The answer is both. Yes, it is a fun way to win prizes and earn income, yet it is still an effective marketing tool, when run properly.
The effectiveness of the marketing results from many things. Obviously any widely advertised sweepstakes will receive some brand recognition as a result of its own advertising, plus the viral publicity that generally will come with any form of promotion, as mentioned in previous articles. People pass it around, more people become aware, more people purchase.
Sweepstakes promotors will generally pick a target audience before starting a sweepstakes. These targets almost always consist of those who are current customers, or those who could be. Each winner will be one of these two target groups, generally speaking. (Though, there could also be a third group, those who might only be interested in the sweepstakes or prize, yet who will still give the sponsor a good bit of word-of-mouth publicity)
Along with the general publicity that will result with any type of sweepstakes promotion, naturally comes the entrants and prize winners.The entrants/winners of each sweepstakes can do several things that would also contribute to an effective promotion.
One would be to buy the sponsors product. Sweepstakes winners and/or entrants can potentially become long-term customers, if they were not already. Targeting current customers improves customer relations and customer loyalty, among other things.
Another thing would be to critique. These groups can also offer simple, yet helpful insights for improvement, either for future sweeps, or, from the winners, also about the product itself. Sometimes a small glitch is easier to see from the side of its receiver.
And yet another would be to promote. If someone wins a valued prize, or purchases it as a result of finding it through a sweepstakes, it will most likely be promoted through recommendation to others, or just through passing what prize was won on to someone else. It's a normal, yet beneficial, occurance.
Aside from these things, there are also the many people involved in creating or running a sweepstakes that will also be exposed to many new companies and products through this venue. These can also be effectively marketed to through sponsoring a sweepstakes.
Although the time, energy, and financial output may seem astronomical in some cases, this is quite normally the exception rather than the rule. A well-run sweepstakes clearly is a most effective marketing tool that can create long-term benefits for all. It is also a fun game to play.