Joonas Karhu, Chief Business Officer at Bojoko, talks about why US state lotteries must consider legalising online lottery ticket sales.
You just have to look at the rapid growth of legal online casino and sports betting in the USA to realise how large the market has the potential to become.
But to date, most lawmakers and state lottery operators have not leveraged this potential by legalising online lottery ticket sales as well as sports betting and casino.
However, the impressive revenues being generated in these early days combined with the pandemic reinforcing the importance of having a digital presence should act as a catalyst for change.
Before looking at how lawmakers and state lotteries can launch digital lottery products, let’s first look at the current state of play and the states where it is legal to buy lottery tickets online.
The state of online lottery sales in the US
As of today, online and mobile lottery ticket sales are legal in just six US states: Michigan, Pennsylvania, Illinois, New Hampshire, Georgia and Kentucky.
Minnesota used to offer online lottery ticket sales briefly back in 2014. But soon after, that state lottery was forced to make a u-turn after the legislature ruled against the move.
This is in stark contrast to Michigan, which began online lottery ticket sales in the same year. Since then, the Great Lake State has gone from strength to strength.
Though online lottery tickets were only on sale for five months of that year, the Michigan State Lottery sold $600,000 worth of tickets. In its first full fiscal year, that figure rose to $18.5m.
By the end of the 2019 financial year, online lottery ticket sales in Michigan stood at $116.3m.
Why online lottery sales will not cannibalise retail
One cause of concern for state lotteries might be that legalising online ticket sales will negatively impact retail outlets or potentially make them redundant.
But as online casino gaming and sports betting in the US have shown, this is not the case and ultimately online sales drive awareness, engage new audiences and allow lotteries to grow.
With a proper strategy in place, online ticket sales can complement state lotteries’ retail efforts.
Consumers demand convenience
Indeed, some state lotteries have seen retail revenues decline in recent years – The New York Lottery saw FY20 revenues drop $550m compared to FY19.
A likely reason for this is that consumers simply do not have the time to visit retail outlets to purchase tickets to the various draws taking place each week.
Lotteries without an online presence are also unlikely to engage new, younger player demographics as their attention is found in the digital world and on their smartphones, tablets and computers.
Brand presence and retail innovation
Another reason that state lotteries should consider legalising online sales is that they will increase their brand awareness among these new players, but also existing customers.
Occasional players that purchase a ticket if and when they are in a store can be marketed to more effectively and regularly online.
If the state lottery has an app, they can even send push notifications about the latest draws, biggest jackpots and when winning numbers have been drawn.
This keeps players engaged with the lottery and ultimately encourages them to purchase more tickets than they would if they could only buy tickets from retail venues.
But this also helps retail sellers.
With players more engaged with the lottery and the various draws being run and prizes up for grabs, when they are in a retail venue that sells tickets they are more likely to buy.
What digital experience lessons can lotteries learn from online casinos?
Beyond Michigan’s success, lotteries in states that don’t yet permit online sales can also learn a lot from online casinos in the US.
So, what exactly do the country’s most popular online casinos have in common?
Think like a tech company
All of the most popular US online and mobile casinos see themselves as tech companies before gambling operator.
This can be seen in how much attention they focus beyond just offering games and to creating a highly engaging and entertaining product and UX.
Creating a seamless user experience is non-negotiable. Players want clean websites and applications that load without delay and are highly intuitive to navigate and explore.
When adopting a tech company mindset, you must also keep a constant eye on what does and doesn’t work in the market and apply this to your online offering.
If you see an opportunity to innovate, validate it with research and then roll out the necessary update and then monitor user engagement. You can benchmark US online casinos from the Bojoko site here.
As important as tech-savviness is generally, it counts for little if you do not have a well-optimised mobile site or app. Indeed, it is important to take a mobile-first approach from the get go.
Buying tickets via smartphone will be the most convenient purchase option for many customers so state lotteries must ensure they deliver the best possible experience.
Players should also be able to buy their tickets without friction and, if they have an account, sign into it quickly with their preferences, information and payment details stored.
Diverse payment options
While cash and card may suffice (for now) when it comes to retail, online lottery players want fast and diverse ways to pay.
Beyond the major debit and credit cards, you also need to look at integrating digital wallets and other modern payment solutions such as PayPal, Neteller and Skrill.
A big future ahead for states that regulate online lottery ticket sales
Though doomsayers may argue that online lottery ticket sales would destroy retail operations, the opposite is true.
As online casinos in the US have shown, a well-developed online product combined with a solid strategy can lead to great multichannel results.
When expanding online, lottery companies must adopt a tech-savvy and innovative mindset.
They can also learn from casinos and sportsbooks about developing well-optimised mobile apps, along with offering a broad range of payments.
Ultimately, the conversation shouldn’t be about retail vs online lottery – it should encompass both working hand in hand together.
The state lotteries that have taken this approach are already hitting the jackpot.