Moneymanagement’s Weblog

The Economics of Spam

Posted in Internet by moneymanagement on August 18, 2008

The dark side of the Web

Spam is flooding the Internet with many copies of the same message, in an attempt to force the message on people who would not otherwise choose to receive it. Most spam is commercial advertising, often for dubious products, get-rich-quick schemes, or quasi-legal services. Spam costs the sender very little to send — most of the
costs are paid for by the recipient or the carriers rather than by the sender.

There are two main types of spam, and they have different effects on Internet users. Cancellable Usenet
spam is a single message sent to 20 or more Usenet newsgroups. (Through long experience, Usenet users have found that any message posted to so many newsgroups is often not relevant to most or all of them.) Usenet spam is aimed at
“lurkers”, people who read newsgroups but rarely or never post and give their address away. Usenet spam robs users of the utility of the newsgroups by overwhelming them with a barrage of advertising or other
irrelevant posts. Furthermore, Usenet spam subverts the ability of system administrators and owners to manage the topics they accept on their systems.

Email spam targets individual users with direct mail messages. Email spam lists are often created by scanning Usenet postings, stealing Internet mailing lists, or searching the Web for addresses. Email spams typically cost users money out-of-pocket to receive. Many people – anyone with measured phone service – read or receive their mail while the meter is running, so to speak. Spam costs them additional money. On top of that, it costs money for ISPs and online services to transmit spam, and these costs are transmitted directly to subscribers.

One particularly nasty variant of email spam is sending spam to mailing lists (public or private email
discussion forums.) Because many mailing lists limit activity to their subscribers, spammers will use automated tools to subscribe to as many mailing lists as possible, so that they can grab the lists of addresses, or use the
mailing list as a direct target for their attacks.


The Economics of Spam

In general, spam is the excessive distribution of messages to as many people as possible.

E-mail is the cheapest form of direct marketing (much cheaper than telemarketing or bulk junk mail through
the post). Andrew Leung (2003) observed observed that the response rate to spam is as low as 0.005% – only 50 in every million people respond to UBE.

But despite this very low response rate spam can make economic sense because the costs of dealing with it
are felt only by those recipients who don’t want it.

And CipherTrust (as reported by John Leyden) says that the response rates for pharmaceuticals is 200 per million, for

“Rolex” is 75 per million, and for porn is 50,000 per million! (Under 1 in 100 click-throughs actually yield a sale).

Fighting Spam

This is an example of negative externalities. Private costs and social costs diverge. Spammers are either unaware or don’t care about the costs they impose.

Anti-Spam Software

We can reduce spam in our
e-mail InBox by installing add-on anti-spam software on our workstation.
The marketplace offers a wide selection of such software that works in conjunction with our e-mail client software. 

The down side of anti-spam software is its expense and ongoing management effort.

A little Help from our ISP

One line of defence against spam can be our Internet Service Provider (ISP).  ISPs that filter spam
have happier customers and avoid clogging their e-mail servers with useless e-mail. 

E-Mail Client Filters

Most e-mail client software
comes with features designed to reduce spam in the InBox by searching for telltale signs in the contents of incoming spam.  For example, in Microsoft Outlook, we can set up various filters using the Tools > Rules Wizard function.

Since spam is rarely sent directly to us but to a list of undisclosed recipients, setting a filter that looks for specific words in the subject line is a good place to start.
More sophisticated filters can search for undesirable originators or selected properties of documents.

The limitations of the client e-mail filter approach are that the spammers are fully aware of the features of
the Rules Wizard and can send messages with misleading Subject lines and document characteristics that bypass our filters.  Also, these filters are not as sophisticated as the add-on software.

Our Behavior

Quite a different approach to controlling spam relies on disciplining our own behavior.  We must resist the temptation to participate in surveys, contests and “free” offers.  All of these ask us for information that greatly increases the
likelihood that we will be spammed.

Definite Don’ts

Don’t ever click on the
Remove button of spam e-mail.  Rather than removing yourself from a list, clicking the Remove button actually confirms that you exist.  Now the spammer will subject you to more spam.

Don’t ever, ever buy anything from a spammer.  Aside from the potential for fraud, we are only encouraging more spam.

Don’t complain.  In my experience there’s no satisfaction to be gained.  We’ll only raise the level of our irritation meter.  Move on.  Life is too short.

If it’s too good to be true…

Needless to say, nobody in Nigeria is really looking for a random person in the US just to do some money laundering.

No national lottery gives prizes to people who don’t buy tickets.

You don’t get refunds on products you haven’t bought.

And no bank or credit company will ever call you up and ask for your PIN. They know it already. They especially won’t call you and ask for your PIN if you had your wallet stolen.

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One Response

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  1. Benny said, on August 21, 2008 at 4:45 pm

    If you live in China or Nigeria at might be a profitable business after all. I guess they do it as if they would work in an office.


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