Giving away money for profit

The internet has thrown up some interesting and different business models - but I think few are as innovative as Chris Holbrook's idea of giving away money. It sounds a pretty impressive way to get people to your site... and that's what he does at the Free Postcode Lottery site.

Before you get too excited, we aren't talking vast sums of money - it's currently around £170 a day, so it's not going to change anyone's life.  But it is free to enter, there's a guarantee that your email won't be sold on, and with Holbrook giving away around £62,000 a year, it is still, at face value, a fast route to bankruptcy.

So how is Holbrook managing this feat? Nothing magic - just advertising. It seems that he has managed to get enough revenue that way (which is pretty impressive, going on the few pence I get from Google) to fund the site, which is apparently significantly in profit. In fact, profitable enough that he has quit his job to concentrate on the venture. The growth in the daily prize fund (it was £20 at the start of 2014) gives some indication of the increase in interest and advertising revenue over a surprisingly short period of time.

He does have one little trick up his sleeve. Players are entered with their postcode (the clue is in the name), and each day a winning postcode pops up, selected at random from those in the draw. But it's only available on the site. Don't check if you've won and 24 hours later your winnings roll over to the next winner. So there's an incentive to get eyes returning to the site day after day - an advertiser's dream.

At the moment, players have to live in the UK. Holbrook has looked into other countries but a combination of strange local laws in some countries that don't allow money to be given away and postcode formats that don't work so well with the approach have limited the possibilities - however, he hopes to launch in the Republic of Ireland once their postcodes go live in the summer.

Will it work long term? I really don't know - but I do think it's a real example of being creative about making use of the different kind of interpersonal contact the internet offers. Holbrook already has three different lottery games running (which means you have to look at three different pages to check if you've won - more eyeball space) and I can see scope for expanding the model even further.

Gambling isn't everyone's cup of tea, and it's arguable that even free gambling might encourage you then to have a go at the better rewarded payed version, but for me it's a very clever piece of work. Well worth popping over and taking a look.