How ESPN just made gambling legal (I think…)
Have you heard about ESPN’s streak for the cash? The basic idea is that if you can predict 27 accurate “wins” in a row then ESPN will cut you a check for one million dollars. The rules are pretty simple – log into ESPN’s website to pick from their list of possible matchups.
It’s a pretty cool concept really – you pick accurately and you win, no real catch. Now I’ll admit I haven’t read every detail of the fine print, but I reviewed the rules online and it all seems pretty simple. So, this got me thinking: why is ESPN so desperate to give away $1M? You can win it by accurately predicting every game in the NCAA tournament or by predicting 27 wins in a row. Are they just using this as a marketing tactic to get you to come to their website, all the while betting that no one will ever actually win? Maybe…but maybe not.
I’m an engineer and an entrepreneur – why would I do this?
If I thought it was a worthwhile business of course. How could this possibly be a worthwhile business? Time to run some numbers…
What are the chances of anyone actually getting this right?
Assuming every matchup has a 50/50 chance of going either way, we can begin to apply probability. Now if I actually worked for ESPN I could give you a better sense of what his % might actually be, but for now lets stick with 50% (there are a lot of bad sports fans out there). If each player has a 50% of picking the right outcome, then the likelihood of any player picking 27 wins in a row is ~ 1 in 134 million. Or if you’re considering the NCAA tournament, its ~ 1 in 1.2 billion.
But are they just playing the odds and assuming no one will actually win?
Maybe, but you can bet they don’t have to! How do I know? More math of course…
Let’s assume that for each entry you have to go on the website one time for each pick. In order to correctly pick 27 winners in a row, you would have to visit the ESPN website 27 times (at a minimum as I’m not including intermittent checking).
But not every entry gets to 27 picks (obviously). So, let’s assume that the average entry gets about 5 picks deep. There will of course be many that go deeper than this, and many that won’t but I think we can safely assume 5 is about the average.
Now whether or not ESPN is guessing anyone will every get it right doesn’t actually matter. Probability and math dictate that everyone who enters has a chance of getting it right. So using simple math theory if enough entries are created, someone will win. No way to argue that – each entry has the same % of winning and if you add enough entries to the pot, the odds take over.
So how the hell can ESPN make this offer if they know eventually someone will win?
Simple, they’ve got you going to the website. Again and again and again. Each time you go to the site, they are displaying advertising to you. Not a whole lot, and not in your face but right there next to your pics.
Advertising generates revenues for ESPN, largely based on how many visitors and how many page views they create. Hrmm… didn’t we figure out about how many page views they would create? We did!
5 picks per average entries * 1 site visit (page visit) per pick * ~134M entries needed to create a winner = ~670M page views
DAMN THATS A LOT OF PAGE VIEWS! On average, ESPN will generate 671 million page views every time they give away $1M. That means that in order to break even, they only need to generate 0.149 cents in advertising for each page view to break even playing this game! In internet advertising terms, this is called generating a CPM of $1.49 or generating revenues of $1.49 per 1,000 page views.
Any website or blog owner will tell you that not only is this doable its remarkably easy! You can create a blog, sign up for Google Adwords account and generally earn a CPM between $5 and 7$. So, if go out on a limb and assume that ESPN (with all of its advertising power) can earn a CPM on the low end of Google, we can assume that they will make $3.51 in profit for each 1,00 page views during this game! (And if no one gets a correct winning streak, the whole $5 is profit!)
Wait…what? Are you saying that ESPN just legalized gambling?
If they did, good for them. But as any casino owner will tell you, it’s not gambling. It’s math. And the house wins every time. Anyone wanna help me build a quick and dirty website that will replicate this functionality? I’ll split the profits **cough cough – winnings** with you…
In: Entrepreneurship · Tagged with: ESPN, Gambling, New business ideas
