the radicati group, inc. the real cost the real cost of spam masha khmartseva senior analyst the...

The Radicati Group, Inc.www.radicati.com

The Real CostThe Real Cost of Spam

Masha Khmartseva

Senior Analyst

The Radicati Group, Inc.

Copyright © May 2004, The Radicati Group, Inc.The Radicati Group, Inc.

Agenda

• Implicit costs – fraud

• Types of spam

• Conclusions

• Cost of spam

• Explicit costs – IT & soft costs

• Q & A


• Spam is electronic messages unwelcome by either the end user or the company that provides him or her with an e-mail account

• Both unsolicited and solicited (messages that users signed up for receiving) can be classified as spam by a company

Definition


• Commercial Advertising (73%) Unsolicited

Messages are mass mailed to users without their permission

Solicited Even though messages are mass-mailed to opt-in users,

they serve as a source of a major distraction when received at work

E-mail Fraud (15%) Chain Letters

Commercial Pyramid schemes

Non-Commercial Good fortune lettersPetition-signing for different causes

Con SchemesMessages asking to support non-existing causes, or to invest in

a “highly profitable” non-existing venture; identity theft

• Other (12%)Jokes, Malicious spam, etc.

Types of Spam


Cost of Spam


Total Cost of Spam =

Explicit Costs:

• IT Costs (Servers to be deployed and maintained)

• Soft Costs (User productivity time lost dealing with

spam)

Implicit Costs:

• Fraud and Identity Theft


Explicit Costs of Spam


IT Cost of Spam – Percentage of Spam Messages

• The numbers are projected on a worldwide basis

2004 2005 2006 2007 2008

Total Corporate Messages Volume

(Billon of messages/day)

55 67 84 108 140

% Spam After Deploying an Anti-Spam Solution for

Corporations

17% 15% 13% 11% 9%

Corporate Spam Messages Growth

(Billion of messages/day)

9.4 10.1 10.9 11.9 12.6


IT Cost of Spam – TCO Model

• Key Assumptions Period of depreciation: 3-year straight line User productivity: considered “soft costs” and is not included Salaries: $60/hour for IT administrators

$35/user for employees

• Based on the number of servers needed to support spam messages

• Costs in order to support the number of e-mail servers engaged include:

Acquisition costs Maintenance costs Administration costs Migration/update costs Downtime costs Training costs


• The model assumes that 34 servers are deployed in a 10,000-user organization in 2004 (MS Exchange Servers)

• 6 of these 34 servers are “Spam Servers” (processing the 17% of messages that spam filters do not catch)

IT Cost of Spam – Number of ServersServers Needed to Process Legitimate E-Mails and

Spam

0

20

40

60

80

100

2004 2005 2006 2007 2008

Nu

mb

er

of

Serv

ers

Avg. Number of ServersDue to Spam

Avg. Number of ServersProcessing LegitimateE-mail


• In 2004, out of 34 servers deployed, 6 are dedicated to processing spam (in corporations deploying an anti-spam filter)

• By 2008 the number of servers needed will grow to 87, 8 of which will be processing spam

IT Cost of Spam – Number of Servers Needed2004 2005 2006 2007 2008

% of spam messages after deploying an anti-spam solution for corporations

17% 15% 13% 11% 9%

Total number of servers for a 10,0000-user company

34 41 52 67 87

Number of servers processing legitimate e-mail traffic

28 35 45 59 79

Additional servers deployed due to spam traffic

6 6 7 7 8


IT Cost of Spam – Upkeep Costs per Server

• The total upkeep costs for one server come to $96,758 per year

Upkeep Costs per Server per Year

Migration/ Upgrade$5,400

Administration$20,442

Maintenance$6,467

Downtime Cost$63,064

Training Cost$1,385


IT Cost of Spam – Spam Server Costs

• Assumes that 6 servers will be consumed with processing spam in 2004

• Assumes that 8 servers will be consumed with

processing spam in 2008

Operating Costs of Managing Additional Servers Due to Spam

$559.3$613.9

$669$728.1

$766.8

$400,000$450,000$500,000$550,000$600,000$650,000$700,000$750,000$800,000

2004 2005 2006 2007 2008


IT Cost of Spam – Worldwide20072007

• In 2004 the total number of corporate mailboxes is estimated to be 479 million, resulting in a financial loss of almost $26.8 billion

• In 2008 the total number of corporate mailboxes is estimated to reach 861 million, resulting in a financial loss of $66 billion

2005 20062006

Number of Corporate Mailboxes (M) 479 546 629 733 861

Cost of Spam Per Mailbox After

Deploying a Filter

$56 $61 $67 $73 $77

Worldwide Financial Loss Due to Spam (B)

$26.8 $33.5 $42.1 $53.4 $66

2008200820042004


Soft Costs of Spam – User Time Wasted

• In 2004 the typical user spends 4 minutes dealing with spam messages/day (64 hours/year @ $35/hour) resulting in a financial loss of over $268 billion

• In 2008 the typical user is estimated to spend 7 minutes dealing with spam/day, resulting in a financial loss of over $843 billion

2004 2005 2006 2007 2008

Number of Corporate Mailboxes

(Million)479 546 629 733 861

Cost of Dealing With Spam/User/Year

After Deploying a Filter

$560 $630 $700 $840 $980

Worldwide Financial Loss Due to Spam

(Billion)$268.2 $343.9 $440.3 $615.7 $843.8


Total EXPLICIT Hard IT and Soft Costs of Dealing with Spam Per User Per Year

• In 2004, the total financial loss due to spam for the typical corporate user amounts to $616

• In 2008, we estimate that the total financial loss due to spam for the typical corporate user will amount to $1,057

$616 $691 $767

$913

$1,057

$0

$200

$400

$600

$800

$1,000

$1,200

2004 2005 2006 2007 2008


Implicit Costs of Dealing with Spam


Implicit Costs – Fraud & Identity Theft

E-Mail fraud is e-mail messages mass mailed to users to trick

them into paying for non-existent goods and services or disclosing

their personal and financial information


Most common fraud categories include the following:

Chain letters Work on the principle of a pyramid scheme, asking users to send an X number of dollars to an X

number of people, promising astronomical returns.

Con schemes Users are asked to support a non-existing cause (cancer victims, etc.), invest in a non-existing venture, help with money transfer (Nigerian letter), etc.

Identity theft Users are asked to confirm their personal and financial information (SS #s, bank accounts, PINs, credit card

numbers, etc.)

Types of E-Mail Fraud


What is the Solution?

% Reduction in the Rate of Spam After Deploying an Anti-Spam Solution

18%

2%

29%

53%

0%

10%

20%

30%

40%

50%

60%

Less than 90% 91-95% 96-99% 100%

• An anti-spam filter is the only way to significantly reduce the volume of spam messages, to curtail both implicit & explicit costs


Projected Rate of Anti-Spam Filter Deployments

Anti-Spam Deployments for Corporate and Consumer Mailboxes, 2004-2008

688806

597522

458

535

818

667

410

335

0

100

200

300

400

500

600

700

800

900

2004 2005 2006 2007 2008

Mill

ion

Consumer Deployments

Corporate Deployments


Anti-spam laws and regulations exist in the US and Europe:

• US 36 States signed laws to regulate the distribution of unsolicited messages, starting with Nevada in 1997

The federal anti-spam law – CAN SPAM ACT- became effective January 1, 2004

•Europe Regulations were passed affecting the members of the European Union, as well as individual countries

Some individual counties that have passed these laws include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden and the UK

What About the Legislation?


What the Results Have Been So Far?It’s too early to tell about the effect the act will have on the volume of spam

• We haven't noticed a significant reduction in the total volume of spam yet

• So far we’ve seen mostly legitimate marketers taking note by offering more clear opt-out instruction in the messages they send to their users

• None of the users we’ve talked to believes that the legislation alone, without any technology in place will make a major difference in stopping the volume of spam


Final Thoughts• Spam is more than just a nuisance – it costs corporations and

service providers billions of dollars. In addition, spam is quickly becoming a new avenue for criminal activity, such as identity theft and con schemes.

• We have yet to see a filter that can completely eliminate spam.

• Tougher legislation may be of great help, however alone it won’t help solve the problem.

• While the spam market today is a confusing space, with over 300 vendors and service providers, we’re expecting to see its active consolidation over the next 3 years. During this time anti-spam solutions will be transformed from stand-alone products to integrated parts of messaging security suites.


References – This presentation includes data from the following reports:

• Anti-Spam Market Trends, 2003-2007• Market Numbers Summary Update, Q1 2004• Messaging Software Market Trends, 2003-2004• Messaging Total Cost of Ownership 2003

Q & A

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