? Since there are no complex, highly technical servers onsite (because it is web-based), you can simply place the unit into your business, turn it on, and immediately start making money. This is unmatched in the industry. When a new game is released, since the platform is web-based, it is automatically and instantly deployed to every single location (like “updating a website”). No other sweepstakes platform in the United States offers this. Thus, with any other sweepstakes system a technician must frequently come to your store to update your computers. Best-case scenario, they may be able to remotely update your systems. But this is extremely time consuming and EXPENSIVE. The web-based technology SAVES YOU MONEY!

The PromoTek Totem uses a unique credit-based accounting system, which means that as a distributor or Totem owner, you don’t have to invoice your customers (business owners) and collect payments. If they don’t make payments to you, their system automatically stops working! Now instead of YOU chasing THEM… they call you. The system also offers the convenience of simple web-based reporting tools. You can check minute-by-minute performance of all your Totems from any web browser (including your iPhone or mobile device). It’s fantastic!

What other hidden benefits are there with the Sweepstakes Totem model? Totems help avoid LEGAL challenges. When the local sheriff has problems with a sweepstakes parlor, what options do the business owners have? The owner has invested a significant amount of money to sign a multi-year lease and has purchased 30+ sweepstakes terminals in the business. When local authorities walk into the business they often think they are looking at a mini casino! If the sheriff has a problem with this, the business owner has two choices; FIGHT it, or go out of business. Both options are extremely expensive.

However, with one or two Totems in an otherwise unrelated business (bar, burger joint, convenience store, laundromat), the sweepstakes terminals often fly “under the radar”. The sheriff is so busy chasing the guys with 30+ computers that he often doesn’t even notice the Totem units. But what if he does notice and has a problem with it? Simple… MOVE it! Rather than fighting the law, skipping out on a lease, or going out of business, you can simply MOVE the totem to the next city, county, or even state if necessary. Because of the web-based technology, your customers also have the option of playing the sweepstakes at home.

I’m sure you have heard that when it comes to starting a successful business of any kind, the top three things to consider are LOCATION, LOCATION, and LOCATION! I could certainly argue that a number of other factors contribute to your success, but it is clear that selecting a great location for your business is critical. What happens when you launch your sweepstakes parlor (30+ terminals) and then realize you aren’t in a great location? Sadly, you’re stuck! What happens if you place a Totem in a location that isn’t making much money? MOVE THE TOTEM!

The fact that the Totem units are MOBILE and can “fly under the radar” allows you to avoid trouble and to maximize profit.

Why is PromoTek the only sweepstakes platform that has developed a Totem unit? Because the others CAN’T DO IT YET! Since no other sweepstakes platform in the industry is web-based and uses the credit-based system they simply cannot create a standalone unit like the PromoTek Totem.

So let’s summarize… The Totem’s “plug and play” ability means installation is quick and inexpensive. Updates are simple, instantaneous, and free. They fly under the radar, avoiding legal issues. They offer flexibility because you can pick them up and move them to a different location immediately. Using a unique “credit-based” accounting system, you never have to chase payments. Operating costs are negligible, yet Totems earn 4x more than similar systems in sweepstakes parlors.

Entrepreneurs, business owners, and distributors are discovering the one-of-a-kind Sweepstakes Totem model and generating amazing incomes! Call now to find out how to get started.

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Sweepstakes at Home

April 8th, 2011

A few of the most important elements of a robust sweepstakes promotional platform are flexibility and adaptability.  This industry is a whirlwind of legal challenges, changing local and state ordinances, and law enforcement that often knows nothing about this business other than “it looks like gambling and by golly I won’t tolerate it in my jurisdiction!”

How are sweepstakes promotional products prepared to meet this dynamic environment?  Unfortunately, many of them are what we would call “one-trick ponies”.  What you see is what you get–and if they need to turn on a dime you’ll find yourself out of business.  This is primarily due to the fact that every sweepstakes solution in America is using a client-server model.  If you need a quick change someone will have to develop it and then come out and install it on every system.  Or, best case scenario, they can do remote updates (one at a time).  This is all well and good–unless there are several hundred, or several thousand, systems to be updated.  Then what?  This could take weeks or months to roll out.

Enter the web-based model.  We have only seen ONE true web-based sweepstakes solution.  This is the PromoTek platform, and the more we see this system in action the more impressed we are by it.  This platform delivers updates, enhancements, and new games regularly.  These updates are instantly and automatically delivered to all 16,000+ PromoTek locations simultaneously when the update is put on the servers.  Speedy updates and INSTANT DEPLOYMENT make this option the most flexible option available.

In this article we want to focus on one hidden treasure of a web-based sweepstakes solution.  A lot of people aren’t aware of this, so we think it’s time to let the cat out of the bag on one of the industry’s best-kept secrets; playing sweepstakes games at home.

What happens if the unthinkable occurs and your city, county, or state completely outlaws sweepstakes promotions?  Well, first of all let’s point out that this is not likely to stick.  They’ve been trying to outlaw sweepstakes for years in several states and haven’t been able to do it.  Sure, places are closed for a few weeks–but they almost always end up opening again soon.  At the end of the day, if the sweepstakes are being run properly they are nearly impossible to completely shut down.  But what happens in that timeframe?  For two weeks, or for two months, or… who knows?  Maybe permanently your business is not allowed to run a sweepstakes promotion onsite.  OUCH!

This is what happened recently in Europe.  An entire country passed strict regulations and penalties preventing anyone from running a sweepstakes in their business.  What did the sweepstakes owners do?  Every sweepstakes solution was forced to leave the country.  Everyone, that is, except for web-based PromoTek sweepstakes.  The businesses that were running the PromoTek system sent their customers home to play.  This solution was implemented instantly–and those with PromoTek games in the US can do exactly the same thing RIGHT NOW.

When an account is created for a new customer, that account is linked to the specific business or location where it was formed.  This means that using the same exact login that the customer uses in the store, that customer can go home (or anywhere with Internet access) and log in to the website: promotekgaming.com.  On this site customers can play games to reveal their winnings–exactly the same way they did onsite in the business where they were given credits to play.

The implications of this concept are staggering.  Back to our example in Europe; PromoTek sweepstakes promotions are bringing in several million dollars of profit each month–and 100% of the business is being played at home.  This concept also allows business owners to send customers home to play if the store is too full (no open computers left).  It allows customers to play at their own convenience, whether or not your store is open for business. Thus, even while your store is closed and you are asleep, hundreds (or thousands) of your customers can be playing your games and making money for you.

But wait – when your customers are playing from home does this mean you are losing out somehow?  To the contrary–business owners LOVE this concept.  They know that their customers can ONLY receive promotional entries in their store and can ONLY redeem winnings in their store.  Furthermore; we have found that when people go home to play and have to return to the store to redeem (“cash out”), the HOLD for the business owner increases significantly.  Generally speaking, when a customer is given 1 “free credit” for purchasing $1 worth of product, less than 10 cents of that is actually redeemed when that customer goes home to play–the business owner keeps 90 cents.   Compare this to about 50 cents redeemed when that customer stays in the store to reveal his entries.  WOW!

Isn’t there something legally wrong with revealing sweepstakes entries from home?  Absolutely not!  When you open a bottle of Coca-Cola you may find a code on the bottom of the cap.  To play the Coca-Cola sweepstakes and see if you have won anything, you plug this number into their online website AT HOME on your own computer.  You’ll find this kind of sweepstakes in everything from cereal boxes to cans of soup.  It is extremely common and absolutely legal.

The “Play at Home” feature is not something that has to be enabled in case of an unexpected emergency situation.  It is ALREADY being used by PromoTek sweepstakes sponsors everywhere.  But if things get tricky and your business needs to keep things on “the down low” for a few weeks or a few months, a client-server model (every sweepstakes product in the US besides PromoTek) must tell sweepstakes sponsors “I guess you better close shop.”  PromoTek operators can keep their doors open and send customers home to play–instantly.

It is this kind of flexibility that makes the PromoTek system and its unique feature set stand head and shoulders above every other sweepstakes product that we have seen (and we’ve tested dozens of them!)

In order to maximize profitability in your sweepstakes business, or if trouble comes, you need OPTIONS. You need FLEXIBILITY and you need SPEED.  The web-based PromoTek sweepstakes give you what you need.  Allowing your customers to play from home is just one of the unique differentiating features that makes PromoTek our first choice for sweepstakes platforms.

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Web-Based Sweeps

January 7th, 2011

Every sweepstakes product requires three components.

The Client System. This is the “game terminal”. It is where the customers play games. Businesses can have from one to several hundred client terminals.

The Game Server. This special computer is “the brain” of the operation. It determines the results of all the sweepstakes and “talks to” each of the client systems to display results (who wins and who loses). The server also maintains the database that contains the finite prize pool information.

The Point of Sale (POS). This special computer allows business owners and employees to interact with the server. The POS is used to create customer accounts, to add “entries” to customer accounts, to determine which customers have won prizes, and to do reporting (such as “how much money did we make yesterday?”)

There are currently two models for deploying these three components in a promotional sweepstakes environment. One is a Client-Server model, and the other is a Web-Based solution.

The Client-Server model requires that the sweepstakes software be physically installed on each Client System (game terminal). This option also requires that the Game Server and the POS be physically located onsite, within the same facility as all the Client Systems. In simple terms, this means that a business with a sweepstakes promotion that is Client-Server based needs an onsite server, an onsite POS (these might be combined into a single computer), and software installed on each Client System.

The Web-Based solution pushes nearly everything to “the cloud” (the Internet). It still requires a Game Server, but that server isn’t physically located in your business, but somewhere offsite. This is how eBay, Google, and Amazon run their businesses. Their servers are tucked away in high-tech, air-conditioned, super secure locations (called colocation center) and are being carefully monitored by a team of technicians. Generally there are a handful of different colocation facilities, all with extremely fast Internet connections and back-up power generators. Since these locations are geographically spread out, even if one of the facilities catches on fire or gets hit by an earthquake or any other disaster, the other colocation facilities will immediately step in and share the extra load. This guarantees a very reliable system that almost never “goes down” or has service outages or interruptions. With this model, Client Systems access the Internet, but the actual game application doesn’t need to be installed on each system. The Game Server is offsite, and the POS simply accesses information via the Internet.

Both the Web-Based sweepstakes solution and the older Client-Server model create a unique, finite pool for each location (or store). It would not make sense to have numerous locations playing from the same prize pool because some locations might pay out high while others are paying out low. No worries–whether the solution is Web-Based or the older Client-Server model, both create a unique prize pool for each store.

Now that I’ve explained the components of a sweepstakes system and the different models used to deploy the sweepstakes product, let’s talk about what this means to someone running a business with sweepstakes promotions. In other words–this is all great, but why should you care?

Nearly every sweepstakes product on the market uses a Client-Server model. However, the Web-Based model has several huge advantages over the Client-Server model.

Advantages of a Web-Based sweepstakes solution:

A Web-Based solution means your customers have a choice–they can play in your store or they can play at home. The implications of this concept are staggering. It allows business owners to send customers home to play if the store is too full (no open computers left). It allows customers to play at their own convenience, whether or not your store is open for business. Thus, even while your store is closed and you are asleep, hundreds (or thousands) of your customers can be playing your games and making money for you. Revealing sweepstakes entries at home is perfectly legal, this is how Coca-Cola does it. It allows business owners to tap into an enormous money-making ability that would be IMPOSSIBLE–if not for the advanced Web-Based functionality.

The Client-Server model requires an onsite server. Having an onsite server means you have to purchase an expensive server to put in your business. Generally you need to pay from $3,000 to as much as $10,000 to buy that server. A Web-Based model has that server offsite. You don’t have to buy it. This is a huge up-front savings.

Now that you have purchased an extremely expensive, highly technical Game Server that is, in essence, “the brain” of your outfit–how does it get installed? You have to pay someone to come out and install it. Don’t think that you or another technical friend of yours can install the system. It will require someone with a very specific knowledge of the sweepstakes software and how that software works with the server, the POS, and the Client Systems. This process usually takes at least a few days and can be extremely painful. Some sweepstakes companies may say “We do the installation for free!” Do not be deceived, there is no such thing as a free lunch (you’ll just get a smaller dinner!) I can assure you that the cost will be buried in something else you pay for. With a Web-Based system the installation is remarkably simple. The systems are “Plug-and-Play”. Pull the systems out of the boxes and they immediately work. The technical genius of a Web-Based solution removes the nightmare of a complex (and expensive) onsite system installation.

At this point, with a Client-Server model, you have purchased a Game Server and gone through the headache of installation. Congratulations! You now have an extremely expensive, highly technical piece of equipment sitting in your store that runs your entire operation. It’s right there onsite, where people can accidentally spill their coffee on it, a power surge can destroy it, or a disgruntled employee can exact his revenge upon it. Let me ask you this question–where would you rather have that server, sitting in your store or offsite in an ultra-safe, backed-up, air-conditioned, humidity-controlled, redundant power generator-fed colocation facility?

Let’s take this another step–what happens if your Game Server has a technical problem? With a Client-Server model and the expensive server onsite you can expect to see a significant technical server-related problem at least once every six months. We know because we’ve opened hundreds of sweepstakes Internet cafes and we’ve been there and done that. If the server has a technical problem with a Client-Server sweepstakes model you’ll be on the phone with tech support trying to get it fixed. Most companies don’t have stellar tech support and even those that do are tough to get ahold of on a weekend (which is, of course, when your store will be busiest and when you’re most likely to have a problem). Odds are they’ll have to send someone out to fix it. This process generally takes at least 2-3 days, during which time your business is closed. OUCH. Compare to a Web-Based solution. The servers aren’t in your store, but are being carefully monitored by a team of highly technical, professional “server babysitters”. The only web-based sweepstakes product we have seen, PromoGames, had 99.9% uptime in 2009 (down for 1 hour) and 100% uptime in 2010. You simply don’t have server-based technical problems with a Web-Based sweepstakes product.

Computers go down–it’s a fact of life, and the older Client-Server model has no solution other than “hopefully we can get that fixed some day soon!” We’ve had OUR CLIENTS who have used a Client-Server solution be offline and CLOSED for over a week while waiting for their onsite server to get repaired. OUCH! The last thing you want is to not be able to sell your product when you have customers lined up wanting to buy from you. One more point for the more advanced Web-Based sweepstakes solution!

A new game releases – or a new patch or update comes out for your Client Systems or your Game Server. With a Client-Server model how do you think you get that update or that new game? In many cases a technician has to actually come out to your location to install it on each computer. Or, best case, you have to call the sweepstakes company and try to talk them into spending the time to manually update each of your computers. This process usually takes weeks. On the other hand, with a Web-Based solution your systems and servers are automatically updated as soon as the update is made. You don’t have to do anything, “it just works”.

Another key benefit to a web-based sweepstakes platform is that it is a necessary technology to enable a sweepstakes “Totem“. A Sweepstakes Totem is, in essence, an Internet access kiosk that doubles as a sweepstakes terminal. This stand-alone unit has a bill-acceptor and allows patrons to reveal entries. The Totem has no need for a server or a point-of-sale system. Generally, 1 or 2 Totems are placed in businesses such as bars or convenience stores. These units have almost no overhead and have been proven to bring in at least FOUR TIMES as much revenue as stations in a standard sweepstakes room. The Totem’s functionality is enabled by the web-based sweepstakes platform and would not be economically feasible without it. No overhead, 4x the income–Web-Based.

Now let’s take a moment to address a myth about Web-Based sweepstakes promotions. Some sales reps that work for companies selling Client-Server sweepstakes products claim that Web-Based sweepstakes are illegal or increase the chances of legal problems. Hm… Tell that to Coca-Cola (open the cap, read the number on the bottom, and plug it in online to see if you’ve won the sweepstakes!), or to Ford, or to any number of huge companies that offer sweepstakes online. Here’s a specific quote from an opinion letter written by one of the most well-known sweepstakes attorneys in the nation, “…a lawful electronically-delivered instant-win free promotional game is equally lawful whether the server which contains the pool of electronic game pieces is located at the venue where the promotional game is conducted, or anywhere else in the world.” Top sweepstakes attorneys agree–there are no legal problems with having a Web-Based sweepstakes solution.

Let’s move on from the discussion about the Game Server and talk about the Client Systems. In order to run a Client-Server sweepstakes the application needs to be installed on each and every client PC. It’s running locally and it consumes a lot of resources. This means the system requirements, and therefore the system cost, will be more expensive with a Client-Server model than with a Web-Based solution. With a Client-Server environment the application can crash at the client level, causing errors or locking up. With a Web-Based solution the application will never crash at the client level because it’s merely displaying a web page. The Point-of-Sale system is also web-based, which means you can access the full functionality of the POS system from any web browser (including your web-enabled cell phone).

Finally, your data is completely safe with a Web-Based solution because the key servers are 100% remote. If a meteor hit your business in the middle of the night (heaven forbid) and you showed up to find the entire thing in a pile of rubble, you could open up the next day with new hardware right across the street without missing a beat. All of your customer and financial data is 100% safe.

In summary, a Web-Based sweepstakes solution is much easier and less expensive to install, is significantly less likely to have technical problems, and it has automatic patch and new software (or new game) deployment. It allows your customers to play at home so you can be earning income even when they’re not in your store. Oh, and it costs a lot less to purchase.

All things equal, I can’t think of a single reason why anyone would spend more money for a lower-technology solution. It is our professional opinion that a Web-Based sweepstakes product is the only way to go.

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Payout Panic

November 23rd, 2010

A very common question that people new to this industry ask us is “can I change the payout?” (or the prize percentage). The answer is a definitive NO. Allow me to explain.

It is a common misconception that there is a “setting” or a “switch behind the counter” that can be moved up and down to determine how much people win. Back in the days of traveling carnivals and snake-oil salesmen there was frequently a “switch behind the counter” that allowed the operator to cheat his customers.

That was then, this is now. It is highly illegal to alter the payout in any way during the game. The game usually lasts about a year–depending on how many entries are in the game (or the pool size).

Furthermore, the sweepstakes software companies employ mathematicians (actuaries and statisticians) to develop the payout tables. These employees are usually people who have gone to school for years before several more years of professional experience all to do one thing–determine the best payout tables. They study trends to determine how much to pay out and when to pay it out to provide the most FUN for customers. This isn’t just about saying “customer should win $10″, but about saying “should the customer win one $10 bill, or two $5 bills, or ten $1 bills?” Sound tough? That’s because it is tough! Believe it or not, it is our professional opinion that “the math” of a sweepstakes game is every bit as critical to its success as having interesting games with good graphics.

Payout dynamics are extremely complex. We’ve seen several sweepstakes companies go out of business while trying to fine tune their payout tables.

So to answer the question “Can I change the payout?” I would respond: in the short run it would be highly illegal, and in the long run you don’t want to! Let the professionals do their job.

Now I’d like to discuss what I call Payout Panic. This is what happens to nearly all new sweepstakes business owners in their first few days of opening their store. It’s almost inevitable. We’ll get an urgent phone call during which the new business owner emphatically insists that the games are either paying out too much, or that they are paying out too little. Which is more common? It’s about 50/50. Go figure.

Although sweepstakes use a finite pool (or a closed system), there is still LOTS of fluctuation. Most good sweepstakes companies will pay out somewhere in the low 90 percent range. But it’s critical to understand that some days will be higher than that and some days will be lower than that. This is NORMAL and is all part of running a sweepstakes promotion. When a business owner calls us after being open for 2 days and says OUR STORE IS PAYING OUT TOO MUCH! We’re going to BANKRUPT! we sometimes want to put him directly on the phone with another new business owner, who called 5 minutes ago to say OUR STORE ISN’T PAYING OUT ENOUGH! after being open for two days. There are HIGHS and there are LOWS and they ALWAYS, ALWAYS balance out. This is because it’s a finite pool. If you pay out at 80% today (too low!) you’ll probably pay out at 100% or more tomorrow (too high!) – but in the end it all evens out. It has to–it’s a mathematic fact.

Generally during the first few days of just about every new store we spend a great deal of time on the phone with business owners explaining this point over and over again. People new to sweepstakes promotions almost always hyper-analyze payouts during the first few weeks and panic at every peak or valley. Finally after a few weeks of watching ups and downs, they begin to see the average and can sleep at night with the understanding that, much to their relief, the sky is NOT really falling.

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Getting Started: A-Z

September 13th, 2010

This is the step-by-step overview of how to get started in the Internet cafe sweepstakes industry. It’s long but it covers it all. Rome wasn’t built in a day, and an Internet cafe can’t be opened in “3 easy steps”. There’s just a lot to cover. If you’re seriously considering jumping into this industry, keep reading.

I want to get started. What do I do first? What are the next steps? What does the process look like and how much is it going to cost me?

First of all let’s be clear–there are a number of companies in this industry who will be fighting over your business. A few of those companies offer strong, legitimate products and a handful are “mediocre”. The majority of the products on the market are simply terrible. Unfortunately, some of the junky products are represented by smooth-talking salesmen eager to separate you from your wallet. It’s not rocket science to put together a software application that looks like a slot machine and attach a “sweepstakes” label to the front of it. However, creating a legal, well-balanced, beautiful sweepstakes promotional platform that makes money doesn’t happen overnight. For this reason you’ll want to avoid most of the sweepstakes you’ll find advertised on Google.

Above all, as you’re entering this new industry be sure to use common sense! Here’s a great article that walks through a quick checklist of what makes a sweepstakes company good and what makes it… “fishy”. SHOPPING SWEEPSTAKES–using common sense!

The first thing anyone considering getting into the sweepstakes business should do is do your homework. Do you know what this business is? Have you visited a sweepstakes Internet cafe? Start by read through our site (especially the FAQ section, the Services section, and the entire Sweeptalk section). Step 1: Do some research!

Next, visit a sweepstakes Internet cafe to play the games. Sometimes people call us wanting us to explain the business. The first question we ask is have you ever seen one? Trying to understand this business without ever seeing it in action is extremely difficult. You should definitely visit one–especially if you’re considering investing a lot of of time in this business. Explaining the concept to someone who has never seen it is like trying to explain what chocolate ice cream tastes like to someone who has never tasted ice cream. Step 2: go get a bowl and dig in!

Now that you have an idea of what the business is all about, two fundamental questions are How much money can I make in this business? and how much does it cost to get started? Obviously the answers vary wildly, but here are a few quick, specific answers.

Revenue from a sweepstakes Internet cafe that is: a) using a good sweepstakes software, b) in a good location, and c) run properly will bring in at least $1,000 per terminal (computer) per month. We have clients making 10x this much, but this is a good benchmark. NOTE: Don’t assume that all sweepstakes games will do this well–many of them are absolutely terrible; nobody will play them and could lose the entire investment. The Internet cafe sweepstakes industry is not for the squeamish. Be smart, be careful, and try to find someone you can trust. That’s why we’re here.

Startup costs also vary tremendously depending mainly upon the size of your business (how many systems) and the sweepstakes promotional product you select (which games). Our favorite products on the market currently range from about $800 to $1,000 per station and require servers that cost from about $1,000 – $5,000 to run the business (the servers are a necessary one-time cost of the number of player terminals you have).

Other than the technical solution, hardware and software, the only other significant expenses are leasing or buying the location and getting it ready. “Getting the place” may require first and last month’s rent–count on spending at least a few thousand dollars on this. Preparing the commercial property for business can include: painting, carpeting, lighting, decor, electrical work, networking, building counters or buying tables, getting chairs, getting a front desk, and sometimes even some construction work (if you need to add a bathroom, for example). For a typical location of about 2,000 sq ft, total site preparation for 30 stations could be about $10-$20k. You can bring this price down by doing some of the work yourself instead of hiring it out to local contractors.

Thus, opening a standard Internet cafe sweepstakes business with 30 player stations (including renting a place, paying for the buildout and site preparation, and purchasing the sweepstakes systems and servers) would probably cost between $30k – $60k. If you already own the location and it requires little or no buildout costs this cost could be as low as about $17,500.

For a quick look at some of the projects we have completed, check out our image gallery.

Now that you have done research to understand the Internet cafe sweepstakes business, you have visited one, and you have an idea of the potential REVENUE associated with the business and the COSTS involved, you can make an educated decision about whether or not you want to launch the business. If your decision is YES, keep reading.

Next steps: You’re ready to get started. Now what?

Ask permission, not forgiveness. This is contrary to the popular phrase–but you can never be too safe in this industry. We don’t care if you’re absolutely sure it will be okay, or if there are already three of them in your town so “one more won’t hurt”. Always, always ask. Go to the city or the county licensing office. Ask to get a business license and tell them you want to open an Internet cafe with sweepstakes promotions. If they ask what it is, tell them. You’ll be selling Internet time (or phone time, or letting people donate to a charity) and running promotional sweepstakes to increase product sales. Make sure you have an OKAY from the local authorities before moving forward with anything.

You may even consider scheduling a quick meeting with the local law enforcement (Sheriff or Police) to give them a “heads up”. This is a delicate matter. You’re not asking permission of the Sheriff because it’s not up to him to interpret the laws. It’s up to him to enforce the laws. So once you already have approval of the city/county for your business, the meeting with law enforcement would be more of an “FYI”. Essentially you’d be saying “We have approval, we’re excited to be opening our new business in your community. Thanks for protecting us. We’d love to have some of your officers over to give them a tour and maybe have an activity at a discount, etc.” You get the point, this is a public relations meeting, not a “can we get approval” meeting.

A word to the wise–if the local authorities or law enforcement tell you they’re not okay with the business model it’s much easier to pack up and find another city or county than to try to prove to them why it should be okay (or worse, opening without permission and picking a fight). Moving your proposed spot could take a few days. Going through the process of proving that it’s okay once the authorities have told you they don’t like it could easily take 6 months – a year and cost a fortune.

Find a location. Look for a place near your customers. Lower to middle income spots are great. Strip malls are great. The kinds of businesses you may want to be near include Wal-Mart, check cashing businesses, pawn shops, maybe slightly seedy but still safe. The elderly frequently love Internet cafes as well as it’s similar to BINGO. They’ll come not to “win big” but to spend $10 or $20 to be entertained for a few hours. High traffic areas are good. High visibility and accessibility is good.

How much space will you need? A good rule of thumb is to get about 50 square feet per computer. Thus, 1,500-2,000 sq ft would be great for a 30-system business (you could probably even fit in 40 if you wanted).

NOTE: Some of our distributors or clients employ a slightly different model. Rather than opening one large store with 20+ sweepstakes machines, they place a few of them (usually 2-6) in a business that is already open. This setup can be placed in convenience stores, bars, laundry mats, or other high-traffic areas and can be a very lucrative model. If you’re interested in doing something like this let us know and we can discuss.

Talk to the landlord (or the commercial leasing agency). Some will be perfectly fine with the idea. Some will not. Again, if they don’t like what you’re doing it’s much easier to move on than to engage in an argument and try to prove to them why it’s okay. Trust us on this.

While you’re working on finding a location, figure out which games (sweepstakes system) you’ll be using. This is perhaps the most critical decision of all. At this phase it would be very helpful to have input from a trusted industry expert.

NOTE: Someone who works in a sweepstakes store will likely be an expert on one product but have no experience with any other kind of sweepstakes software. Going back to our ice cream example; this would be like asking someone who has only eaten chocolate ice cream which flavor of ice cream is the best. “I LOVE CHOCOLATE!” Take it for what it’s worth.

Speaking with salesmen for specific products can be informational and can’t hurt. Of course, they’re all going to tell you why their product is the best. A real strength of SweepsCoach is that we can discuss strengths and weaknesses of the different products from an unbiased, 3rd-party perspective. We’ve seen them all in action, we’ve helped our clients set up, install (and uninstall) dozens of different sweepstakes products and we’re happy to give you the lowdown. And this doesn’t cost you anything–the software companies pay us. For more information on our background, check out the Services, the About, and the Testimonial sections of our site.

There are many, many kinds of sweepstakes products. We are familiar with just about all of them and have worked with most of them first hand. We know which companies are making money and which are not. This is because we get phone calls all day long from people who are using the different games. Many are switching from the games they have because they aren’t very good and they’re not making money. You don’t want those games. We have a very short list of games that are working well for people. Which games are making the most money? Give us a call and we’ll give you our professional opinion of the top 2-3 options in your area–which are the best and why.

Sometimes the best sweepstakes solution may not be as obvious as you think. Keep in mind that no sweepstakes software company will tell you about their weaknesses. Are their games good? Is the math they use in their games good? Is their technical support good? Will they protect the area and not let someone else open with the same software right across the street from you? Will they add on bonus, surprise expenses once you’re already open (and threaten to turn off your games if you don’t pay?) What is the payout ratio and the hold for their games?

Ironically, some of the busiest games are popular because they pay out TOO MUCH. This means that the customers love the games because they keep winning but the business owners are paying out at slightly greater than 100%. The busier the sweepstakes store is, the more money the business owners lose. We have received a number of calls from people using sweepstakes software with this problem. Who would have guessed? Using this sleazy tactic, some sweepstakes software companies makes a fortune on licensing fees. In this case the sweepstakes manufacture is raking it in–at the expense of the business owner who is slowly losing his shirt.

There are dozens of sweepstakes gaming companies but only a small handful that are are really working for business owners. Contact us and we’ll give you our honest opinion on who’s who out there. Then you can make an informed decision about which sweepstakes product makes the most sense for you.

Now that you understand the business, you’ve asked permission of the local authorities, found a perfect location and selected a promotional sweepstakes solution, what’s next?

Buildout and Marketing. When you get to this point we’ll be happy to hold your hand through the process. Carpeting, painting, lighting, decor, counters, tables, or cabinets for the sweepstakes systems, chairs, electrical work, networking, Internet connection… This stuff is all in a day’s work for us. You’ll also start spreading the word that your business is coming so that when you open the doors your customers will be waiting for you. Don’t assume that “if you build it, they will come”.

While you’re busy with these projects we’ll be working on two things. First we’ll be coaching you through the buildout and marketing, and second we’ll be getting the sweepstakes technology solution put together for you. It usually takes the same amount of time for our technical group to get the systems assembled and ready to go as it does for you to get the onsite preparation completed. We’ll coordinate our efforts so that by the time you’re cleaning up the paint and sawdust, your sweepstakes systems will be showing up and you’ll be ready for installation and training. This process should take a few weeks.

You’re open! Finally the business is ready to go, the place is all set up and smells of fresh paint, the new sweepstakes systems are installed and your employees are trained. You’re exhausted but it’s all worth it because here come the customers!

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What are you Selling?

September 12th, 2010

When people are getting started in the business of using sweepstakes promotions they frequently misunderstand one of the most critical principles of this business. What are you selling? If your answer is “Sweepstakes Entries”, you are wrong–dangerously wrong. Do not pass go, do not collect $200.

This common misunderstanding goes against the very definition of sweepstakes. A sweepstakes is used as a marketing tool to promote a product. No true sweepstakes will allow a customer to buy sweepstakes entries. If it does allow this, the sweepstakes sponsor can expect serious legal trouble sooner or later because it is not really a sweepstakes; it is GAMBLING.

The sweepstakes sponsor sells something else, a PRODUCT, and uses sweepstakes to encourage sales of that product. Let’s look at Coca-Cola. When you buy a bottle of Coke and find a number on the bottom of the cap, you can enter that number into an online sweepstakes form to determine whether or not you have won. The product, in this case, is Coke. Coca-Cola did NOT sell you a sweepstakes entry for $1.25. They sold you about 1 cent worth of carbonated water, sugar, and flavoring and 19 cents worth of packaging and shipping for $1.25 (this is a bottle of Coke). In order to encourage you to buy their product instead of a competing product they used a sweepstakes promotion. This marketing tool is designed to entice customers to buy the product, but the product is never, EVER, the sweepstakes entry.

So let’s ask that question again. What are you selling?

Our Internet kiosks, as the name implies, sell Internet access and the use of a touch-screen computer terminal. Thus, when a customer buys $10 worth of Internet time he will receive a number of free entries into the promotional sweepstakes. In the case of the sweepstakes promotion running on our Internet kiosks, the PRODUCT (Internet access) is being sold and the SWEEPSTAKES ENTRIES are being given out for free. The difference is subtle but critical.

It is fundamentally important that you as a sweepstakes sponsor and all of your employees understand this. More than one Internet cafe has landed in hot water because an undertrained or lazy employee told a customer (who happened to be an undercover law enforcement officer) that they were selling sweepstakes entries instead of selling some other product and then getting the sweepstakes entries for free. Don’t make this mistake and don’t let your employees make it.

The line between PRODUCT and PROMOTION blurs when we’re selling an intangible product such as Internet access time. In every case the product must be kept separate from the promotion. Specifically, if you sell Internet time and then give away sweepstakes entries to people who purchase that Internet time, using the Internet time cannot consume the sweepstakes entries. Alternatively, using the sweepstakes entries should not get rid of the time you have purchased to access the Internet. The Product and the Sweepstakes Promotion must always be kept separate.

For clarification and simplification, let’s bring this back to a model that uses a tangible product. When you buy a Quarter Pounder with Cheese at McDonald’s and get a Monopoly sweepstakes game token, eating the burger will not make your Monopoly sweepstakes game piece disappear. And revealing (or redeeming) that game piece will not make your hamburger disappear. Furthermore, if your Monopoly sweepstakes entry (which you have not yet revealed) is a $1 million grand prize, the value of that prize will not (and should not) decrease as you eat your burger. The same rules apply to any product that is promoted by a sweepstakes, whether it be cheeseburgers, Internet time, or anything else.

Sweepstakes are a fantastic marketing tool. As you begin to promote your products with sweepstakes, you must understand exactly what you’re selling. Sweepstakes Promotion is a marketing tool used to help increase sales of that product. You are selling a PRODUCT, which will NEVER be “sweepstakes entries”. Good luck with your product sales, good luck with your sweepstakes promotions, and feel free to contact us if you have any questions.

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