People love contests, with the twin motivators of fun and prizes. So it’s only natural that businesses use social media marketing tactics like running contests and sweepstakes to attract and engage potential customers. However, it’s crucial to be informed about the legal considerations involved with social media contests and giveaways, so you don’t unwittingly run afoul of the law.
We’ll explain the laws surrounding social media games and contests and share tips for running social media giveaways that bring positive attention to your brand.
Laws governing social media contests and sweepstakes
Social media games can help heighten buzz around your brand or product launch, generate sales leads and increase sales. However, business owners and marketing managers must familiarize themselves with the rules and regulations surrounding them.
First, by law in the U.S., you must list general rules, fine print and “terms and conditions” for your contests or sweepstakes. You could include details like “no purchase necessary,” the date when the winner will be chosen and notified, eligibility requirements and more. “Once a suitable goal, audience and prize have been chosen, promoters must ensure all pertinent information is readily available to participants through terms and conditions and that entries can be tracked easily and winners chosen randomly or without bias,” said Araminta Jurgen-Romrig, strategist at Spin Brands.
“The absolute worst thing a company could do is assume there is no need for the fine print,” Mark Voronov, co-founder and CEO of SocialPlug, added. “You may be shocked at the number of campaigns that are suspended due to not completely laying out and spelling out guidelines for eligibility, along with any prize tax details that might need to be included.” In certain states, like New York, you might be required to send your winner a 1099 the following January for taxes on the reward.
Laws also differ depending on whether you’re running a contest or a sweepstakes. On one hand, a sweepstakes is a randomized selection, meaning you’ll have to provide an alternate method of entry (AMOE). An AMOE is a free way for people to participate in the giveaway. On the other hand, a contest requires participants to actually showcase their worthiness, so to speak. Say you own a bookstore, and you want to run a skill-based poetry contest. You will outline the requirements on your post, such as sharing an original poem on a specific topic and tagging your business. Then, you explain how you will judge the contestants and select a winner.
“Though sweepstakes and skill-based competitions are technically allowed on most social platforms, as promotions they are considered ads, and are therefore beholden to advertising rules that wouldn’t usually apply to organic social activations,” Jurgen-Romrig said. “Paid entry to competitions is also dangerous territory, constituting ‘lotteries’ which require a licence from the Gambling Commission.”
Best practices for hosting social media contests and sweepstakes legally
When running a social media contest or sweepstakes, there are a few things you can do to prevent falling foul of the law.
1. Ensure you don’t run an illegal lottery.
Lotteries are games reserved for state governments to raise money for public initiatives like education. They’re considered a type of gambling. As such, they’re regulated heavily to help rein in gambling addictions and the devastating societal issues they cause.
For these reasons, nongovernmental entities, including private businesses, can’t hold lotteries. To avoid an illegal lottery and run a legal contest or sweepstakes, a company generally must eliminate one of the three lottery elements (prize, consideration and chance). For example, a lawful sweepstakes typically will involve a chance to win a prize but doesn’t require consideration to enter.
2. Give people a free alternative way to enter the sweepstakes or contest.
Many companies want to run sweepstakes for their current customers, so they give away an entry ticket with a purchase. However, since money is exchanged, there is consideration, which causes a problem. A popular way to circumvent the problem is giving people a free alternative way to enter with no purchase required.
Under most state laws, creating a free entry alternative makes the sweepstakes legal. Take McDonald’s. It can give away its McDonald’s Monopoly tickets to paying customers ― consideration ― because it also offers an alternative free method to enter the sweepstakes.
3. Make your sweepstakes or contest easy to enter.
Money isn’t the only form of consideration. If a customer must put excessive effort into entering the sweepstakes, the work and time they put into the submission can turn into consideration. And that would convert the sweepstakes into an illegal lottery. Time is money, after all. Make entering your sweepstakes easy to avoid running into this problem.
4. Be up front about your sweepstakes or contest prizes and rules.
When it comes to contests and sweepstakes, businesses must clearly:
- Explain what the prizes are
- Announce the opening and closing dates for entries
- Disclose how winners will be selected
- Announce when prizes will be given out
- Contact all winners
- Actually give winners the prizes they are promised
All of these steps (except for the awarding of prizes) must be set up when the game is initially launched and the information must be available during the contest’s entire duration.
One Florida Hooters restaurant found this out the hard way. In an effort to increase beer sales, the business ran a contest among its servers in which it promised the winner a new “Toyota.” However, on prize day, the employee was blindfolded, escorted to the restaurant parking lot and given a “toy Yoda.”
Unsurprisingly, the winner was unhappy. The worker quit and filed suit against the company to get the promised Toyota, alleging breach of contract and fraudulent misrepresentation. The server won, and Hooters purchased the former employee a new Toyota.
While this is an extreme example, it provides a cautionary tale demonstrating the importance of planning a contest before jumping in head-first with a giveaway. “Just avoid deception in any form,” Voronov said. “Don’t claim [a] $5,000 gift card as money that will change someone’s life unless that truly is what you are trying to claim.”
The most
popular giveaway items for promotional products include branded food, stress balls, lip balm and reusable water bottles.
5. Follow state laws governing promotions.
Complicating matters more is the fact that each state has its own set of laws governing promotions and each law is different.
For example, Florida, New York and Rhode Island require sweepstakes offering prizes over a specific value to be registered. Similar laws also apply to contests, especially if a purchase is required to enter. Arizona requires the company to register the contest with the attorney general’s office, including a sworn statement that no additional fee was added to the purchase price in connection to the contest.
Moreover, the official rules of the sweepstakes or contest must fully disclose information about the prize offerings, method of entry and selection of winners. These are samples of what may be required, so a company must always check the applicable state’s laws before engaging in a promotion.
6. Abide by platform-specific rules for your contest or sweepstakes.
Online legal complexities are not your only consideration. Most social media platforms, including Facebook and X (formerly Twitter), have specific guidelines in their terms of use that you must follow when conducting a promotion.
Typically, social platforms require acknowledgment that they don’t endorse, promote or administer the promotion. Specific platforms have their own rules, as well. For example:
- Facebook requires that all promotions be run through specific pages or apps, not on personal pages.
- X requires contests to discourage participants from creating multiple accounts and posting the same tweets repeatedly.
A business that ignores the rules or fails to abide by them could find its promotion suspended or, worse, its entire social media account deactivated.
If navigating various platform-specific rules sounds arduous, especially when running a promotion online is so easy ― that’s because it is. Despite low barriers to entry, the risks are real. However, while thoroughly vetting the legality of a contest or sweepstakes may seem costly, it’s usually worth it when you reap the rewards of increased online brand awareness.
Use your
Instagram business account to hold social media contests to draw attention to your brand, add followers and gain customers.
Tips for hosting social media contests and sweepstakes
Online promotions are a digital marketing trend that shows no signs of slowing down. Consider the following social media contest best practices to make your online game successful.
1. Determine the goal of your contest or sweepstakes.
Contests and sweepstakes can benefit your company in the following ways:
- Increase brand awareness
- Generate more web traffic
- Improve engagement with social followers and customers
- Attract new social followers
- Boost sales
- Inspire new product ideas
Before creating your game, determine which of these goals is most important. Next, focus the game on achieving that goal. Here are some examples:
- Contests that increase sales: For example, if you want to increase sales, consider running a contest asking current customers to send in videos of them using your product creatively. This user-generated content will show prospective customers your product’s versatility. These videos act as testimonials, leading to more conversions.
- Contests that increase brand awareness: To increase brand awareness, consider running a sweepstakes that awards a prize related to your products and your target market’s needs. For example, a high-end travel company could hold a sweepstakes in which the prize is a seven-day stay at a villa in the Greek Isles with an on-site butler.
2. Narrow your target audience.
To get the most relevant entries, it helps to identify your target audience. What are their demographic and psychographic characteristics? How can you best reach them and what types of messages will appeal to them? For clues, go through your customer data and website analytics.
“Hosting a successful contest starts with understanding your audience,” Voronov said. “Design your campaign with your audience in mind. Use good graphics, clear instructions and time-limited calls to action.”
3. Choose the right social media platform.
Based on your target customer analysis, one or several social media platforms will emerge as the best place to launch and run your contest. For example, if you target older professionals, consider using LinkedIn or Facebook. If your brand targets Gen Zers or millennials, Snapchat, Instagram or TikTok may be a better choice.
4. Decide what type of promotional game you want to run.
Do you want to run a sweepstakes or a contest? Your goal will help inform your decision. Here are some characteristics of each to help you determine the best game for your brand:
- Sweepstakes: Sweepstakes tend to be more general. They attract a wider audience because they’re free. They also take some effort to participate in. Sweepstakes are suitable for increasing brand awareness, gaining social followers and boosting web traffic.
- Contests: Consider a contest if you want to address people further down in your sales funnel, such as social media followers, prospects and current customers. A contest will help you focus on increasing engagement and sales within those groups.
You must also consider your budget and secondary goals. For example, a photo or video contest showing people using your product will increase sales and create user-generated content for future marketing campaigns.
5. Choose your prize and game rules.
Rules will help you keep the game fair for all entrants and protect you from people trying to work the system. Your rules will spell out the length of the contest or sweepstakes, its opening and closing dates and the prize award day.
The prize should be something related to your brand. It must be compelling enough to motivate people to enter the game. When it comes to sweepstakes, the prize must be impressive enough to create buzz and publicity that will increase the time your sweepstakes is actively discussed, boosting your digital marketing return on investment.
6. Actively promote your game.
Even if you hold a social media game, be sure to promote it through other channels. Consider an email marketing campaign, influencer marketing with social media stars, in-store signage and website promotions. “After the contest is underway, stay engaged,” Voronov said. “Monitor submissions, answer questions promptly and keep entrants on their toes with updates. Experiment with new formats, review performance metrics and tweak strategies based on what performs best.”
Consider offering incentives for people to refer others to your game, such as discounts or additional entries. The more people who discover your game, the more consumers are likely to hear about your company and products, visit your website, follow you on social media and, ultimately, buy from you.
To
get influencers to market your game or contest, find influencers popular in your niche, build a relationship with them and create exclusive content for them to promote.
7. Make the most of your winner announcement.
The announcement of your contest or sweepstakes winner should not be a private affair where you contact the winner directly. In addition to contacting the winner to let them know they won, use this fun news to increase engagement on social media platforms and your website. Send the news via email and craft a press release. If possible, capture photos and videos of the winner receiving or using the prize. This material will keep the excitement going and extend the life of your promotion.
8. Analyze game KPIs and feedback.
The only way to know if your contest or sweepstakes was successful is by crunching the numbers through a marketing analysis. Did you achieve your primary and secondary goals? Did you realize other positive benefits from the game’s promotion?
In addition to key performance indicators (KPIs) like website traffic, new social followers and revenue increases, analyzing and using customer feedback is essential. Gather the following survey data:
- Did participants have fun?
- How do they perceive your brand now?
- Did they feel the contest was fair?
- What ideas do they have to improve future contests or sweepstakes?
These answers will help you enact changes to make your next contest or sweepstakes even more successful.
Sammi Caramela and Daliah Saper contributed to this article.
