The Economics of Spam
March 16, 2013 1:14 AM   Subscribe

A paper from Justin M. Rao and David H. Reiley in the Journal of Economic Perspectives (full-text pdf) about spam economics.
Spam also seems to be an extreme externality in the sense that the ratio of external costs to private benefits is quite high. We estimate that American firms and consumers experience costs of almost $20 billion annually due to spam.... On the private-benefit side... we estimate that spammers and spam-advertised merchants collect gross worldwide revenues on the order of $200 million per year. Thus, the "externality ratio" of external costs to internal benefits for spam is around 100:1.
Summary from the Atlantic

Is Spam a Public Policy Problem?

(Previously, previously)
posted by frimble (7 comments total) 5 users marked this as a favorite

 
This is really interesting and demands a careful read, but the part that was most compelling was part about what spammers can make:

Direct mail is the most expensive form of advertising, due to printing and
postage costs; this medium thus requires high breakeven conversion rates of at
least 2 percent. For the case of $50 profi t per sales, standard online display adver-
tising can be profi table down to a conversion frequency of 2 per 100,000 ads, while
“premium display” would require 10 per 100,000 ads. Retail spam is profi table
down to 0.2 conversions per 100,000. Bulk spam through wholesale botnet rental is
sustainable with a mere 0.06 conversions per 100,000 ads, or about 1 in 2,000,000.
Clearly, spam can be orders of magnitude less effective than traditional forms of
advertising and still remain profi table.

posted by chavenet at 2:04 AM on March 16, 2013 [1 favorite]


It's really annoying that they use an entirely different analysis when they compare spam with other forms of advertising. If you were to include in the calculation the time spent viewing or otherwise dealing with, say, Youtube commercials—not to mention things like cable television commercials which consumers effectively pay to watch—I wouldn't be surprised if the externality ratio isn't that much better than the one they calculate for email spam.
posted by XMLicious at 2:32 AM on March 16, 2013 [1 favorite]


"Of the 42,000 Internet Service Providers (ISPs) surveyed, just 20 were found to be responsible for nearly half of all the spamming IP addresses.

I read something the other say about a new wave of spam/phishing likely to break thanks to the rising tide of wealth in places like India and China, etc, putting more people on the but damned if I can find it now.

So, you can have that link.

The $200 million figure does seem a bit small. Annecdata from my corner of the world recently is seeing people fleeced by scams like African love connections swindling people for thousands over months (and there was one death), and houses being sold from under their owners by (usually reported as) Nigerian scammers.


So, $200 million? Seems small.

My work account seems to get less spam than ever these days too, and that has a public-facing email address.
posted by Mezentian at 3:22 AM on March 16, 2013


Of the 42,000 Internet Service Providers (ISPs) surveyed, just 20 were found to be responsible for nearly half of all the spamming IP addresses.

I'm betting Airtel India is #1 or 2.
posted by Thorzdad at 4:32 AM on March 16, 2013


Count me as carrying a chunk of those losses due to spam. It's not the incoming spam that is a problem - we all have good filters to deal with that these days - it's my outgoing email that gets trapped in filters at the receiver's end.

This is a daily problem for me; people will use a request/order form on our site to begin an order process, but when we write back to them for confirmation, etc., we never get a reply. In some cases, this will probably be people who have changed their mind, but in many many cases, it is because our reply didn't get through, due to their (necessary) aggressive filtering. I would happily pay a 'postage' fee for sending email, if it could thus be identified as 'not spam' and thus guaranteed to get through to the inbox at the other end. Death to spammers!
posted by woodblock100 at 5:47 AM on March 16, 2013 [3 favorites]


I would happily pay a 'postage' fee for sending email, if it could thus be identified as 'not spam' and thus guaranteed to get through to the inbox at the other end.

Oh, whoa. That was a thing in The Road Ahead, back in the Dream Time of the web in 1995, IIRC. It hadn't occurred to me that it might be feasible now.
posted by XMLicious at 6:01 AM on March 16, 2013


You might also be interested in the paper Why do Nigerian Scammers Say They're From Nigeria, which suggests that it actually improves conversion rates down the pipeline, by screening out people who are too smart and would figure something's amiss by the time they they're directed to a Western Union office.
posted by pwnguin at 11:46 AM on March 16, 2013 [2 favorites]


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