Why U.S. lottery creative accounts are so valuable for ad agencies

The Illinois Lottery has issued a request for proposals for a full-service creative agency to help evolve its digital and upfront approach. Camelot Illinois, the private manager of the lottery, will name a new agency of record at the end of July. The contract is a three-year agreement with an annual media budget of around $20 million, exclusive of creative agency fees and production costs. O’Keefe Reinhard & Paul, Chicago, held the account for the last four years but did not participate in the RFP process. "We had a great four-year tenure with the Illinois Lottery and helped them increase revenues, grow their customer base with new players, and improve the overall image of the Illinois Lottery year after year," said Nick Paul, president of OKRP in a statement. "We are really proud of all that we accomplished together and wish them continued success. OKRP has a policy not to defend accounts that go into review." Cannes Lions 2022 Read all of Ad Age’s festival coverage here Check out our live blog here But while OKRP isn't pitching to retain the account, it's likely the review will be a hot ticket. Almost all U.S. states have lotteries, and they can be lucrative contracts with long-term incomes—and given that shops can work for more than one lottery account at a time, it's a business that's conflict-free. Guaranteed source of revenue While it varies from state to state, lotteries tend to start contracts at a minimum of two or three years, guaranteeing a steady source of revenue for an agency, according to Terri Markle, founder of TLF Publications, which publishes La Fleurs, an online magazine that tracks the worldwide lottery industry. “For a lot of lotteries, if they’re happy with an agency’s work, they’re just going to keep renewing it and that’s why what could be a minimum three-year term ends up running for seven or eight years,” Markle said. That is exactly what happened with Denver-based agency Cactus, which just renewed its Colorado Lottery contract, an account it’s been working with for over 15 years. Cactus has "won" the lottery twice: In September, Joe Conrad, founder and CEO of the agency, got a call that said, “You’ve won the lottery ... account!” when it scored AOR duties for the North Carolina Education Lottery, the second lottery on its roster. The Colorado Lottery contract came in just under $15 million per year for another five years and North Carolina at $30 million per year for three years. Jeff Graham, president and chief marketing officer at Cactus, said being “contractually locked in a multi-year revenue contract” is good for an agency and accounts like that can be hard to come by in this business. Cleveland-based agency Marcus Thomas knows the benefits of working with a lottery: It has been AOR for the Ohio Lottery since 1974. The agency also does project-based work for the Virginia, Georgia and New Hampshire Lotteries, as well as working specifically on the Mega Millions’ website. The Ohio Lottery spent $29.6 million on advertising in 2021, according to its annual report. Marcus Thomas has done an array of campaigns and projects for the Ohio Lottery, including launching a TV show called “Cash Explosion” that features a live audience. Over the years, it’s expanded its reach to mobile apps and social media. “As you might imagine, nowadays there are lots of ways to engage with players,” said King Hill, senior VP of business development at Marcus Thomas. “But early on, there weren’t that many ways to engage with players.” He added that creating a TV show was a way to extend the lottery’s media reach. Since landing the Illinois Lottery contract in 2017, Camelot has transformed the way the brand does marketing, leading with a digital mindset now, according to Marisa Zimmerman VP of marketing at Camelot. “We want them [agencies] to have the mindset that our media plan is heavily digital-led. We still have traditional assets in our media mix, but we’re night and day from where we were three years ago,” she said. State lotteries have evolved to digital and social media advertising, with many having their own social media pages where winning lottery numbers are posted. There are also specific apps for players to download as lotteries take their games digital. While scratch-off tickets are still one of the most popular ways to play the lottery, some state lotteries have apps where people can scan a barcode from a scratch-off ticket and play directly on their phone or they can play games made specifically for the app. Others have started loyalty programs for those who play often. Hill also said Marcus Thomas' long partnership with the Ohio Lottery is what made it possible for the agency to pick up work from other lotteries—and other types of accounts—from outside of the state. “It's really given us a chance to show what we can do and to deliver new ways to perform for people of Ohio so that, when we talk to other lotteries, we've been doing it for so long that they don't have to teach us how to talk about lotteries,” he said. Dealing with the red tape Lotteries are government accounts and bring rules and regulations that agencies must follow, which can "slow things down relative to an agency's typical brand clients," according to Graham. The highly regulated industry has strict gaming guidelines set in place to ensure players do not get "in over their heads," causing some creative constraints. When agencies are working on creatives for lotteries, they can't make people's chances of winning feel better than they actually are or appeal to children, which includes showing anyone under 18 in a commercial. They also can't include a call to buy or try a product. Agencies also can only let people know what the new games are and can't praise people for playing or make fun of those who don't. While these can cause creative constraints, it's "nothing onerous," Graham said. Lotteries are also trying to overcome the stigma around gambling. While specific objections to lotteries vary by state and region, one way to break the stigma is explaining where the money goes when people play the lottery. "A common objection that cuts across regions is the notion that people don't feel like they really know where the money is going, that it's just going into some general revenue black hole for politicians versus doing something for the public good," Graham said. Lottery money mainly goes toward education, but not always. The Colorado Lottery directs its money toward protecting its outdoor spaces. Ohio and North Carolina Lotteries, though, give the money to education funds, whether for specific scholarships or for the entire state. Other big states like Illinois, New York and California also put lottery funds toward education. "It's important for lotteries to have a clear proceeds beneficiary messaging that helps players feel good about where the money goes," Graham said. Home advantage Creating campaigns for a state lottery allows agencies to make them more personable and creative geographically since they specifically focus on targeting locals. Tampa, Florida-based agency PPK has been a full-service AOR for the Florida Lottery since 2016. It was originally awarded a five-year contract, but the agency has been renewed every year since. The Florida Lottery spent $39 million on advertising in 2021, according to its annual report. It just recently became the No. 1 lottery in the nation, bringing in more revenue than New York and California, according to PPK President Garrett Garcia. In 2021, the Florida Lottery had about $9.08 billion in sales, according to its annual report. “You’re really concrete when it comes to your geography,” Garcia said. “It allows you to really, for obvious reasons, focus and concentrate your media efforts accordingly. I think there's a high degree of connectivity between the creative conceptually that we're able to build and the residents and the consumers of the state.” Hill said that because MarcusThomas is able to measure data at a local level, it gives the client more information on “what motivates people to play and how they’re playing" and allows the agency “to customize where we intersect them [players] on their journey and deliver value to them.” While there are advantages to being based in the same state as a lottery account, it isn’t uncommon for lotteries to work with agencies outside of their home state. Graham said the main difference with doing local work is “you can make it feel and look like the state and the people” but “there are things about lottery games that are universal from state to state to state."

Why U.S. lottery creative accounts are so valuable for ad agencies

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