While lotteries racked up $80 billion in sales last year, if millennials aren't interested in playing, the industry's luck could change.
Only one-third of people aged 20 to 35 bought a lottery ticket last year, and the numbers are declining. That demographic trend troubles both the lottery industry and the states and programs that rake in tax revenue or donations from it.
Now, a start-up called AutoLotto is helping lotteries tap into that next generation of players where they already shop and play. The company's mobile app allows users to buy tickets from their smartphone. It also lets them scan a paper ticket purchased in-store to track it, and get notifications if they win.
The company's co-founders, Matt Clemenson and Tony DiMatteo, said that millennials comprise 57 percent of their user base so far. "Mobile just makes sense," DiMatteo said. "Millennials shop and play games on their phones a lot. And they don't make up a lot of the foot traffic to the traditional retailers that sell lottery tickets, whether that's your local pharmacy or a store at the gas station."
AutoLotto maintains a facility in each state where it operates. It buys up, signs and keeps original paper tickets there, which it also pays to insure, in case anything goes wrong at its holding facility. When it has a winning ticket, it takes it to the local lottery agency to redeem it, and pay out winners via its app.
So far, AutoLotto hasn't had a winner from any of the big jackpots, DiMatteo said, "Statistically, the odds of winning a big lottery are around 1 in 292 million, and we haven't sold that many tickets yet."
AutoLotto must work with lottery commissions, lottery directors, attorneys general and other relevant legislative offices to gain access to each new market it enters. Today, it's authorized to sell Powerball tickets via mobile to customers in eight states but it hasn't yet come to New York, one of the biggest markets.
The start-up just raised $17 million in a series A round of venture funding to ramp up operations to most of the U.S. and to expand beyond Powerball.
Investors in AutoLotto's new round included a mix of institutional and angel investors, including iHeartMedia, and Fortress Investments, a fund affiliated with U.S. newspaper publishers, GateHouse Media, along with several angel investors.
One of AutoLotto's investors, Adjacency Partners' Tom Arrix, formerly vice president of global marketing solutions at Facebook, said he sees international potential in the company, too. "Gaming is highly regulated here. And AutoLotto's approach is ideal. ... But other markets offer the potential to expand more broadly, even beyond the lottery."