The True Cost of Spam

Al Bredenberg
Publisher of EmailResults.com

Is spam really just like any other marketing method? Consider this analysis of the costs of spam ....

I get a letter every once in awhile 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.html]

* 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:

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.