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Avoiding Prize Draw Pitfalls
UK-Netmarketing Weekly Round-up - December 1, 2000

Running a prize draw can be a great way to draw people to your website and more importantly capture valuable data about your visitors. Nick Horley asked, "I want to sell tickets for a prize draw on my site - anyone know where I can find the regulations governing this sort of thing?"

Chris Heathcote replied, "Then it's a lottery, and you're in so many heaps of trouble :) I think you have to have charitable status (or give some money to charity) to be even considered for a lottery licence. If you add a game of skill to the prize draw, it becomes a competition, and removes the 'No purchase necessary' restriction."

Richard Gale added, "For all your info needs on this kind of thing have a look at http://www.isp.org.uk ... anyways its the Institute of Sales Promotion, but be careful!"

David Cabrera suggested, "... it sounds as if you are looking to run a raffle (sell tickets for a prize draw) rather than a specific prize draw which is usually free to enter and not conditional upon a purchase. If this is the case you probably need to have a named promoter with their address details, a published list of prizes, details of how and when the draw will be made, who will be supervising it and where/when the list of winner(s) will be published, etc. You should also consider how to use the prize draw as a data gathering strategy"

The question of which approach to take: lottery vs. prize draw vs. charity draw has clearly come up many times before, with plenty of helpful links emailed to the list. Pete Bresser suggested some more:

www.isp.org.uk/legal/legaladv.html what you need for various prize draws competitions etc
www.cap.org.uk this is where you will find legislation and codes of practice
www.marketinglaw.co.uk site run by Osborne Clarke OWA with lots of info on legal issues

Good luck. Selling tickets for a prize draw is covered by the Lotteries and Amusements Act 1976 and amendments. Try searching on this for comprehensive - but probably confusing - information"

Jonathan Phillips highlighted a very comprehensive guide to running competitions and draws at: http://www.ppa.co.uk/comp/, which also handily includes model rules.

Justine Koder suggested an alternative to a lottery, writing, "You can't 'sell tickets' for a prize draw that means people are paying to enter which comes under Lotteries and Gaming act - you can't even make people pay a premium rate telephone line to enter. [You] can do prize draw with no purchase required in which case standard T&Cs include closing date, restrictions on entry, full details of prize and quite few more. If want to link to a purchase then need to make it a competition e.g. skill and judgement in which case all entries must be judged against set criteria."

Nick Horley emailed the list to say, "Thanks - I'm hoping to run a Society lottery with a licence from the Gaming Board of Great Britain - special rules apply!"

Amazon.com costs

Members of the UKNM list often get asked a wide variety of questions, but when Mark Seaman asked about Amazon.com, it was the first time there'd been public speculation about the cost of one of the leading e-tailer's running costs. Mark asked, "I've currently got a client wondering why their site doesn't have all the bells and whistles that Amazon.com has. I've told him that it's because of how much money Amazon put back into their site to run it that way. Sod's Law now determines that he wants to know how much."

Martin Lloyd replied, "According to their annual report Amazon.com spent $199,535,000 for the nine months to September on "technology and content". What exactly that includes is anyone's guess, but if even 10% of that is spent on the books, CDs and videos selling side of the operation your client should start to understand." Putting it into perspective he added, "Still even $20m wouldn't get you Rio Ferdinand. Something is badly wrong there..."

Jonathan Peterson guestimated $70m allowing, "If you just go for software licenses and development costs, ignoring hardware, hosting etc, and if you take total expenditure on all versions of all Amazon sites past and present since starting... and that's probably low..."

Steve Bowbrick speculated, "Amazon's quarterly accounts show last quarter's costs as $133.1M. Since Amazon's only significant activity is selling stuff online, that's probably a pretty good indication of what it costs to operate an ecommerce business of that scale. So you just have to tell your client to set aside around half a billion dollars a year. That should shut him up."

I wonder how many lorries you'd need to carry that sort of money around. Given the current state of the market, it seems unlikely anyone will get that much investment to build an infrastructure in the foreseeable future, unless, of course, they're building a 3rd generation mobile phone network.

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