All the Spammers in the World May Only Make $200 Million a Year

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We all get a lot of spam. Just today, Gmail has neatly filed more than 100 messages into my Spam folder. When I look at the list of subjects, I wonder: How the hell could any of this actually make someone money?

It's just weird: I understand annoyances like telemarketing where it's clear that some people buy things from people who call them at home. But spam? It just seems like a waste all around.

Now, in a new paper in the Journal of Economic Perspectives, Justin Rao of Microsoft and David Reiley of Google (who met working at Yahoo) have teamed up to estimate the cost of spam to society relative to its worldwide revenues. The societal price tag comes to $20 billion. The revenue? A mere $200 million. As they note, that means that the "'externality ratio' of external costs to internal benefits for spam is around 100:1. Spammers are dumping a lot on society and reaping fairly little in return." In case it's not clear, this is a suboptimal situation. cost-externality.jpg

It is just so cheap to send spam and even if you only ensnare a tiny number of people, that's enough to make it worthwhile. Rao and Reiley estimate that only 1 in 25,000 people need somehow buy something through spam advertising to make it worthwhile.

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So what's the way forward? The researchers gloss a variety of techniques like "attention bonds," in which you'd be paid some tiny amount (say, $0.05) for reading unsolicited emails, and government interventions. But their preferred solution is to find ways to raise the cost of business for spammers, so that their campaigns become unprofitable.

"We advocate supplementing current technological anti-spam efforts with lower-level economic interventions at key choke points in the spam supply chain, such as legal intervention in payment processing, or even spam-the-spammers tactics," they conclude. "By raising spam merchants' operating costs, such countermeasures could cause many campaigns no longer to be profitable at the current marginal price of $20-50 per million emails."

Many activities impose costs on society that are not "internalized" by the firms or individuals. Air and water pollution are the paradigmatic examples. You get to drive your car around emitting particulates and various other smog-causing molecules that increase the cost of treating asthma and other illnesses for other people by a tiny bit.

Spam has a remarkably high externality ratio, not just relative to driving an automobile, but stealing one, too. Here's a chart that Rao and Reiley include in their paper, which just looks at the direct costs of spam to end users (which they estimate at $14-$18 billion):

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Alexis C. Madrigal

Alexis Madrigal is a senior editor at The Atlantic, where he oversees the Technology Channel. He's the author of Powering the Dream: The History and Promise of Green Technology. More

The New York Observer calls Madrigal "for all intents and purposes, the perfect modern reporter." He co-founded Longshot magazine, a high-speed media experiment that garnered attention from The New York Times, The Wall Street Journal, and the BBC. While at Wired.com, he built Wired Science into one of the most popular blogs in the world. The site was nominated for best magazine blog by the MPA and best science Web site in the 2009 Webby Awards. He also co-founded Haiti ReWired, a groundbreaking community dedicated to the discussion of technology, infrastructure, and the future of Haiti.

He's spoken at Stanford, CalTech, Berkeley, SXSW, E3, and the National Renewable Energy Laboratory, and his writing was anthologized in Best Technology Writing 2010 (Yale University Press).

Madrigal is a visiting scholar at the University of California at Berkeley's Office for the History of Science and Technology. Born in Mexico City, he grew up in the exurbs north of Portland, Oregon, and now lives in Oakland.

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