Are lottery ads expected to do the impossible?

A recent audit of the Missouri Lottery has renewed a familiar debate: how much responsibility should lottery advertising bear for swings in revenue and shortfalls in education funding? The audit, which was released by State Auditor Scott Fitzpatrick, was completed for Fiscal Year 2024.

In it, Fitzpatrick found that Missouri schools received $35.3 million less in lottery funding that year, even though there was an increase in lottery advertising spending by about $5 million. While this has brought up some questions on why the discrepancy, the bigger question may be whether lottery ads are being asked to solve problems they simply can't control.

What did the audit find?

According to the report, advertising spend for the Missouri Lottery went up to $5.4 million in FY24. In FY23, the advertising spend was about $400,000, so an increase of about $5 million in one year.

However, during that same time period, total lottery revenue fell by $49 million. This resulted in less money being transferred to education, which totaled $389.8 million for FY24.

Fitzpatrick said these numbers do raise legitimate questions about the relationship between lottery performance and advertising. He told KCTV 5:

The amount of money generated by the Lottery for our system of public education is the best way to gauge whether the program is succeeding. In this case, we've seen transfers to education increase while advertising budgets were nearly non-existent and then seen transfers diminish when the advertising budget was increased significantly.

Despite these numbers, the Missouri State Lottery Commission still received an overall “good” rating. This signalled that the auditors did not view the results as evidence of systemic failure.

Are lottery ads the scapegoat?

The data from this audit has fueled criticism of advertising. If you are spending $5 million more in one year, why isn't revenue going up as well, right?

At the same time, this data also highlights the limits of what marketing can realistically achieve. Lottery ads can promote games and remind players to participate. However, they can't dictate jackpot sizes, offset inflation concerns, or fundamentally change player spending habits.

For FY24, national lottery jackpots grew by 33%. However, Missouri Lottery ticket sales and overall lottery revenues remained essentially flat, slipping just a little bit. This disconnect suggests something bigger is at play beyond advertising alone.

Missouri is still well below other states in spending

Yes, the Missouri Lottery spent $5 million more in advertising from FY23 to FY24. However, their advertising budget is well below what other state lotteries are spending.

For FY24, even with the increase, Missouri spent just 0.31% of lottery sales on advertising. This ranks 44th out of 46 state lotteries. Comparing it to FY23, the Missouri Lottery ad spending was the lowest in the nation at 0.02% of sales.

When comparing those numbers, the Lottery stated that many competing consumer brands spend 10% to 13% of total sales on advertising. When thinking about it that way, Missouri's spending remains modest, even after lawmakers approved a higher appropriation.

Lottery defends its strategy

After the audit was released, the Missouri Lottery defended the advertising budget, saying it's a necessary tool in a crowded retail and entertainment marketplace.

In a statement, the Missouri Lottery stated:

The Missouri Lottery's goal is to responsibly maximize the transfer to Missouri education. The Lottery acknowledges that there are many factors in achieving that goal, and one of those factors is the ability to advertise the Missouri Lottery's brand and family of products.

Lottery officials also pointed out that advertising budgets are set by the Legislature and Governor as part of the annual budget process, not solely by the Lottery itself.

What happens next

Fitzpatrick said after the audit was finished that more trend analysis would be needed before drawing any firm conclusions regarding advertising's long-term impact on sales and education funding. He said these findings should help lawmakers decide how much to allocate for lottery advertising in the upcoming fiscal year.

For now, the debate will continue, with one big question looming: are lottery ads being asked to do too much in a system shaped by far more than marketing alone?

Enjoy playing the Missouri Lottery, and please remember to play responsibly.