The True Cost of Spam
---------------------
By Tom Geller
Executive Director, SpamCon Foundation
I GET A LETTER EVERY ONCE IN A WHILE from someone asking
about "postal spam" or "telephone spam". These letters are
generally of two types:
* "Spam's annoying, but what really bothers me is when
marketers call at dinnertime."
* "Spam's annoying, but paper junk mail kills trees and
fills my REAL mailbox."
Sometimes these correspondents ask what they can do to stop
postal and phone solicitations, in which case I refer them
to Jason Catlett's amazingly thorough Junkbusters site
http://www.junkbusters.com .
Just as often, they're angry that anyone would be upset by
a little spam. After all, the argument goes, spam takes the
place of those more-invasive forms of marketing. Phones
must be answered; paper mail must be carted to the trash.
But with spam all you have to do is "hit delete", right?
(There was even a rumor that antispam activists were part
of a secret "lumber cartel" to ensure that marketers would
continue to send "tree-based" paper mail!)
http://info.astrian.net/jargon/terms/l/Lumber_Cartel.html
http://come.to/the.lumber.cartel
http://www.geocities.com/SiliconValley/Lakes/5362/cartel.html
At their bases, both letters express the same beliefs: that
every form of marketing has a "cost" to the recipient, and
that spam's "costs" aren't as bad as those of unsolicited
phone or postal mail marketing. A subsidiary assertion is
that spam cuts down on the prevalence of other direct
marketing forms.
The second assertion is easy to dismiss. According to the
Direct Marketing Association, ad expenditures for
"traditional" direct marketing grew an average rate of
seven percent during the period from 1995-2000, and are
expected to continue to grow at about the same rate for the
five years to come
http://www.the-dma.org/library/publications/libres-ecoimpact2.shtml
In short, email advertising has had no substantial effect
on the prevalence of phone and postal marketing.
But the first belief -- that unsolicited email "costs" the
recipient less than unsolicited phone and postal marketing
-- is worth examining.
If one defines "cost" exclusively as "direct financial
burden" then there's no contest: Spam costs more. In the
U.S., there's generally no cost to receive a phone call
(unless you're on a cell or satellite phone), and the
sender pays for postal mail virtually everywhere in the
world. On the other hand, a substantial number of Internet
users still pay per-minute fees to pick up their mail,
whether they're dialing in for mail from a dollar-a-minute
hotel phone or a metered line in rural Missouri.
http://www.earthlink.net/accessnumbers/toll
http://www.cauce.org/tales/retrieve_mail.shtml
http://www.ecofuture.org/jm/spam_cost.html
But "cost" is not just about money. The person angry about
unsolicited paper mail considers the "time cost" of
carrying letters to the trash, the cost of paying the
municipal garbage company to take the excess bulk, and the
environmental cost of creating that much paper in the first
place. One who hates phone solicitation perceives a cost in
time, privacy, and "opportunity cost" (because others can't
get through when a salesperson is on the line.)
Arguments about spam's costs are starting to loom large in
the legal arena. Often, courts assert the rights of Network
Resource Owners to control their equipment, but are
uncertain how NROs should be compensated for spammers' acts
of trespass. As I see it, four types of cost should be
considered in spam cases http://law.spamcon.org/us-cases/
* DIRECT COMPUTER AND BANDWIDTH COSTS
Includes increased need for storage, bandwidth, CPUs,
wear and tear, etc. While often mentioned, these costs are
relatively minor. In the case of AOL vs. Prime Data
Worldnet Systems Inc., the plaintiff claimed (and won)
direct computer costs of 78/1000 of a penny per message
http://legal.web.aol.com/decisions/dljunk/primereport.html
* DIRECT NON-COMPUTER COSTS
Server-room space, cooling, electricity -- and the
biggie, personnel to handle both the increased traffic and
the inevitable complaints from customers. A 1999 study
found that over 50 percent of people who complain about
spam do so by involving their own ISP
http://www.brightmail.com/pdfs/gartner_rebuilt.pdf
* INDIRECT NON-COMPUTER COSTS
Includes:
-- False positives (i.e., damage from blocking legitimate
mail) due to the need for antispam filters
-- Damage to the network owner's reputation (for
"allowing" spam in)
-- Customer attrition and subsequent acquisition
-- Lost opportunity. These are by far the biggest costs
-- and are, unfortunately, impossible to quantify. The
abovementioned 1999 study found, for example, that
customer attrition due to spam costs $7 per member per
year at large ISPs, but that figure was publicly
debated by the owner of a small ISP
http://www.wired.com/news/technology/0,1282,20234,00.htm
* COSTS THAT HAVE NO DIRECT FINANCIAL REPERCUSSIONS
For example, the loss of privacy and parental control
that spam introduces. Such arguments wade in philosophies
of civil rights -- a subject far too broad to discuss here.
So all forms of direct marketing impose some recipient
cost. The question then becomes: how much cost can
marketers reasonably expect the recipient to shoulder?
In my opinion, the answer depends on the cost that the
*sender* bears. You see, a high sender cost will naturally
limit the amount of unproductive solicitation: Nobody's
going to spend a million dollars to contact a million
unqualified leads. On the other hand, they might well spend
a hundred dollars. As a recent study by the European Union
stated (Page 110): "The history of the advertising industry
shows that the lower the cost of a direct marketing
technique the greater the risk of abuse". That report
discusses cost issues extensively, and is highly
recommended
http://europa.eu.int/comm/internal_market/en/dataprot/studies/spam.htm
Unsolicited advertising by postal mail is expensive for the
sender: It's not unusual for postage, paper, printing,
creative services, tracking and fulfillment fees to come to
over a dollar per contact. Phone solicitation is even more
expensive -- and less popular.
By contrast, spam falls into the same sender cost category
as unsolicited faxes and automated phone solicitation. Both
of those marketing practices cost comparatively little
(under $0.05 per contact), while spam costs a fraction of a
penny per contact. Both unsolicited faxes and automated
phone solicitation are forbidden by U.S. Federal law
http://www.junkbusters.com/ht/en/fcc.html
Let's assume that each of these contacts, regardless of
method, costs the recipient a small fixed amount. A worker
who is paid US$12.00 per hour would make US$0.10 in the 30
seconds it takes to hear the phone solicitor's pitch and
say "no, thank you". Average in the lower recipient cost of
paper mail and the high price of fax cartridges, and I
think it's fair to say that unsolicited ads cost the
recipient an average of a dime per contact in purely
financial terms.
That yields the following chart:
COST COMPARISON OF UNSOLICITED MARKETING METHODS
All cost figures per contact, estimated
COST TO COST TO % OF COST BORNE
FORM SENDER RECIPIENT BY SENDER
---- ------ --------- ----------
LEGAL
Telemarketing $1.00 $0.10 91%
Postal mail $0.75 $0.10 88%
ILLEGAL
Fax $0.03 $0.10 23%
Automated phone $0.07 $0.10 41%
OF UNCERTAIN LEGALITY
Spam $0.00001 $0.10 0.01%
Even if these figures are off by a factor of a hundred, the
legitimacy of unsolicited email is clear. It has no place
being lumped in with unsolicited postal and phone
solicitations, in which the sender carries the bulk of the
cost; rather, it belongs in the cesspool with currently
illegal marketing practices.
-- Tom Geller is executive director of the SpamCon
Foundation http://www.spamcon.org , a non-profit
organization dedicated to protecting email as a medium of
communications and commerce.
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