BUSINESSWEEK ONLINE : APRIL 24, 2000 ISSUE
THE INTERNET

You May Already Be a Winner.com!
E-lotteries are springing up all over. Will any survive?

Here's David Achenbach, a 24-year-old from Bangor, Pa., describing the moment he heard he was one of four finalists who could win $10 million through an online sweepstakes: ''I just blacked out. I lost feeling in my legs and then fell to the ground. My eyes were open, I just couldn't see a thing.''

Achenbach will find out if his name was the lucky won chosen on Apr. 15. That's when CBS Corp. (CBS) and its majority-owned Web site, iWon.com Inc., will award one of four visitors to the site the boatload of cash. The three runners-up will get $1 million, a trip to Hawaii, or a new convertible Mercedes-Benz. ''There will be drama,'' promises William Daugherty, a co-founder of iWon.com. ''This will be a life-changing event for some person.''

VIRTUAL SLOTS. It certainly has been a life-changing event for Daugherty's company. iWon.com is a Web portal, like Yahoo! (YHOO) or Excite (ATHM). The difference is that iWon.com lures visitors with cash prizes. Visitors who use the site to get sports scores, weather, and the like rack up points that qualify them for entry into the giveaways. In just six months, iWon.com has gone from zero to more than 11 million visitors a month, making it the 25th most-visited Web site in the nation for March, according to site tracker PC Data Online.

In fact, lottery-related sites are now the fastest-growing category in the dot-com universe. The 50 sweepstakes sites identified by PC Data reeled in some 24 million visitors in March, 7 million more than just five months earlier.

There's nothing subtle about their strategy. The idea is to give away just enough money or prizes to attract a lot of customers, whom the sites then pitch products to or charge advertisers to reach. The names of the sites say it all: winfreestuff.com, winamilliondollars.com, and extremelotto.com. Publishers Clearing House is in on the act. Its Web site, pch.com, offered $21 million during January's Super Bowl. So is Monty Hall, former host of Let's Make a Deal, who is a spokesman for BuyBidWin.com.

In early April, Web pioneer Bill Gross, whose Pasadena (Calif.)-based idealab! founded eToys.com (ETYS) and CarsDirect.-com, launched Jackpot.com Inc. It promises to award $22 million in increments as high as $2 million over the next year to visitors who download a little slot machine that spins the names of the site's advertisers. Line up the same logo three times in a row and you win $1 million. ''Can you imagine the brand-building value of that?'' gushes Jackpot.com Chief Executive Gregg Rotenberg.

The $64,000 question: Can you make money by giving away money? Possibly. Iwin.com has handed out $2 million in four months of existence, but Fred Krueger, CEO of the site, says his acquisition costs for registered users are only $2 per name. That, says Krueger, is a fraction of what the typical Web site spends and well below the $25 per user that some sites reportedly spent on Super Bowl ads.

SITE-HOPPING. Still, the rapid growth of the category has the makings of a fad. The enthusiasm could quickly fade, given that a winner is not guaranteed for every contest. Imustlotto.com, for example, advertises that it will give away $50,000 an hour. But contestants must check in every hour to see if their number has come in. In the two months since its Feb. 10 launch, the site has yet to give anyone a $50,000 prize.

The sites must also prove that they can deliver customers to advertisers. Scott Sanborn, a vice-president at media-buying firm itraffic.com, warns that a click on a lottery site ad is not equivalent to one at another site: Visitors have to click on many ads just for a chance at winning the money.

Right now, many ad banners at the sites seem to be those of other online lotteries, suggesting the venture capital the companies have raised may be sloshing between them. In the end, the only winner may be the last one left solvent.

By Christopher Palmeri in Los Angeles

To read a letter to the editor about this story, click here.

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