We've all seen the ads. Charlize Theron, George Clooney, or Richard Branson invite us to a fantastic experience. If it's not that, then it's a chance to win a supercar or even a house. Of course, we’re talking about Omaze. It seems so perfect that many ask themselves: is Omaze a scam? To answer this question, let’s go back in time and understand how the company started.
Ryan Cummins and Matthew Pohlson have worked in foundations and charities for years. The two lifelong friends also loved working in the media industry. Their CVs are impressive. They worked with Bill Clinton's foundation and created the Girl Rising documentary, directed by Oprah. This bit of film led to a non-profit organization for women's education. So, the two had great connections with celebrities.
But, this world wasn't perfect, and frustration is a crucial part of Omaze's origin story. Cummins and Pohlson love basketball. Since they were friends with the wealthy, they attended exclusive auctions. One prize was a chance to hang out with Magic Johnson, and the two idolized him. But, it cost more than $15,000. So, they couldn't afford it.
The two rubbed elbows with celebrities. And, yes, they had worked with foundations and even helped in organizing the Live Earth concert. But they weren't exactly millionaires. Pohlson, for example, was $200,000 in debt because of business school. Plus, they felt their activities reached a close elite circle and not the entire world.
So, the two created a platform where regular people could win a celebrity experience. That's how Omaze was born. The equation made sense: they knew celebrities and had worked in foundations. So, investors were keen on participating.
But Omaze got off to a slow start. First of all, it had no previous reputation. So, convincing fans was tough. Plus, the first experiences weren't impressive. The first one was a guest judge on Cupcake Wars. It ended up raising $748. But the two believed in the idea and kept at it, even when death knocked on the door.
Thanks to celebrity contacts, Omaze manage to outgrow the cupcake experience. Prizes now included a date with George Clooney and a wine tasting with Jennifer Lawrence. By the way, Clooney did a pair more, but after he got married, neither was a date. So, from a celebrity standpoint, it was rolling. But, as a business model, the founders struggled to find a way to scale the business.
Their platform for everyone to bid on celebrity experiences was, in itself, a niche market. Ironic, I know. But, look at the reality. First of all, the bidder has to be a fan of said celebrity. Then, the activity has to be appealing to the fan. So, their challenge was to make more mainstream prizes and, then, in 2018, Pohlson died. But, how?
You see, Pohlson was born with a twisted stomach. It's a condition that can generate a lot of scar tissue, but people can live a healthy life. However, in 2018, some of Pohlson's scar tissue detached and caused a significant blockage. He rushed to the hospital, and doctors intervened. But his pressure kept dropping until, at one point, he flatlined.
For four and a half minutes, Pohlson's heart didn't beat. Doctors were frantic to save him, but nothing happened. Then, just like that, he came back to life. After hours of hard work, he was stable. The recovery was long, but he has said this fueled to grow Omaze.
After recovering, he got back to work and ran into lukewarm news. Omaze still hadn't found a way to grow a business that relied only on experiences. Was it that they were doing things wrong? What if people didn't want an adventure?
Cummins and Pohlson found the answer with James Bond. Daniel Craig promoted a chance at winning an Aston Martin DB7. This prize differed from the norm, as most focused on experiences. So, they didn't project high income for the Aston Martin. Well, it turns out people wanted that Aston real bad. So, it exceeded all expectations.
To confirm their theory, the founders bought a $250,000 McLaren. They estimated that it would raise around $500,000. The final result? $1.9 million. So getting wasted with Jennifer Lawrence isn't as interesting as a supercar.
Right there, they decided to change gears. Of course, Omaze still included celebrity experiences. But the company would double down on vehicles, houses, and vacations, and it worked. Now, is Omaze a scam because it did this? No, not at all, and we’ll explain in the following section.
From the change in 2018 to 2020, Omaze saw incredible growth. And, yes, hold on to that adjective: unbelievable. Pohlson claims that Omaze grew 500%. In two years. Now, I'm not saying it's not true, but it's hard to grasp. Still, investors believe in Omaze. In its series B funding round, Omaze raised $30 million. Plus, the founders claim that, by 2020, Omaze has generated more than $130 million gross income for different causes.
Then, there are the celebrities. They love Omaze. Bono, Branson, Damon, Affleck, and Theron flock to offer experiences. So, at least in front of the camera, Omaze seems to work.
Now, Omaze doesn't divulge revenue numbers because it's private. It doesn't have to. But, here's where it gets interesting. The company has never denied that it's for-profit. They're vocal about their goals of becoming the first for-profit to give a billion dollars in charity in a year. Now, there's nothing wrong with being a for-profit. It's valid. But, how exactly does it make money?
Let's use a $10 donation as an example.
Some people lash out and wonder is Omaze a scam for doing this. To the company’s defense, it’s open about this. Their website says that the net donation is between 12% and 20%. Also, it promises that more people will donate by having such a low entry, like $10 or $20. Still, it's only $1.5 out of $10.
So, if I were to ask you right now what the difference between Omaze and a lottery is, what would you say? The prizes? It might be. Most lotteries don't include riding a tank with Arnold Schwarzenegger, but you'd be wrong. The only difference between Omaze and a lottery is that you don't have to buy entries to participate. And, why did they do that?
Well, Omaze operates in the US and the UK. In those two countries, lotteries cannot be for-profit unless they meet a certain percentage. Omaze doesn't. So, to avoid the term "lottery," Omaze must allow for free participation and, you can. You can get up to 2,000 entries for free. But, then, you can donate to increase those to as much as 6,000.
Fun fact: in 2019, the maximum number of entries was 1,000,000 entries. Now, it's only 6,000. Now, in case you're wondering, there's no difference in the possibilities. Omaze claims that free entries have as big a shot at winning as donations do. But that's what many people are contesting, and that's why many people wonder: is Omaze a scam?
There are several complaints of free entries winning a prize then running into a world of trouble. Claiming it becomes difficult and tedious, and some don't even get it. Finally, it got so bad that the California attorney general filed an investigation against Omaze.
Though the company avoids the term "lottery," the state considered it as one. It also filed a claim that Omaze was illegal, but the company was quick to act. Omaze settled the investigation and for $120,000.
Many people mulled over the question: is Omaze a scam? The Northern District of California filed a class-action suit against Omaze for illegal activities. The claim is that it misled the general public into believing that the entirety of the donation went to the charity.
Even the UK version of Omaze has seen controversy. When Omaze UK launched, the Advertising Standards Agency filed a complaint. The company didn't explain that you could take part for free.
As for the UK prizes, they're controversial as well. For example, Omaze UK has given away several mansions.
One such prize had high risks of flooding. Another one was on a cliff, and some engineers considered that, in years, it might fall. Two of the three winners have already sold their houses. The third one is considering it.
Now, Omaze has insisted that it does due diligence with all prizes. But, it has a tough time shedding a bad reputation. Google Omaze reviews, and you'll find a mix of opinions.
What caught my attention is that they're all absolutes. Some people hate it with their guts, as several customers complain of poor customer service and unwanted fees. Others rant about it being fake and a scam.
Then you go o the positive reviews, and they all seem too perfect. The comments don't seem authentic. I can say the same about media coverage.
It's just too nice. Yes, Pohlson is a warrior for overcoming adversities. The founders have a great equation for their business. But, there are few, if any, articles that analyze and criticize the platform. For me, that's fine, to a degree.
But, I wanted to dig deeper. So, that's why we made this video.
Now, let's make one thing clear. There's evidence of some of the winners. One of them even took to Reddit for an AMA. So, the prizes do exist, even if most of the videos come directly from Omaze.
That means that, yes, you might win a trip to space or a date with your favorite celebrity. And, like most lotteries and raffles, the chances of winning are low. Add to that that Omaze is open about making money. And, yes, the money goes to good causes. But so much gets lost in the way that we ask ourselves: is it a charity? Is Omaze a scam? Not necessarily. It's a business that gives out spare change to charities. Is that wrong? You tell me.