The surprising economics of spam

A look at the screwy economic model of that pesky inbox filler.

$20 billion a year. I bet we as a society could find a better way to spend that than dealing with spam.

Yet that's what we spend, says a new report in the Journal of Economic Perspectives.

One of the authors, Justin Rao of Microsoft Research, says when you assign dollar values to all the hassle, it adds up quick. "The time people waste just dealing with spam. That two channels there, one is that stuff shows up in your inbox that you have to delete or get out of the way. And the other would be, since we run spam filters, sometimes a legitimate message gets put in your spam box, and you have to go find it, or you miss a meeting, or your mother gets mad at you and so forth. So those two components waste people's time. And the other component is all that effort to fight spam. All that systems administration, technology and infrastructure set up just to defend the system."

Thing is, spam doesn't bring in that much money. Rao puts annual revenues for the whole industry at just $200 million. One percent of what we spend fighting spam.

Justin Rao: For every dollar you get out, you cost society a hundred.

Moe: And it's the bad guy getting a dollar out.

Rao: Bad guy gets a dollar out, good guys or everybody else loses a hundred. So an analogy would be, we looked at non-violent auto theft, not carjacking, which is actually pretty rare, this is you go to sleep, you wake up, your car's gone. There, the thieves get out about a dollar for every 25 dollars they cost society.

The numbers surprised Rao. He says, "Man, these spammers don't make that much money. Like, $200 million, that's a tiny global market. And it just turns out that not that many people click, right? Not that many people buy, so it's really not that profitable be a spammer relative to being Google or Yahoo or Bing, but it is profitable maybe relative to the outside option you have in the country you're in with the skills you have."

Time may be running out for the weird business model of spam, says Patrick Peterson. He's a consultant who specializes in fighting spam.

Patrick Peterson: In the last two years, law enforcement and the security community have shut down some of the biggest spammers on the planet. there's been law enforcement in Eastern Europe and the U.S. seizing servers, seizing assets, and actually putting some of these guys in jail who have done tremendous challenges.

Moe: Does that mean there's less spam than there used to be?

Peterson: There is. We've actually seen it declining for the first time ever year over year as we put more of these bad guys and their evil empires out of business.

Then all those Nigerian princes will just have to write letters.

**

And now, Tech Report Theater. Producer Larissa Anderson will play Facebook, I will play the United States Postal Service.

Facebook: Hey, US Mail. How's it going?

USPS:  Like you care, Facebook. Like you REALLY CARE.

Facebook: Whoa whoa. Hey. What do you mean?

USPS:  Everyone goes on you, Facebook, and posts on walls and comments on status updates. Direct messages. No one writes letters. With stamps. In envelopes. And has people put them in boxes.

Facebook: Well, that's what I wanted to talk to you about. I'm trying out a postcard feature, where users send postcards of their pictures to friends.

USPS:  What, through a text message or a Netflix or something?

Facebook: That doesn't even make se--

USPS:  I will not be mocked, Facebook!

Facebook: No, it's a real thing. Goes by US Mail to your friend's actual home. They buy stamps. Real mail.

USPS: Oh. Really? THANK YOU. I better get cleaned up! I'll have MAIL to deliver! You think this will save me?!

Facebook: Ooh, I don't know if Facebook post cards will catch on? Even if it does, probably won't save you.

USPS: I see. Well. Thanks for coming by. Aaaand scene!

 

About the author

John Moe is the host of Marketplace Tech Report, where he provides an insightful overview of the latest tech news.

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