AOL Taxing Email?

One of the persistent urban myths that continues to circulate around the Internet concerns various forms of taxes: a tax on modems, a tax on email, and so on. Despite being thoroughly debunked, such legends have a life of their own and periodically show up in my email box.

But as we all know, things do change, not always for the better, and so, like my long-ago exhortation to pre-ActiveX email users – "Email can't hurt your PC!" – the no-tax-on-email meme appears headed for the dustbin of history.

MoveOn, the rabble-rousing political action group that assisted in the rise of Howard Dean, is calling for users to email AOL regarding a policy they are implementing that amounts to an email tax, according to the PAC.

According to the Electronic Frontier Foundation, an online-rights watchdog, "Yahoo and AOL have announced that they will guarantee access to your email inbox for email senders who pay $.0025 per message. They will override their own spam filters and webbug-strippers, and deliver the mail directly with a "certified" notice. In the process, they will treat more of your email as spam, and email you're expecting won't be delivered." The companies plan on using the ironically-named firm Goodmail to ensure advertisers' access to Yahoo and AOL mailboxes.

EFF rather snidely remarks, "Apparently AOL and Yahoo believe that if we 'tax' speech then only desirable speech happens. We all know how well that works for postal mail -- that's why no one gets any 'free' AOL starter disks, right?"

Now, many people have proposed that one way to cut down on spam would be to have Internet Service Providers (ISP) start charging to send email. The theory here is that you and I can certainly afford to pay a quarter-penny or so for the email we send on a monthly basis. For example, in January, I sent 404 emails (not including the newsletters that Alert SNS Readers such as yourself received), so my bill would be $1.01. The feeling is most folks would gladly pay $12 a year to be relatively free of spam. As we'll see, that won't necessarily be the result.

The pay-for-email reasoning goes that spammers, who may send a million emails a day or more, would find it harder to be profitable at an average of .0023 percent response rate if they had to pay for each one to be delivered. A million emails dropped into AOL users' mailboxes, for example, would cost $2,500 (versus $0 today) under the new scheme.

So how much could a spammer hope to earn by spewing a million emails under the new scheme? Determining the actual response rates of spam is understandably hard to do. As a group, spammers aren't the most forthcoming about their business practices.

In a paper entitled, "Proof-of-Work" Proves Not to Work, Ben Laurie and Richard Clayton figure the profit angle thusly:

Figures for response rates to legitimate "opt-in" email show responses to sales promotions varying from 0.7% to 1.6% over time. Actual figures for response rates to spam emails are rare, although there is a lot of "what if" speculation. In 2002 the Wall Street Journal gave real-world examples of spam response rates of 0.013% and 0.0023%. If the rate per email did indeed return to 0.1 cents then at a 0.0023% response rate then advertisers would need to be selling goods with a profit margin of at least $4.35. This is not implausible: mortgage leads are worth $50, cellphone sales about $85 and there are examples of companies selling fake medicines worth $2.50 for $59.95.

If sending a million emails costs a Yahoo or AOL spammer $2,500, and the spammer can expect a response rate between 0.013 percent and 0.0023 percent, that works out to between 23 to 130 buyers for each drop and a customer acquisition cost of $19 to $108 each. If you figure a profit margin averaging 30 percent, the spammer has to be selling something that costs between $76 and $433. While this cost certainly weeds out a large percentage of spammers, it is by no means going to eliminate them.

By the same token, if we extrapolate the higher response rates that legitimate businesses might expect – using Laurie and Clayton's opt-in figures – we see that 7,000 to 16,000 responders cost between $0.15 and $0.35 a piece – still less than the cost of a first class stamp. It seems obvious that non-spammer businesses are going to jump at the chance to increase their email marketing based on these economics. Wanna 'nother credit card?

But wait a second. Stefan Tornquist, Research Director for MarketingSherpa states, "58% of email recipients define spam as communications from companies they do business with, that come too frequently." So even if you've opted in, commercial email can still be annoying. I can personally attest to this because, even though I've purchased the Diskeeper disk defragmenting tool, I get three to five emails a week from the company encouraging me to purchase or upgrade. Leave me alone!

The annoyance factor may help explain a couple of trends that could hold down the rate of friendly-fire emails: Although the average opt-in email list is growing by 40 percent per year, "open rates" – the percent of emails actually opened by the recipient – has dropped 20 percent since 2004.

Any way you look at it, if the Yahoo and AOL scheme is implemented, and is successful, you're going to be hearing a lot more from legitimate businesses, and perhaps only a little bit less from spammers. But the price we pay is restrictions on free speech.

As EFF says, free email is not a bug, but rather a feature of the Internet, a means for anyone anywhere to connect with like-minded people. Paying for commercial email may be a slippery slope. "Once a pay-to-speak system like this gets going, it will be increasingly difficult for people who don't pay to get their mail through. The system has no way to distinguish between ordinary mail and bulk mail, spam and non-spam, personal and commercial mail. It just gives preference to people who pay," says the EFF.

Try running your own bowling or fantasy football league or a discussion list via email under the new scheme. Any kind of charge will discourage you from communicating with your group.

There are other ways to cut down on spam, including running a spam filter, not giving out your email address too freely, and even using new technologies that require you to identify yourself via a certificate to send email, like Microsoft's proposed standard. And while some may argue that having to pay the Postal Service to send snail mail doesn't discourage you from sending it, I never in my life sent 404 letters in a month. I don't think we all want to give up the ease of communication that email represents, and paying for it could restrict our freedom to use email.

I have to admit, at one time, I thought pay-per-email was a decent way to attack the spam problem. Upon further review, I'm agin it. If you are too, and you want to sign the MoveOn petition to pressure AOL to drop the scheme, you can do it here.