The Jackpocket Business Model – How Does Jackpocket Make Money?

Executive Summary:

Jackpocket is an app that enables people to buy state lottery tickets online. Tickets are then purchased and stored by Jackpocket’s licensed partners.

Jackpocket makes money from a service fee as well as commissions that paid out by the states it is available in.

Founded in 2013, Jackpocket has grown to become the leading third-party iLottery app in the United States. Its service is currently available in 11 states.

What Is Jackpocket?

Jackpocket is a platform that allows users to buy official state lottery tickets that are fulfilled by one of its licensed lottery partners.

Using Jackpocket is dead simple. First, users download the app, which is available on both Android and iOS devices.

Lottery players must be 18 years old and be located in a state that Jackpocket is available in (the app can be used in 11 states, including Arkansas, Colorado, New York, or Ohio).

After signing up, users can place buy lottery tickets through the app. Playable lottery games include Mega Millions, Powerball, and more.

Users then receive a confirmation email along with a high-resolution image of their purchased lottery ticket (uploaded in the app).

If the user ends up winning a small price (normally below $600), then the money is placed into their Jackpocket account. From there, the user can transfer it to their bank account.

Should they end up winning larger cash prices, then the ticket is sent to the user’s address in a secure fashion. From there, they can claim it at the state lottery branch in question.

Jackpocket offers a few more features to make its experience more engaging and intuitive. For instance, users can play in groups (by pooling money together) or use its Autoplay feature to automatically place bets.

The app, furthermore, entails features to help people with gambling addiction, such as daily deposit and spend limits, the option to self-exclude, or in-app access to responsible gaming resources.

Users on Jackpocket have won over $30 million over the course of its existence. The company claims to be the first and only licensed third-party app in the United States that offers online lottery games.

A Short History Of Jackpocket

Jackpocket, headquartered in New York City, was founded in 2013 by Peter Sullivan (CEO), Leo Shemesh, Eric Parker, and Matt Silber.

Prior to launching Jackpocket, Sullivan was the founder and CEO of Tripl, a web application focused on social travel.

While he was able to raise $700,000 in funding and participate in a few accelerators, the business never went anywhere. In 2012, after three years of work, he had to shut it down.

After his failure, Sullivan worked on a freelance basis for a variety of tech startups in the New York City area. Most of his work was conducted out of a WeWork office where met Shemesh who eventually became his co-founder.

The idea for Jackpocket originated from Sullivan’s family. His dad is an avid lottery player. Sullivan was sometimes even late to football practice because his father needed to buy a ticket.

When his dad got his first iPhone in 2013, Sullivan noticed that he was playing a lot of different social casino games on the phone. Yet, playing lotto remained stuck in the previous century, prompting Sullivan to think that there should be a better way to buy tickets.

The Jackpocket app, first available on Android devices, launched in December 2013. In the beginning, the service was only available in New York. Right after launching, Jackpocket had already acquired close to a thousand users as people rushed to buy tickets for a $636 million Mega Millions jackpot.

In the coming years, the Jackpocket team was meticulously focused on improving the quality of its product. The team’s approach was (and remains to be) to work closely together with state regulators. This allowed Jackpocket to often become the first and only licensed third-party app that can offer online lottery tickets in the states it operates in.

2020, in particular, proved to be a very positive year for the company. Stay-at-home orders due to the novel coronavirus forced many retail locations to temporarily close. People, fearing to contract the virus, flocked to online courier services like Instacart or Postmates to have items delivered to their doorstep.

As a result, states recorded lower income from their various lottery offerings, forcing them to modernize. Jackpocket, with its compliance-first approach, was in a perfect position to take advantage of this trend. Despite a slowed-down lottery market, Jackpocket was able to grow fourfold in 2020.

On the heels of that growth, the company raised an impressive $50 million Series C round in January 2021. For now, the team remains laser-focused on expanding its business into more states.

Close to 200 people are now employed by Jackpocket, which operates offices in New York City and Santa Barbara.

How Does Jackpocket Make Money?

Jackpocket makes money from a service fee as well as commission paid out by the states it is available in.

Let’s take a closer look at these revenue streams in the section below.

Service Fee

Jackpocket charges a 7 to 10 percent service fee in exchange for providing its courier service (that is buying and storing tickets on behalf of the user).

The fee is based on the overall purchase price. If, for instance, a user buys tickets for $10, then the service fee will be between $0.70 to $1.

The purchase and storing of the ticket is then either executed by Jackpocket employees or by employees from the ticket operators it works together with.

Commission

Apart from service fees, Jackpocket also makes money from commissions that it splits with the stores it works together with.

In a traditional lottery ticket sale, the state-funded lottery program pays a commission to its retail partners for distributing those tickets.

If a ticket is sold through its app, then the commission is split between Jackpocket and the retail partner.

The actual percentage split is not publicly disclosed and likely dependent on the contractual agreements made between the two parties.

Jackpocket claims that partnering with the service allows lottery retailers to access a younger, more tech-savvy demographic. In fact, more than 72 percent of the app’s users are below the age of 45.  

Jackpocket Funding, Revenue & Valuation

According to Crunchbase, Jackpocket has raised a total of $79.6 million across six rounds of venture capital funding.

Notable investors are The Raine Group, Greenspring Associates, BRV Capital Management, Evolution VC Partners, David Blitzer (owner of the New Jersey Devils and Philadelphia 76ers), and many more.

As a privately held company, Jackpocket is not obligated to disclose any revenue or valuation figures to the public. Successive funding rounds may reveal those if the company (or anyone associated with it) is willing to share those metrics.

Viktor

Hi folks, my name is Viktor! By day, I lead a tech team of 10 for an e-commerce startup. At night, I work on expressing my weird thoughts through this blog. And if there's time, I cuddle my cat..