In February, DraftKings announced it was spending $750m to acquire Jackpocket, a lottery courier service. For Kevin Kramer, the CEO of a rival courier service Lottery Now, the acquisition validates the sector.
DraftKings recently confirmed it is purchasing Jackpocket for $750m. How significant is that for the sector?
I think it’s a great validation for the overall courier space. Jackpocket has been at this for many years, as has our team. It’s been a long, slow regulatory evolution that’s been moving in our direction with more states being supportive of the model.
It’s fantastic to see DraftKings validate the lottery courier space and look to invest more into it; because there’s a huge opportunity to help lotteries become far more convenient, easier for consumers to access and increase good cause donations in each state.
As you indicated, your company, Lottery Now, is also a courier service. Tell us about your company and what you do.
Lottery Now operates the Mido Lotto app. It’s a fun app that’s been in the Apple App Store for eight years and has 35,000 reviews. The name Mido comes from a play on words of Fido, your loyal dog who gets your lottery tickets and brings them back to you, and “my dough,” (my money!).
We have customers using the service in nine states. We’ve raised less than Jackpocket and have a little smaller business than Jackpocket. Despite being smaller, we have a very healthy organization and extremely loyal customers. There are many people who can’t get out of their house, they’re homebound or it’s very inconvenient. They don’t carry cash. They drive electric cars and don’t go to gas stations. They don’t go to convenience stores. They don’t go to places that normally sell Lottery tickets.
Also, Lottery tickets being a cash at the corner store business, it’s a very inconvenient way to play the Lottery. So, it ends up being very difficult for lotteries to reach new customers, because it’s just so inconvenient. So our app allows customers to order a Lottery ticket much the same way they might order groceries or order food for delivery. And we fulfill their orders at licensed retailers.
Tell me about the history of your company. When did you guys start? What was the genesis of it?
The product was actually started around the same time Jackpocket was, around 2013. The app launched in the App Store initially in 2016 and has been used by customers since.
You mentioned you operate in nine states. What are those states?
We’re operating in California, Arizona, Oregon, Ohio, Texas, Montana, Massachusetts, Connecticut and Delaware.
What are your big states? Where have you been heavily adopted?
They all vary based on size and population. We’ve got material business in all nine states, and we continue to really roll the business along. We’re looking at adding new states and we also continue to add new games in existing states, which helps our consumers. For example, we just recently launched “The Pick” as another game in Arizona. We launched “Lotto Texas” down in Texas a few months ago. Those are two state-run games in addition to Powerball and Mega Millions that are available in the app.
How can lottery courier services like Lottery Now and Jackpocket help state Lotteries?
We help state Lotteries very much. We help them reach new consumers. We help them better service consumers, to answer questions on their behalf. It’s an interesting, symbiotic relationship we have with Lotteries in that they are state agencies and they’re not great, necessarily, at individual, one-on-one relationships with customers.
In the DMV world, you see in some states a DMV middle man that helps people interface with the DMV. Companies like AAA do a handful of DMV services and have a better customer relationship with the end consumer. Lottery courier services like ourselves, like Jackpocket, come into a state and invest our own advertising money to acquire customers in that state.
Also, in acquiring customers with our advertising dollars, we’re helping bring in new people to the Lottery and Lotteries don’t have to spend advertising dollars on that. So, it’s a combination of attracting new customers, making it more convenient for them, helping those customers play more frequently because it becomes more convenient, and then servicing those customers, answering questions, helping them and educating them. Those are all roles we take on behalf of the Lottery to really help them have a better consumer experience.
Wow, you’re doing the work for the state lotteries! We knew of course about the basic courier function but hadn’t quite conceptualized the notion that you’re doing for them additional advertising and outreach. That’s got to be a tremendous benefit for the states.
It really is. It’s funny; we went into one of the states a couple of years ago to have a conversation with them about our model. They had an RFP for iLottery. An iLottery lets the state directly sell Lottery tickets to consumers electronically. And in most states, iLottery requires legislation to allow a Lottery to sell direct, which can be challenging depending on the state. It’s always challenging when you have to take a legislative path because everyone has an opinion on the legislation.
We told them we just wanted to operate in their state as a courier service, and we wouldn’t need any kind of agreements or contracts with them to do so. We told them it would make a lot of sense because we can bring our own dollars to advertise on behalf of them to bring in customers, and service and take care of those customers on their behalf.
Everyone in the room from the state Lottery kind of looked around and said, “This makes a ton of sense. This is kind of a no-brainer.” So, it really does help the states very much, as we’re really in a symbiotic relationship with them where we’re taking on a lot of the functions that they are incapable of doing themselves at this time.
What other innovations do you see on the horizon for Lotteries and lottery courier services like your own?
There’s a lot of room for innovation in the lottery industry. There haven’t been new games launched in some states – for example, California hasn’t launched a new game since I think late ‘90s/early 2000s. Draw games are fairly hard to launch. It’s a paper process with terminals and paper at the stores. So, we’re removing paper as a huge environmental footprint, helping Lotteries reduce the amount of paper they use. You have different distribution trucks, rolling around, dropping off paper at the stores. Over time, we can reduce the paper total and the logistics of delivery.
Innovation, more appealing games to younger people. If you look at what sports betting has done: all these parlays and other little bets that are available within apps have become really fun and entertaining for the consumer. There are apps that let you bet onplays in real time as you’re rolling up to the play, before the play runs, you make a little micro bet on the play as it goes along. That kind of innovation, that real-time type of innovation or innovative play really hasn’t come to Lottery; it hasn’t yet come to draw games. Scratchers has had a little bit of innovation. They brand things differently. They use different logos, different colors, and slightly different mechanics.
But Lottery really is relatively unchanged in how you interface with it and how you play the game since they first came out. It’s a bit stuck in the ‘90s from a technology perspective and from a distribution perspective, being cash at the corner store with essentially the same games that have been there. As a result, you don’t have younger people really flocking to play Lottery. They’re flocking to sports bet. When you make sports bets, in most states there’s no money going to a good cause. It’s going to the gambling operator. Some states have set it up in conjunction with the Lottery where there are some good-cause beneficiaries of sports betting, but in all single state Lottery proceeds go to a good cause.
Thanks for speaking to us on all things Lottery. Do you have any closing thoughts?
It’s really in the best interests of the causes and the states to have Lottery grow; and have Lottery grow responsibly with younger, more affluent customers who can afford to play Lottery. Playing Lottery, getting that enjoyment, getting that entertainment factor, but having some of their spend go to a good cause. We think it’s a very ripe area for innovation because they’ve been challenged to innovate given some regulatory hurdles and the legacy vendors that are out there, and what they’ve been able to do. We think couriers, especially with DraftKings bringing a very innovative approach to sports betting, can apply that same level of innovation and help guide lotteries into some much more fun ways to play.
