By Damian Martinez, journalist at G&M News.
The lottery market is experiencing a significant transformation, with the traditional draw-based games evolving to include virtual formats. The growth of the online lottery market is driven by factors such as increased smartphone penetration, improved Internet connections, and the proliferation of mobile application-based lottery games.
The global lottery market size is estimated to grow by USD 182.44 billion at a Compound Annual Growth Rate (CAGR) of 6.96% until 2027. The year-over-year (YoY) growth rate for the sector from 2022 to 2023 was 6.56%, which indicates an expansive trend in the market, according to a report from Technavio. Specifically in the United States, the sector is estimated to rise at a CAGR of 6.61% until 2027. The size of the US market is forecasted to increase by USD 39.39 billion.
MORE USERS AND SECURITY CHALLENGES
One of the key drivers of the online lottery market growth is the convenience it offers to customers. With the availability of mobile applications, players can easily participate in lottery games from anywhere at any time, leading to an increase in the number of users and overall return on investment for lottery operators.
In this sense, lottery operators are leveraging social media platforms as part of their promotional strategy to attract customers and increase engagement. By using social media channels, operators can reach a wider audience and create excitement around winning prizes. However, the growth of the online lottery market also brings challenges, particularly in terms of cybersecurity.
As more transactions occur on digital platforms, there is a heightened risk of cybercrime. Lottery operators must prioritize security measures such as encryption, banking security, and collaboration with auditing companies to ensure the reliability and integrity of their platforms.
AN INCREASING POPULARITY
In the lottery industry -positioned at the intersection of entertainment, digital transformation, and social change-, certain characteristics of games can remain unchanged for decades. The overall customer proposition and how games are played evolve every day. Lotteries have risen to prominence as an immensely popular and tightly regulated form of entertainment that captivates players with the allure of life-changing wins alongside contributing to good causes. They are also major economic engines.
The lottery market has consistently demonstrated resilience through recession and even through the challenges brought about by the COVID-19 pandemic. Indeed, the popularity of lotteries provides insight into consumers and the psychology of winning, namely that people are seeking escapism and are drawn to the thought of lotteries changing their lives. As the industry embraces further digital transformation and evolving societal values, a key priority will be, as always, to continue to drive relevance among new generations of players.
ADAPTING TO CHANGES AND NEW GENERATIONS
Historically, the core customer has been perceived to be older, with player ranks refreshed as new generations discover the lottery. Over the next decade, not only will media use and social engagement further evolve, but so will where, when, why and how the lottery is played, presenting a clear opportunity for companies that successfully capitalize on this dynamic.
By 2030, the Bank of America predicts that Generation Z (made up of those born after 1996, minor of 28 years) will hold more than a quarter of global income. As generations transition, there will be a need for lotteries to successfully task themselves by adapting to changes in how consumers seek to interact with products’ brands and their own priorities. Responding to the preferences of younger consumers -and aligning the lottery experience with their values and needs- will be an important objective for the lottery company of the future, as the industry has previously adjusted to other changes in consumer preferences.
Cause-driven, the sector has long been a champion of purpose, setting it apart from every other gaming subset. Yet this role often remains misunderstood by some players. Beyond the need to continue to innovate the player’s experience, it will be vital to amplify the social component of lotteries and the special role they have in supporting good causes.
DIGITAL EVOLUTION OF SALES
While, historically, distribution has primarily been through physical venues and shops, lotteries have been quick to recognize the potential of the digital sphere and are rapidly moving online, mirroring trends seen in various sectors like retail. This underlines the ongoing focus of lottery operators on adapting to new consumer touchpoints and upgrading their virtual applications. But the digital development being realized in the lottery industry is more than just a change of platform; it is also an evolution in how players engage with both draw-based lotteries and online games.
Creating more seamless customer experiences, the rise of digital has presented benefits to consumers and operators alike. For the former, increased accessibility and convenience. The latter, meanwhile, have a greater knowledge of their customers and what appeals to them, while also being able to develop new approaches and techniques for ensuring player safety.
Ultimately, technology allows for many forms of player interaction. In the future, physical lottery locations and retailers are likely to see even more digital integration. Research by Context Consulting found that nearly a third of British people want to see more digital technology in their local convenience store, rising to half among consumers aged 35 and under. As virtual economies grow and consumers’ online lives become more advanced, lotteries will have more room to maneuver, cross-promoting channels and appealing to players in both digital and physical realms, from e-commerce to bricks-and-mortar points of sale.
A QUESTION OF TRUST AND THE ESG AGENDA
Across age groups, consumers are actively seeking socially responsible brands. Data backs this up. Revealing the extent to which people are scrutinizing businesses, 77% of consumers think companies and brands should be transparent about their commitments and promises, according to a report from Havas.
Lotteries now have a two-fold opportunity. Firstly, they are positioned to meet this consumer discernment, head on thanks to their contribution to good causes, keeping in mind the variations in how this is approached in different markets. Secondly, they can continue to reinforce trust among consumers through the way in which lotteries are regulated and operated.
Trust is the cornerstone of the lottery industry’s relationship with the public. In a world that demands openness and integrity from corporations, lotteries are in a unique position to demonstrate their long-established commitment to fairness, safety, and reliability. They will have to continue making players, regulators, governments, and society more broadly aware that lotteries are trusted forms of entertainment, benefitting from lotteries’ alignment with the wider principles of environmental, social, and corporate governance (ESG).
The lottery industry’s focus on responsible gaming and player protection should enable it to set ever higher benchmarks that continue to adhere closely to societal values.
GENERATIONAL ENGAGEMENT AND SOCIAL VALUES
With the oldest among Generation Z in their late twenties, their influence is already starting to be felt. The lottery industry’s ongoing innovation of games and technology must keep pace with the growth of this cohort, raised in a digitally connected world with distinct values and preferences in the player base.
Gen Z grew up with a clear sense of what’s right and wrong. They tend to hold businesses to account in a much more fearless way. Traditional lottery games and platforms should sustain a focus on aligning with their values and media habits. This generation’s emphasis on transparency, social responsibility and meaningful experience presents a real opportunity for lottery brands to double down on their charitable and socially driven causes, and their commitment to responsible gaming.
Another avenue for engagement is making lottery games shared and social experiences. Interactive and socially conscious elements can be further integrated into lottery games. Although the cost of lottery tickets is typically low, new features that give players better visibility of where their contributions go over time could introduce another layer of added value, aligning with this demographic’s desire for progress and activism.
