AOL, Yahoo, and paying for spam-filter bypass

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EG reader Nagendra Modadugu pointed me to this Times article on AOL and Yahoo's plans to charge mail senders for the right to bypass their spam filters:
America Online and Yahoo, two of the world's largest providers of e-mail accounts, are about to start using a system that gives preferential treatment to messages from companies that pay from 1/4 of a cent to a penny each to have them delivered. The senders must promise to contact only people who have agreed to receive their messages, or risk being blocked entirely.

The Internet companies say that this will help them identify legitimate mail and cut down on junk e-mail, identity-theft scams and other scourges that plague users of their services. They also stand to earn millions of dollars a year from the system if it is widely adopted.

AOL and Yahoo will still accept e-mail from senders who have not paid, but the paid messages will be given special treatment. On AOL, for example, they will go straight to users' main mailboxes, and will not have to pass the gantlet of spam filters that could divert them to a junk-mail folder or strip them of images and Web links. As is the case now, mail arriving from addresses that users have added to their AOL address books will not be treated as spam.

OK, so they'll be charging, but it's a little unclear what the terms are going to be here. It seems to me that there are two possibilities:

  1. Senders of non-spam messages that might otherwise be potentially flagged as spam (e.g., opt-in mailing lists) will be able to avoid false positives.
  2. Senders of spam messages will be able to bypass AOL and Yahoo's spam filtering system and deliver their messages right to consumers.

Now, from a technical perspective these are basically identical, but not at all from a social perspective. In case (1), Yahoo and AOL are acting in the interest of their users who presumably want to receive the order confirmations and opt-in advertisements they signed up for. The payment is pure monopoly rent: it's not more expensive to bypass the spam filter, but less so, and all the receiver needs to be able to do is to verify that the sender is a non-spammer, which is a simple authentication problem. So, at most they would need to charge a simple setup fee to defray their costs. Also, as Lixia Zhang pointed out on a mailing list we're both on, there's a bit of a perverse incentive here in that Yahoo and AOL can benefit by purposely tagging legitimate messages as spam and forcing the senders to pay to have them bypass the spam filters.

In case (2), by contrast, Yahoo and AOL are taking a payment from the senders in order to do something the users wouldn't prefer--send them unwanted e-mail. The users, of course, would prefer that Yahoo and AOL do the best possible job of filtering spam. Here, too, there is an interesting incentive issue: Yahoo and AOL want to do the best possible job of filtering spam from people who haven't paid them in order to extract the maximum amount from people who have: if the spam filters are really good, then the only way to get your spam through will be to pay.

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Assuming a competitive market, if people really have a strong preference not to receive spam, AOL and Yahoo will loose business if they are going for (2). Their users will simply convert to other email systems. Given the relative ease of setting up Web mail as an application, I think we can assume a competitive market.

I'm willing to bet that AOL and Yahoo know this, so I would be very surprised if they had an explicit plans for (2). Of course, they may think there's a large contingent of "borderline spammers"--organizations that send more mail to opt-in users than users would like and make it hard to opt out. These guys will certainly be strong candidates for paying AOL and Yahoo, while giving them enough plausible deniability to minimize switching.

One clarification, they are using a system called GoodMail to do this. They clearly get a cut of the revenue, but it seems a bit wierd to set GoodMail up as basically an email tax agency.

Under your analysis, you should be able to distinguish cases (1) and (2) by looking at the false-positive and false-negative rates of AOL's filters, no?

Let's see: There is no plan to charge for -- or discriminate against -- regular person-to-person e-mails. The system is targeted solely at bulk e-mailers.

So, an important consequence of marking a message as "paid e-mail" is to indicate to the user that the message originates from a bulk e-mailer. The smart user would thank Yahoo/AOL for the clue and redirect these messages to the Spam folder where they probably belong!

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