Spam not at economic equilibrium

The average U.S. household receives a little more than 100 pounds of bulk mail every year. While this may seem like a lot, it actually represents a fairly small percentage of the total weight of paper-based information (mail and newspapers) that households take in annually. Further, unlike spam, the amount of bulk paper mail that we receive has not grown dramatically during the last few years. Why?

The fundamental reason that bulk mail represents a reasonably small and constant portion of the typical household’s paper-based information flow is that bulk mail is at economic equilibrium in the context of other sources of paper-based information.

In other words, the three economic factors of bulk mail are well established and are not in a state of flux:

* It costs bulk mailers something of value (paper, printing costs and postage) to send their material.

* These mailers can quantify the percentage of their material that is thrown away before it is read.

* These mailers know that a small percentage of people respond positively to the offering presented in their material.

The fact that all three factors are relatively constant means that the amount of bulk mail we receive is no more of a problem today than it was a few years ago.

E-mail-based spam, however, is not yet at economic equilibrium, primarily because the first factor – the cost of sending spam – is more or less non-existent in the e-mail world. It costs spammers almost nothing to send their material.

So, what will it take for the economics of spam to reach equilibrium? The most important factor will be a dramatic increase in the cost of sending spam. That won’t come through legislation, but it will come about as a result of the rapidly increasing use of antispam tools. What these tools do, at their most fundamental level, is to dramatically increase the cost of sending spam.

For example, if an antispam filter can stop 95% of the spam that reaches an end user, the cost to the spammer of reaching that potential customer has risen by 20 times. Increasing the effectiveness of these filters to 97% increases the cost to the spammer by 33 times. The hope is that the potential revenue available to spammers drops by a corresponding amount, and equilibrium is reached.

Let me know what you think by dropping me a line at mailto:michael@ostermanresearch.com