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Sweepstakes sites play for survival

Web sites that lure visitors with prizes have seen a big boost in Web traffic lately, but such businesses should read the fine print closely before deciding they're already winners.

Sweepstakes Web sites that lure visitors with prizes have seen a big boost in Web traffic lately, but such businesses should read the fine print closely before deciding they're already winners.

A report released Tuesday by Web traffic measurement firm Jupiter Media Metrix listed five cash-incentive and sweepstakes sites among the top 10 newcomer sites in August. Numbers from Nielsen/NetRatings paint a similar picture: The Web metrics firm reported last week that a grab-bag of sweepstakes sites posted double- and triple-digit traffic gains in the last week of September, including the Web site for sweepstakes giant Publishers Clearing House, which popped 230 percent on the heels of an ad promotion.

iWon profile
While the numbers are encouraging for these companies, analysts say sweepstakes sites must answer several crucial skill-testing questions before they can claim their prize of survival in the battered dot-com economy.

Buying traffic can be an expensive way to boost advertising in a tight market, analysts say. Paid Web surfers are not as valuable to advertisers as unpaid surfers, making it harder for incentive sites to sell consumer data and target marketing campaigns.

"Every site that's implemented some kind of sweepstakes promotion giveaway has attracted a lot of traffic," said Sean Kaldor, vice president of e-commerce strategies for Nielsen/NetRatings. "Greed in terms of gambling and very well online. (But) it is not easy to execute on that; not everyone does a great job."

As traffic and advertisers gravitate to a handful of top-ranked sites such as Yahoo, start-up rivals have dangled costly incentives, including cash prizes, in a bid to compete for viewers and valuable consumer data.

On the surface, the odds don't look too bad.

In June, 47 percent of U.S. Internet users said they would be willing to trade their personal data for a chance to win a prize in a sweepstakes, according to a Jupiter Research survey that polled 2,312 individuals.

Sweepstakes portal ranks in the top 20 most-visited Web sites, according to Web metrics firm PC Data. The site awards a monthly $1 million prize as well as an annual $10 million prize. Consumers receive points as they travel throughout the site.

Newcomer Web sites have also benefited from the greed principle. Jupiter Media Metrix found that all of its top three new sites in August offered sweepstakes and other cash incentives. Excite@Home-owned led the pack with 1.96 million unique visitors for its games-related site, followed by and Microsoft's Win Me Sweepstakes.

Nielsen/NetRatings also reported a surge in interest in sweepstakes sites, led by Publishers Clearing House's site, which logged 851,000 unique visitors during the last week of September, up 230 percent from 258,000 unique visitors in the previous week. Following were sweepstakes sites with a 92 percent growth rate, with 87 percent, with 86 percent, and with 63 percent.

Numbers may not lie, but translating traffic into dollars can be tricky, analysts agreed.

"The growth is happening because it is a new phenomenon," said Charlene Li, research director for media entertainment at Forrester Research. But, "I don't think growth is going to be the best measurement of whether they're going to be successful or not."

Li said a host of factors determines the prosperity of sweepstakes sites, including marketing costs, funding and investments.

The difficulties facing sweepstakes sites are already being played out among pioneers that last year rushed to test incentive business models such as pay-to-surf schemes, in which Net surfers are paid by the hour to click on advertisements or rack up points that can be redeemed for cash and merchandise.

Some of those companies have been caught in the general dot-com downdraft, announcing layoffs, new strategies and closures.

Los Angeles-based pay-to-surf site mValue, recently redubbed, joined the list of dot-com failures Monday. In August, the company slashed its work force by 23 people and changed its business strategy from paying members by the hour to search the Web to offering regular drawings for cash prizes., which pays members to surf the Web while they view advertisements, has shed about 160 employees in an effort to trim expenses. The Hayward, Calif.-based company said it paid $32.7 million to members from December to March but earned only $9.1 million in the same period.

AllAdvantage offers daily sweepstakes, promotions or cash to Web surfers who allow the company to collect personal data about their online shopping habits and use its Web browser. Advertisers then pay the company to reach people interested in products they sell.

Despite its recent difficulties, AllAdvantage says its business model is sound.

"We have a thing called the advantage network where we are acting as a

Swept up
Fastest-growing sweepstakes sites for the week ended Oct. 1:
Site Unique audience, 9/24 Unique audience, 10/1 % change 258,000 851,000 230% 197,000 379,000 92% 294,000 549,000 87% 176,000 328,000 86% 601,000 978,000 63%
Source: Nielsen/NetRatings
sales network for free (Internet service providers). That's one of the ways we create revenue," said AllAdvantage spokesman Gregg Stebben, adding that the company also has data its members have opted to share with the company. "We never use their personal data, but we use aggregate data and that data itself is valuable."

While consumer data is often described as the Holy Grail of Net marketing, analysts said advertisers may not trust data gathered through pay-to-surf sites.

Jupiter Media Metrix's Christopher Todd said that advertisers can't trust the leads that come through sites such as AllAdvantage and iWon.

"It's like picking straws through a hat: maybe you will, but chances are you won't," Todd said. "What these (sweepstakes sites) are going to need is the user make sure they're showing relevant ads to interested consumers and users, or they're going to risk dampening their business models over the long term."

Beyond advertising, sweepstakes sites are also trying e-commerce opportunities that have been well-tested in the offline world.

Publishers Clearing House, which was founded in 1953, formed its Web site last year in an effort to expand its business to the Net, which has offered consumers sweepstakes while pitching them with discounted magazine deals and product offers.

The company has been launching promotions such as its prize patrol blitz, which contributed to the site's recent growth. is offering 100 $10,000 prizes to 100 winners in 100 cities throughout the United States.

"The success of (sweepstakes) Web sites indicates consumers enjoy the opportunity to enter (contests) online," said Christopher L. Irving, senior director of consumer affairs at Publishers Clearing House. "There always has to be a strong combination in getting consumers interested in your site, but of course you have to offer something that they're interested in."

Because of their relatively well-known brands, analysts give incentive Web sites such as and iWon better odds of success than lesser-known sites.

As for the sites themselves, some appear ready to play out their hands to the end, despite misgivings that the deck is stacked against them.

"How many Internet businesses aren't doing too well? Is it particular to sweepstakes sites, or is it a phase that the Internet is going through?" asked AllAdvantage's Stebben.