says a group of spammers has cost it at least $5 million in damages.
But the true cost of spam for EarthLink -- and for fellow Internet service providers such as
AOL Time Warner's
America Online and budget ISP
-- is difficult to pin down. And the answer to that question figures to be one that investors will be seeking out in coming weeks as the summer of spam winds to an uncertain close.
The issue of unsolicited commercial email -- not to mention various worms and viruses that have inundated the Internet in recent weeks -- popped up again Wednesday, as EarthLink, the Atlanta-based ISP, filed suit against 100 John Does it alleges have used EarthLink's network to send out emails advertising Viagra substitutes, adult matchmaking services and, appropriately enough, spam-sending for hire.
Saying that these spammers have set up EarthLink subscriptions with stolen credit card numbers and fake bank accounts, and have violated the ISP's rules against using its network to spam, EarthLink is seeking at least $5 million in damages. EarthLink spokeswoman Carla Shaw says that number is subject to change, depending on the information the company collects in the course of the lawsuit.
But as for the total cost of spam to EarthLink -- the expenses involved in containing these and other EarthLink-based spammers, as well as in intercepting incoming spam targeted at its 5 million customers -- EarthLink has no ready number. "It's difficult to quantify," says EarthLink spokeswoman Carla Shaw, because of the many different facets of EarthLink's ongoing battle against spam.
Quantifying figures to be something investors will want to do as much of as possible, however, as each of these stocks has risen some 50% or more off the spring's lows. On Wednesday, EarthLink rose 3 cents to $7.26, hot-performing United Online jumped 90 cents to $37, and AOL added its 2 cents to finish at $15.85. Needless to say, a sharp rise in costs at any of the ISPs could scare off Wall Streeters who have been attracted to this group.
And those costs seem to be legion. Start with the cost of EarthLink's in-house team -- Shaw says it numbers about a dozen people -- that tracks and identifies abuse on its network. There are network and bandwidth costs. Product development costs, such as that for EarthLink's spamBlocker service (incorporating its earlier spaminator service). Legal costs, too, to cover lawsuits such as this one. There are even goodwill costs for an ISP -- the price of angry customers who blame the ISP for the spam delivered to their email boxes.
"It's a hard number to pin down," says Shaw.
But it has been done before, in a way. Earlier this year,
EarthLink won a $16.4 million judgment against a man it labeled the "Buffalo Spammer." (On the basis of apparent hometowns, EarthLink is calling the latest objects of its wrath the "Alabama Spammers" -- not to be confused with
the mixed drink -- and the "Vancouver Spammers.")
While several technology analysts have published numbers approximating the cost of spam -- the Radicati Group, for example, estimates the information technology cost of spam will amount to $20.5 billion in 2003 -- most of these estimates focus on the cost to companies providing email accounts for their employees.
Data related to ISPs seems anecdotal at best. In a presentation published online, the spam consulting firm Word to the Wise reported that a dial-up ISP estimated the cost of dealing with a single spamming customer to be between $2,000 and $10,000. A large-end ISP estimated it cost $8 to handle each incoming complaint about spam.
The woeful reality, though, is that investors will probably have plenty of chances in coming months to add up these kinds of costs, much to everyone's displeasure.