Written by Jeremy Horelick
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The term sweepstakes can refer to a specific type of contest or the prize awarded at the end of that contest. Usually, a sweepstakes generates its jackpot by collecting entry fees for that contest, meaning the sponsor or host need not front the money itself. In fact, lots of companies can actually profit by giving money away. How's that, you ask?

Say, for the sake of simplicity, that a particular contest takes a dollar from one million separate contestants, and the length of that contest is an entire year. Now say the sponsor is able to earn, conservatively, two percent interest per year. If all the money is collected up front, by the time the contest ends, the sponsor is sitting on 20,000 dollars it didn't have before. Even if the grand prize is 15,000 dollars, the company stands to make five grand for doing nothing at all!

Types of Sweepstakes

One need only tune into planet Earth for a few moments to witness the explosion of sweepstakes everywhere. There are contests for free condos, free vacations, free cars, jewelry, and countless name-brand products. Sometimes it's even free to enter these sweepstakes. The sponsor is only too happy to put its name at the top of the competition for all the exposure it receives.

Why purchase a million-dollar TV spot during a football game when for no money at all you can beam your name out to millions of people? Lots of sweepstakes, especially those offering premium prizes such as cars and trips, receive plentiful media coverage, which is similar to having your very own PR firm on the job full time. Still, many sweepstakes offer a shot at real winnings, even if the odds seem remote. As they say, somebody's got to win, right?

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