Peter Lynch Wants to Give You $1 Million
Erick Schonfeld
56 comments »
What is legendary investor Peter Lynch doing involved with a sweepstakes Website that guarantees giving out $1 million a week, and offers jackpots as large as $100 million or more? Lynch is an investor in Jackpot Rewards, a site that mixes retail discounts, giveaways, and charity. The company has raised a $16.7 million series A financing from Lynch and other Boston-area captains of finance, including Chuck Clough (the former chief global investment strategist of Merrill Lynch), advertising man Jack Connors, and DST Systems CEO Tom McDonnell.
“The company grew out of a strategic planning mission for charity,” says CEO Jim Miller. It is a for-profit company that will give 50 percent of its profits to education and children’s health charities.
The site launches today. You sign up and get up to 10 percent cash back for purchases at 550 retailers, including Apple, Barnes & Noble, Best Buy, Land’s End and Target. The company makes money by driving sales to the retailers. It gets a commission for each sale. But instead of pocketing the commission, it passes on the savings to its members. This may sound like iWon redux, but it is really quite different. Jackpot Rewards is not ad-supported. To participate, members need to subscribe and pay $3 a week. That’s right. You’ve got to pay to play.
Is Peter Lynch crazy? Nobody subscribes to anything on the Web (except the WSJ and Consumer Reports). That is where the $1 million jackpot comes in. While you would have to spend $30 a week ($120 a month) online to break even on the rewards program, there are plenty of people who spend more than $3 a week on lottery tickets. This lottery ticket actually comes with fringe benefits like retail discounts and the knowledge that half your money is going to charity. When I spoke to Miller, he seemed sincere enough:
What goes on typically in sweepstakes is that if it is a huge prize, it is an illusory prize where nobody will win it. Even most million-dollar offers are rarely won. We are building in large jackpots we will give away in rapid succession—one million dollars a week.
Those are guaranteed, he says, every week. But there is also a bigger jackpot that keeps growing and has very miniscule odds (1 in 847 million). But when it hits $150 million, the company guarantees giving that away as well. It is all based on how many subscribers it can attract. Since the jackpots are paid out as a 40-year annuity (or a much smaller up-front cash payment of about $420,000 for each $1 million), the cash outlays could become manageable. Miller figures he needs only 150,000 subscribers ($23.4 million a year in subscription fees) to do okay. At 300,000 subscribers ($46.8 million), the business becomes a nice cash machine. And at 1 million subscribers ($156 million), it really takes off.
Online giveaways rarely work, and if you have to pay to enter, it could constitute a lottery, then he would be under state regulatory guidelines for lotteries.
As long as they can make the site seem legitimate to the average person they can probably easily get a following going. The problem with seeming legit with a jackpot website is that so many sites out there are scams that guarantee lotto jackpots and/or offer free or heavily discounted iPods, laptops, etc. through spam emails. This could cut their possible audience in-half as someone like my friend who plays the lotto a lot is so paranoid of spam that I get emails/phone calls when they get any type of suspicious email asking if it was legit. If they can convince people of that I think the $3/Week cost isn’t too much to ask.
Yes. Isn’t this considered gambling? If “subscribers” were guaranteed something or had to participate in something, I think it would work. However, in this case, this would be considered a lottery.
How did they pass the state regulations for this?
probably will run out of $$$ before he manages to break even.
>Nobody subscribes to anything on the Web (except the WSJ and Consumer Reports).
While I know it’s rhetorically put, that’s not exactly true. Large sites like classmates.com and small sites like hotornot gets millions per month and per year respectively by way of subscription fees…
This is no genius biz model… quite a no brainer indeed. The entry barrier is usually the local laws making it very difficult by way of getting the required permits to do some lottery-centric biz.
@1 - echo 100%.
site looks down to me. anyone else?
yes, the site is down….
I wanted to take a peak but def. down. I’ll def. be checking it out, it’s an interesting concept, but I do believe they’ll have to make a big PR push about the tie-in to Charity to gain acceptance and not be viewed as spam.
down here as well
Yeah ! site is down . Though I wish good luck for their strategies .
up for me now.
I don’t see this working.
we are all doomed. this is the end. i can’t believe what people invest in these days.
I can see it now as well….
At first sight it’s difficult to be impressed…
As per the founder, the main purpose is to create something that will help educate kids at risk…because of that I do hope this site works. However, I still think there needs to be a big push to promote the tie-in of this company to helping kids in need..
They can create Jackpots to benefits specific schools, specific causes etc. on a weekly or monthly basis, I think people would rally around that, especially if it’s a cause close to home…
It’s up now.. says in the footer that “NO PURCHASE NECESSARY” — what is a purchase then?..
NEVER pay to enter sweepstakes. EVER.
12 years ago when Peter Lynch was still with Citibank and speaking in Singapore he said, “What made you rich 10 years ago will not make you rich 10 years later. Investing in a sweepstakes site is quite a change!
Interesting biz model. the challenge will be to get folks to fork over their cc# for the recurring billing every month. Otherwise, some attractive incentives to scratch that gambling itch..
Well, to answer your questions as to is this a lottery since you have to pay to play, it’s not.
Hidden inside their Official Rules is the way you can play for free.
To participate without purchasing a Jackpot Rewards subscription, an entrant must neatly hand print in blue or black ink on a white 3 inch by 5 inch card or piece of paper your first and last name, your complete mailing address with zip or postal code, your daytime phone number, and e-mail address if you have access to e-mail. Mail the card or paper in a first class postage paid (metered mail is not accepted) envelope to: Jackpot Rewards, P.O. Box 8369, Elmhurst, IL 60126.
This gets them around any monopolizing laws that keep state lotteries in business with their ridiculous odds.
You think maybe they had some of those guys with law degrees, what are they called, lawyers, look into the “regulatory guidelines” and such before they dumped $16.7M into it?
No matter, this will never work, I’m sure they can’t get the “jackpotrewards.com” domain name, i’m sure that’s taken.
[rolls eyes]
http://www.techcrunch.com/wp-content/jr.jpg
“What would you do with $100 million?”
Probably something cooler than have a lame-ass garden party.
ha, thats it Ben. The investors launched the PR without getting the domain name. what a moron.
I don’t think that you can draw a parallel to a state lottery. State lotteries are generally played by the poor, but this isn’t a substitute good for them because they don’t have access to the internet and they don’t have credit cards. Sure they can go to the library and they might have a debit card, but I would make a bet that the average lottery player isn’t going to be visiting this site any time soon. The idea might still be good, but converted lotto players won’t be the reason.
well, the first draw is in 5 days, they will have to pony up 100 million dollars but they just went online today!!!! What am i missing here?
odds seem better than getting vc funding for most
I can’t believe that people choose to spend their time building these types of businesses. Get a life.
Getting 10% back on purchases would be a good deal for small time resellers that buy up clearanced merch at Best Buy, but I’m sure there’s a catch. I see that they only pay quarterly for one, and maybe you need to maintain membership to get paid. Precious few details on the site unless you want to read the ToS (no thanks).
Otherwise, not sure how you sucker people in when it isn’t even entertaining.
#18 is on the ball. I’ve worked at a number of Jackpot sites and the law is that you have to offer users a free way to join. Reminds me of when Warren Buffett had a similar site, at least it was some tiny division of Berkshire. Anyone remember the name? I think they were planning on giving away $1 billion.
well, i think this kind of businesses is just make more people dreaming, more people register, more money they get, and more people dreaming they will win the 100 million dollar.
This is the same concept as the Lottery in the UK. You pay a fee, take part in the lottery and the profit that they make goes to charity. This is a multi-pound business in the UK alone, so I don’t see why it is supposed to be a stupid idea.
And yes: it is a lottery, BUT, they packed this very nicely with the discount programme to make the status less clear. It also states at the bottom of the page: No purchase necessary and the first week is free, too.
I bet you the whole set-up of the site circumvents US lottery registration/online gambling laws. I believe they checked this out very thoroughly. Given that you can only buy when you are located in the US or Candad seems to confirm this.
Unless they get shut down based on existing law or somebody changes the law to stop them, I think they could be doing extremely well.
BTW: The insurance against a 1:847,000,000 chance to win 100,000,000 win is probably very affordable.
@#12
Listen to this man, he speaks the truth.
It seems to me that there is consideration involved with the membership fee. Unless Jackpot Rewards offers a free alternative to opt-in for the prize, I’m afraid they’ll quickly be sued for running an illegal lottery. That is, unless this site
Most similar programs have a “send a self addressed, stamped envelope” clause. Hopefully this one does too or it will be a very short ride for all involved.
It seems to me that there is consideration involved with the membership fee. Unless Jackpot Rewards offers a free alternative to opt-in for the prize, I’m afraid they’ll quickly be sued for running an illegal lottery. That is, unless this site has been licensed to run a lottery.
Most similar programs have a “send a self addressed, stamped envelope” clause. Hopefully this one does too or it will be a very short ride for all involved.
uhm - can anyone say wannabe fatwallet?
I am not convinced that the businessplan will show positive results.
If they guarantee USD 1 Mill./week, they need at least 333.333 paying participants, which is to my opinion not easy to achieve.
Further more if they have to pay out USD 150 Mio. at the end of the year, they need more than 4 Mio. paying participants a week.
Who invests money in this kind of business?
another site not ready for prime….”Credit card service is not available at this time, please try again later”
Nope…..
So wait a second, Let me get this straight, there are people out there who will invest in stupid ideas like this one.
Why in the world do I continue to work 9 to 5 when I can just quit my job, find some suckers, apparently one is born every day and open an internet business.
- oh yeah never mind that one of the hardest things to do on the net is to get people to pay money, because most people think of the net as being free. Unless it’s like for a product or merchandise. No one and I mean No one pays money for absolutely nothing. which is basically what your getting because 10% off products can be found by just going to dealcatcher.com for free. (but good luck with this one, you know what they say about a fool and his money… )
I bet you the whole set-up of the site circumvents US lottery registration/online gambling laws. I believe they checked this out very thoroughly.
When it comes to the law, in most cases “gambling” has three components:
1. Chance
2. Prize
3. Consideration
I say this lightly because there is the law and then there is the interpretation of the law (enter the gray area).
Alternative Method of Entry (AMOE) is generally not considered “consideration”. Even though the laws that govern this tend to differ from state to state, this is generally considered a fair way to run a sweepstakes. There are some states that tend to react negatively to this type of gaming — some web searches for “gaming”, “sweepstakes”, “illegal” will reveal this. Utah for instance tends to be complicated and strict on how they interpret their gaming laws; if it is a game of chance and you pay money to win money, no matter how it’s structured, it could be branded as gambling. I suspect CT, from their past stance on such gaming, may have this interpretation as well.
I take pause at their strategy — I would suspect you’ll see fairly high jackpots at the start to attract players, but if they do not meet their registration numbers, will be forced to either continue to hemorrhage cash or reduce their prize numbers in line with their income.
interesting #29
looks like the site is back up…seems interesting, not sure I totally understand it the full concept of what they are doing, but a 100 mil in five days is not bad.
#19 Ben Dean and #21 Ben Dean’s Daddy: simple enough to check the domain name registrant with the corporate address. they are the same and legit. as for you fellas, ?
#22- the world has changed, ppl in the hood now have internet access just like everyone else. I hate to sound bigoted, but when I think of the kind of people who would pay to play, I can only think of the people I see buying lottery tickets in the convenience store when driving through a bad part of town. Mainly the poor and elderly poor.
Talk about whoring out your legacy. Why doesn’t just walk around truckstops in a wig and heels
I remember something like this during the first Bubble, can’t remember the name was it called Iad or Ione? I think they got bankrupt.
What’s up with this:
“For potential Canadian prize winners: In addition to complying in full with these Official Rules a potential Canadian prize winner must correctly answer a 4-function mathematical skill-testing question, without assistance of any kind, whether mechanical, electronic or otherwise, before the participant can be declared the winner of any Prize. If the potential winner cannot correctly answer the question the prize will be forfeited and Rules 8 (G.) and 8 (H.), below will apply.”
-?-
http://www.jackpotrewards.com/company/sweepsrules/
So it is $144 per year to be a part of the lotter. But you do get cash back on anything you purchase through them. Target 10%, Apple 3%, Dell 4%….not a bad deal at the end of the day if you actually shop through them.
the slickdeals crowd will love it.
@44
i think that math problem is due to some law in Canada about these kind of giveaways/sweepstakes. You can probably only “win” skill games. I saw a website with a 2+2 math problem for Canadians before. This is interesting, wondering if they can recoup the money if they really are giving out $100 mill.
150,000 subscribers isn’t exactly a lot, nor is 1,000000, so strictly on this basis the site has a chance. But it could easily lose any interest it might acquire through inital marketing, ie. users could quickly get bored. Discounts are only useful when you are buying something & there are plenty of price comparison & coupon shopping sites. Discount offers arrive through most peoples’ doors most days anyway. There are also too many lotteries, sweepstakes, scratch cards around anyway, so I’m not sure this this will have a lasting impact.
This sure looks like paid advertising article, just disclose it. It’s a lottery. All this talk about charity is only a coverup for the lottery commisioner, attorney general and the lawmakers, just to pass through the government monopolized Lottery Laws scrutiny.
Now - legally, the law is not broken here - “no purchase nessesary” clause is 100% met by stating in the rules that you don’t have to pay if you send your entry by mail. Who in the right mind will be sending the postcards (first class mail with all restrictions >$1 - read Rules) when you can subscribe and automatically be entered in, rather then sending the postcard every time the drawing is held because they only valid for one draw.
Also, take a look at the odds of winning ~ 1:850,000,000 (that is 1 to almost a billion) - that is 7 (seven) times less possible to win than the Mega Millions lottery (odds there are ~1:175,000,000), yet your single day entry still cost a $1 ($3 weekly for 3 drawings a week). As for the prices - same (or better) you get from those online retailers allowing JR to be online affiliate. Online classified listings are not unique - all RSS feeds from other sites.
Do not want to bash it - but it does seem that most commenters here are with some interest as Wade said seem to be “some kind of creepy conspiracy or orchestrated comment spam”.
Good luck.
talking about 100 mil prize - guess what - they will never pay that money, insurance will, that is it will ever be won.
It was stated that they took out a policy to cover 100 mil prize - which wasn’t so expensive due to the extremely minimal odds of winning 1 to almost a billion
their logo should use a pyramid instead of a sphere
It’s a lottery. All this talk about charity is only a coverup for the lottery commisioner attorney general and the lawmakers.
The odds of winning is 1:52*52*52*52*52*52 or 1:19,770,609,664 (1:19 billion), they make $$$ from the subscription fees and the when subscribers shop through their site (just like other cashback sites).
They only raised $16 mil from the investers how are they going to pay the 100 mil
- Simple THEY WON”T PAY
Enjoy
Name game… Leib….I see your comments at a few places already and everywhere you start with….whatever good saying above is an add spam…. It’s doesn’t look this way for me. I like you comments, but a bit too agressive… I bet you anyway joined a membership and waiting for your luck…-)))
That’s my Mom’s website. She hasn’t had any luck. No one buys from her nor does anyone know it exists yet she has been paying for it for quite awhile now and spent over 10 thousand dollars just to try to promote it. Now she is old and has very little money left.
Now about Peter Lynch’s idea. I really hope it works out well and I can see he has a good idea and a good business. It would be nice to be wealthy to do the things in life you would like to do but what do you do when even $3.00 per week seems like it is more than you can find to pay? I never though I would say that nor be in this position. It is good that he cares and wants to help others but can he really help me? Can he make me become wealhty? Can he do it without the $3.00 per week until he has made me wealthy? Can he really find a way?
They have a winner.. I wasn’t sure if this was legit, but it seems to be true…the odds were 1 and 460ish….thats insane http://www.sys-con.com/read/512649.htm!
Most of the previous comments are written by idiots.
1. You guys need to stop assuming so many idiotic things. All investments are risky especially this one, so guess what? These guys have investigated plenty (due diligence). They don’t need help from pikers who haven’t a clue about what it takes to launch such a business.
2. Big sweepstakes almost always pay an annuity. NO ONE gets all the money at once. $1M winners tend to get $25-$35k/year for 30-40 years. So, guess what? Jackpot Rewards doesn’t actually dole out $1M/week. Read the find print before you make your stupid comments.
OOOpppps! MASSACHUSETTS BASED JACKPOT REWARDS FORGOT TO INCORPORATE IN THEIR HOME STATE!!!
5/17/07 - register as a general corporation in Delaware.
1/22/08 - Jackpot Rewards Charitable Foundation was registered as a non-profit in Boston.
2/20/2008 - National roll-out of company announcing 50% of the profits
will go to charity.
3/7/2008 - Jackpot Rewards Inc. finally registers as a foreign corporation after conducting business in Massachusetts for almost one year.
What were investors Peter Lynch, Jack Connors and CEO Jim Miller thinking?
They registered as a non-profit corp, and 30 days later; they announce they will be keeping 50% of the profits.
The Boston Globe quotes Jack Connors as saying, ” he was persuaded by the idea, but also by a business model based around giving 50 percent of profits to charity.”
The business model he references is one that he stole from me, a single mother of 2 teenage daughters, that I discussed with him and gave him my business plan in the beginning of February.