Bill Gates calls it a plague and his company is suing to stop it. Ferris Research says it collectively costs businesses $10 billion a year. Wharton legal studies professor Dan Hunter labels it a cancer on the Internet.


Whatever you call spam, it’s everywhere and it’s spreading fast. Estimates of the amount of spam – a colloquial term for unsolicited commercial e-mail – vary but they range from 50% to 80% of all messages zipping across the Internet. Wharton marketing professor Peter Fader estimates that he receives 40 to 50 spams a day. “They are all the usual stuff – offers to make millions doing business in Third World countries, body-parts enhancement and Viagra,” he says.


Spam has become such a nuisance that Microsoft in early June filed 15 civil lawsuits – 13 in the United States and two in the United Kingdom – against people and companies that it identified as spammers. The company claimed these spammers sent users of its MSN and Hotmail online accounts more than 2 billion unwanted messages. In an op-ed article published June 23 in The Wall Street Journal, Gates said, “Spam threatens to undo much of the good that e-mail has achieved.”


Microsoft’s action follows similar ones by AOL Time Warner’s America Online division and Earthlink, an Internet service provider. Earthlink even managed to have one notorious spammer – Howard Carmack, known as the Buffalo Spammer – arrested on fraud charges. And in Washington, lawmakers are considering ways to restrict spam, including a requirement that e-mail advertisements be clearly labeled as such and/or the establishment of a national do-not-e-mail list similar to the Federal Trade Commission’s new do-not-call list.


Sure, spam is seriously annoying. But is it really the vampire that Gates and other opponents portray it as – a sinister force sucking the Internet’s lifeblood? And are the costs to businesses high enough to justify a raft of new laws?


The Delete Key

Some Wharton experts think so. Others don’t. But they all say spam is, at the very least, a huge irritation – and more important, an added cost – for businesses. Even so, their views about what should be done vary. Hunter, for example, says new laws may be needed, while Fader argues that people already have a solution at hand. “It’s called the delete key.” 


Fader’s quip points to an interesting aspect of the debate, namely some people’s belief that technology can hold back the spam flood. Spam-filtering software may not be especially effective now, this line of thinking goes, but it’s getting better every day.


Hunter, for his part, doesn’t buy that. Or rather, he doesn’t believe technology alone will stop spam. “The spammers are clever about getting around the filters,” he says. “After all, they have a strong commercial interest in [doing] that. So it’s an arms race.”


In addition, filters tend to be blunt instruments: Make them too sensitive and they end up blocking messages that e-mail users want. “I read an article in [the online magazine] Salon by a freelance writer whose e-mail provider signed up for one of the high-end anti-spam programs. It ended up blocking all sorts of messages she needed for her work,” Hunter says. Eventually, filters probably will be good enough to avoid mistakes such as this. But until then, people will be justifiably reluctant to use them and spammers will continue to buzz around like mosquitoes.


That’s why Hunter sees a place for legislation and regulation. The best solution for all involved – consumers, companies selling products via the web, legitimate marketers – will come only from extensive study of the regulatory options and the push-and-pull of lawmaking, he suggests. The answer, he adds, will probably include some kind of labeling or truth-in-spamming rules – one current problem is deceptive subject lines on spams – and a version of the do-not-e-mail list.


Could spammers go abroad to evade American laws? That’s unlikely, Hunter says. “It’s a major drag to move, so that’s an enormous barrier.” And spammers won’t be able to relocate only their servers overseas. American courts consistently have ruled that companies can’t skirt American laws by such action, he points out. If spammers don’t want to abide by American statutes, they have to relocate their entire operations.


In addition, if a spammer is selling a product, rather than just shilling for someone else, he would cut his profits by moving abroad because shipping costs would be higher. About the only product easily sent from abroad is pornography, and porn pitches are easily filtered because they are easy to identify, Hunter says.


The 20-minute Fix

David Croson, Wharton professor of operations and information management, has greater faith than Hunter in the ability of technology to stamp out, or at least seriously impede, the torrent of spam. “Ninety percent of the problem can almost be solved for free,” he argues.


These days, many e-mail programs include at least simple anti-spam features. Likewise, commercial e-mail providers enable you to block unwanted messages. But in both cases, you have to make some adjustments to your software settings. “It requires investing 20 minutes once,” Croson says. “But people don’t make very good investment decisions with their time this way.” Instead, they spend a few minutes every day dealing with – and cursing at – spam.


And that points to something unique about spam among direct marketing tools, Croson says. It places a much bigger burden on the recipient than the sender. With junk letters and telemarketing calls, both sides incur some costs. That discourages users of these more traditional means from deluging consumers to the same extent that spammers do, even if it doesn’t always feel that way when the phone starts ringing at dinner time.


Croson proposes remedying the spam imbalance by letting consumers charge spammers for their time and attention. “It would be easy to add a little field to the top of e-mails that says the sender will pay you X cents if you read this message,” he says. “Then, if somebody really wanted my attention, they could pay for it. And if somebody didn’t want to pay, they could say that, and I could filter my e-mails accordingly. The e-payment technologies are there to make this possible now and so is the software to add the e-mail field.”


Like Croson, Fader believes that technology will provide the best solution to spam. “There are so many technology solutions that exist today or are right there on the horizon,” he says. “Five years from now, this will be a non-issue.”


But unlike his colleagues, Fader questions how big a problem spam really is. He agrees that spam is annoying and imposes some costs on recipients. But he bets most people are little more bothered by it than he is, despite what they say. “Spam is like privacy,” he argues. “When you ask about it, people get bent out of shape. But then they will give away all sorts of information about themselves to get discounts and register for” goods and services. Plus, spam must work or else spammers wouldn’t be in business and apparently flourishing.


Gerry McCartney, Wharton’s chief information officer, can quantify the burden of spam in dollars and cents. He estimates that it costs the school about $200,000 a year in staff and filtering software. Spamming “has really picked up in the last 12 months,” he says, accounting now for about 50% of the incoming e-mail at Wharton. “And it’s growing all the time.”


McCartney’s team is in the process of rolling out a new spam filter called Postini, which is Italian for postman. It’s been tested with small groups at the school and will go into general use in the fall. Postini lets users set personal filtering parameters. The program then diverts spam to special folders and, every few days, sends alerts telling users they have spam they need to review. “Sometimes, because it’s using sophisticated algorithms, it traps mail that’s genuine, so you have to adjust your filtering accordingly,” McCartney explains. The cost is about $4 per user.


Postini notwithstanding, McCartney would like to see legislation as well. “I like the idea of people taking on the spammers,” he adds. “It’s a little industry that has grown up in the shadows. But people are realizing that it’s now costing companies real money. If we can reduce that with some laws, that’s great.”