The Business of Unsolicited Communications

Crime doesn't pay.

Do you believe that? Often it's true, but not always. There are both successful and unsuccessful criminals, and the successful ones typically have failed one or more times in the past. Further, success isn't a guarantee against future failure.

It is no accident that the above description is equally valid if every occurence of criminal is replaced with entrepreneur. Too often we define criminality and business using very distinct value systems, which tends to blind us to the common economic foundation for both:

Success(profit) = Revenue > Expense

If you find this morally abhorrant please put the feeling aside for a moment. I will not be arguing that criminality is ok, or that business isn't. Instead I want to say that many forms of economic behaviour are driven by a desire for profit. We value various behaviours differently, as we should(!), yet there is that common ground among them all.

So we come to the subject of this article, the business of unsolicited communications, and specifically email spam and telemarketing. Both are regularly in the news since they are a constant source of grief for almost everyone. What is so often missed is why it exists. If pretty much everyone hates this stuff why does it continue? What's in it for the perpetrators?

As you may have guessed by now, if you didn't already know, it exists because it pays. Its legitimacy or criminality is secondary to its profitability. It pays because for those who do it the revenue exceeds the expense. The same is true of any criminal enterprise, including drugs, property theft, financial malfeasance, protection rackets, and so on. For crimes, there is also the indirect expense of jail time, yet even that can be turned into a dollar figure - opportunity cost. Criminals are businessmen. They are not always successful businessmen, but all are driven by the pursuit of profit.

Email spam is interesting because of the technology angle. Email is cheap. Really, really cheap. That permits the spam merchants to address a large market, repeatedly, and remain profitable even with the very low percentage of targets they convert into customers. They have also branched out into related fields like blogs and social networks.

Telemarketing is more expensive but works because the hit rate is much higher than for email spam. There are social and psychological reasons for this with which we can all identify. With technology also working its way deeper into this sector, for both the legal and illegal telemarketers, their costs are declining. This causes telemarketing to increase in volume and in the range of products sold. They can remain profitable with less revenue potential per outgoing call.

This profit angle is why governments and police forces have found some of their greatest success in fighting crime by increasing the expenses of the criminal enterprises they target. Regrettably this often has a high cost to the taxpayer; enforcement is very expensive. That is a key reason why criminals are hard to stop - as a society we can only afford so much enforcement expense. Indeed, for the large criminal organizations a popular counter-strategy is to increase the cost of enforcement. Often this is achieved through brutal means, such as violence and corruption, but the financial strategy is sound.

In the meantime, every successful enforcement action is given maximum press exposure. This is largely done for political purposes, to try and convince the populace that government is on the ball. The numbers say otherwise. Drugs continue strongly, as do spam and telemarketing. All are increasing. Large court settlements over spam, while often undisputed are impossible to collect, either because the criminals are insolvent or, more often, are anonymous and overseas. Enforcement has failed, and will continue to fail.

Since many of our laws are based on a shared sense of what's right and wrong it is difficult for us to attack the other side of the profit equation - revenue. Drive down the criminal's revenue and you can put them out of business. When it comes to drugs the top strategies seem to be education and legalization. In the former case, reduce demand by getting people to stop consuming drugs (or responding to spam), and in the latter case, reduce the street price by making the drugs legally available. It's quite the dilemma. We see these debates all the time nowadays, and there are no easy answers.

So coming back to unsolicited communications, if as individuals we cannot adequately address either the expense or revenue of the perpetrators what can we do? This is where technological solutions come to the fore. By this I mean spam filters and telephone screening products. These can work, and they are, slowly, getting better. Unfortunately these do come at a price, measured not only in dollars but also in inconvenience and filtering errors. Yet this is all we can truly count on since laws against spam and telemarketing are pointless without the requisite enforcement. For now we are on our own.