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How Does Jackpocket Make Money? The Jackpocket Business Model In A Nutshell

Jackpocket is a North American third-party app enabling consumers to purchase official state lottery tickets, founded in 2013 by Peter Sullivan, Leo Shemesh, Eric Parker, and Matt Silber, with a mission to provide a convenient, fun, and responsible way to play the lottery. Jackpocket has a relatively simple revenue generation model, collecting service fees and commissions.

Origin story

Jackpocket is a North American third-party app enabling consumers to purchase official state lottery tickets.

The company was founded in 2013 by Peter Sullivan, Leo Shemesh, Eric Parker, and Matt Silber with a mission to provide a convenient, fun, and responsible way for consumers to play the lottery.

Tech freelancer Sullivan is the man credited with the idea behind Jackpocket. Growing up, Sullivan’s father was an avid lottery player.

But as an adult, he wondered why the lottery system had not gone paperless, with his father still forced to buy them in person. 

Sullivan then observed that his computer-illiterate father was still able to play social casino games on his iPhone.

The co-founder wondered if the lottery system could finally adapt to modern technology and be accessible from a smartphone.

Jackpocket is born

In 2012, Sullivan ended his tenure at social platform Tripl and decided to get to work on Jackpocket.

As part of a Series A funding round, he managed to secure a major investor who was also a former CEO of one of the largest lottery companies in the world.

However, the investor pulled out at the last minute, with Jackpocket employees working for free to see the idea for the platform come to fruition.

In December 2013, the Jackpocket app was launched in New York. Leveraging the attraction of a $636 million jackpot, usage of the app grew quickly.

Publicity from the New York Post and Good Morning America no doubt contribute to the hype.

As the company expanded across the USA, its success was facilitated by an ability to build close relationships with state gaming regulators.

Less than five years later, 20-year-old student Brandon Stevenson became the first person to win $1 million or more using a lottery courier service.

Stevenson, a casual lottery player from Minnesota, won the prize the day after he downloaded the app and had paid for his winning ticket using referral credits from a friend.

COVID-19 and lottery’s changing demographic

Jackpocket was another business to profit from the coronavirus pandemic, with states forced to modernize their gaming industries and allow locked-down consumers to purchase lottery tickets remotely.

There are now over 2 million Jackpocket users, with the company noting that it is “attracting a new demographic of lottery players who are tech savvy, affluent, and younger.” Indeed, the average age of a Jackpocket user is 36, with 58% between the ages of 18 and 40.

In July 2022, Jackpocket announced that it was officially the most popular entertainment app in the App Store.

This put the app ahead of TikTok, Netflix, and Amazon Prime Video.

The download increase was due to a no-winner streak where the first prize in the Mega Millions lottery exceeded $1 billion.

That Jackpocket occupied the top spot is doubly impressive when one considers that it is only available in twelve of the 50 US states. 

To celebrate over one million winners on Jackpocket a month later, the company added a new social sharing feature to make it easier for users to tell others their good news.

Those who share their wins can earn free plays and lotto credits.

Jackpocket revenue generation

Jackpocket has a simple revenue generation model, collecting service fees and commissions.

It should also be noted that there are no monthly subscription or sign-up fees.

The company also refrains from taking a cut of the jackpot winner’s prize money.

Service fees

Firstly, Jackpocket charges a service fee of around 7 to 10% for its courier service.

In the context of the lottery industry, a courier service simply describes the buying and storing lottery tickets on behalf of the entrant.

After receiving the required funds, Jackpocket places an order with a licensed lottery retailer and secures the tickets in a locked vault with restricted access.

For peace of mind, customers are given a scanned ticket copy available in-app. They are also sent an email including the ticket serial number.

The exact fee varies according to the state and the total purchase price of the tickets.

Commissions

Historically, a state-funded lottery system would pay a commission to retail partners such as gas stations and newsstands to distribute (sell) the tickets.

Jackpocket splits the commission from each in-app ticket sale with its partner stores in the more modern system.

The exact nature of the split is undisclosed and likely agreed upon contractually.

Product expansion

In November 2021, Jackpocket announced a Series D funding round worth $210 million.

CEO Peter Sullivan noted that some of the capital would be used to add to Jackpocket’s core business of lottery ticket sales with mobile gaming.

Capital would also be invested in technology, enabling the company to invest in best practices from the eCommerce, subscription, and mobile wallet service industries.

Games that may be added to the Jackpocket platform include raffles, sweepstakes, social casino games, and bingo.

According to Sullivan, these would complement Jackpocket’s existing lottery system, where a portion of the money is donated to charity.

What a lot of people don’t know about the lottery is that a percentage goes to good causes. We want to provide more fun gameplay and chances to win, and more ways to give back.”

Sullivan has also touted future partnerships with instant grocery delivery startups, considered to be digital extensions of the popular corner store, which, at one time, were the only place lottery tickets could be purchased. 

Partnerships

In 2021 and 2022, Jackpocket entered into several partnerships with high-profile universities and sports organizations. Some of these are listed below.

Dallas Mavericks

In a multi-year partnership with NBA team Dallas Mavericks, Jackpocket will host sweepstakes across the season, allowing fans to win game tickets, merchandise, and VIP experiences. 

The deal was undoubtedly helped by Dallas Mavericks owner and serial entrepreneur Mark Cuban, who was aware of Jackpocket’s momentum in the industry and believed mobile gaming was a natural evolution for lottery-based games.

New Jersey Devils

Jackpocket also announced a multi-year partnership with the National Hockey League team New Jersey Devils to become its official lottery courier partner.

Similar to the deal announced with the Mavericks, Devils fans will be able to participate in branded sweepstakes with many prizes such as:

  • Free Jackpocket lottery tickets.
  • Autographed merchandise that is one-of-a-kind, and
  • Private access to the ice at the team’s practice arena.

Announcing the deal, Senior Vice President of Corporate Partnerships Adam Cross said that:

we are confident Jackpocket will be the preferred, digital lottery platform for Devils fans – who are already five times more likely to play the lottery than the national average.”

Rutgers Athletics

In January 2021, Jackpocket and Rutgers Athletics reached a multi-year agreement to become the school’s first-ever mobile lottery partner.

For Jackpocket, this enabled brand integration in two major sports stadiums and the school’s social media platforms.

The company would also receive significant exposure via print, radio, and other digital assets.

Rutgers was Peter Sullivan’s alma mater, with the CEO relishing the opportunity to enhance the viewing experience for basketball and football fans during games.

Jackpocket will offer free lottery tickets with special codes and host contests where participants can win tickets to sports matches like the other deals.

These are open to campus alumni, students, and general attendees.

ESPN NY Sports

Jackpocket then announced in August 2022 that it had become the official digital lottery partner of ESPN New York.

ESPN is an iconic brand, and their popularity in the tri-state area is something local fans always rely on for the best and most thorough coverage of New York’s famed sports teams,” explained Sullivan on the Jackpocket blog.

The partnership was seen as the company’s largest sports broadcasting promotion, with extra coverage across Major League Baseball added to other major sports competitions such as the NBA, NHL, and NFL.

Key takeaways:

  • Jackpocket is a North American third-party lottery app, the first such app of its kind in the United States. Co-founder Peter Sullivan got the idea for the app after noticing that lottery ticket purchasing systems were outdated.
  • Jackpocket has a simple revenue generation model. It does not charge a monthly subscription fee, nor does it take a cut from the winning entrant’s cash prize.
  • Instead, Jackpocket collects a service fee for buying and then storing the tickets in a secure vault on behalf of the entrant. It also splits a commission fee from each ticket sale with various retail partners.

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