the charity of its choice, as long as it’s been screened by GuideStar, a clearinghouse for information about tax-exempt non-profits groups. “If you’re passionate about giving back, we help you make the same commitment to charity that we make,” says Miller. “We think there can be a profound social networking effect there.”
Social networking is actually one of the other keys to Jackpot Rewards’ business plan. Miller believes that membership in the rewards program will balloon quickly thanks to the company’s refer-a-friend policy. “If you refer one friend, you double your chances of making it to the weekly $1 million drawing for as long as your friend remains a member,” Miller explains. If you refer two friends, you triple your chances, and so forth. Miller expects referrals to spread virally via e-mail, at a speed that only the Internet could allow. “Ten years ago, you would not have been able to do this in a really substantive way,” Miller says. “The company lives in large measure online because consumers are migrating online in droves.”
Of course, most members will never win a jackpot, no matter how many friends they recruit—so the company’s real value proposition is the 12-percent cash-back program. And whether that’s a value for you depends entirely on how much money you spend online. At $3 per week, Jackpot Rewards membership will cost you roughly $156 per year. To make back that much in rewards, you’d need to spend $1,300 per year at participating e-retailers (most of which were selected as Jackpot Rewards partners because they already have affiliate programs that pay commissions to the owners of sites that send them customers).
“With one smart buy, membership pays for itself,” says Miller. Well, maybe—if your one buy is a 42-inch plasma HDTV. It seems likely that Jackpot Rewards will earn at least some money from members who fail to buy enough stuff at approved e-retailers to earn back their membership fee. (Or who accidentally start their shopping expeditions at a merchant’s website without going to the Jackpot Rewards site first. Says the company’s shopping FAQ: “In order to receive cash back from Jackpot Rewards, you must begin your shopping at Jackpot Shopping every time. It’s the only way we can track your purchases.”)
Whether $3 per week per member is enough to cover the weekly $1 million prizes, pay the company’s overhead, and leave enough after-tax profits to make a difference for needy kids depends on how many people sign up. But according to Miller, “The company is structured in a such a way, and has sufficient funding, so that even if we grow at a glacial pace that’s far below what any model of the marketplace would predict, we will still be able to fund the weekly $1 million jackpots for almost as far as the eye can see.” And regardless of the company’s bottom-line performance, Miller has already promised to donate at least $1 million in 2008.
As for the huge $100 million jackpots: if some member or group is fortunate enough to match all six numbers, Miller says the winnings will be covered at least initially through the insurance policies the company has purchased. Now, if someone would just start an insurance company that gives away half of its earnings—that would be real revolution in social entrepreneurship.
Addendum 9:20 a.m., February 20: Carolyn Johnson at The Boston Globe has a piece today about Jackpot Rewards that’s a good bit more skeptical than my take. She points out one thing I missed: to comply with laws against non-government lotteries, Jackpot Rewards does allow you to enter its sweepstakes without becoming a member or purchasing anything, by sending in a postcard. The sweepstakes rules are here.
