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12 Jun 2005

How much money is there in e-postage? Email

I was doodling on the back of an SMTP envelope trying to figure out what the economics of an e-postage system would look like.

Let's say there's 100 billion pieces of mail a day. Knock out 80% of that as spam that's not going to pay, and half of the remainder as mail from known correspondents and lists that recipients will accept without stamps. (Does anyone have any stats for how much of the non-spam is CE?) So you have 10 billion stamped messages per day, and let's optimistically assume that a stamp costs a penny. That's $100 million. Unless I guess wrong, ISPs are going to demand most of that penny to accept the mail since, as people I know at ISPs have noted, a lot of the stamped mail will be mail that their users aren't thrilled to get, so let's assume that the e-postage bank takes a 10% commission.

So that's $10 million/day, which means that the bank has to handle the valid transactions for a tenth of a cent apiece and the rejected spam transactions for a hundredth of a cent apiece, just to break even, with nothing left for building the system, selling the stamps, remitting the recipients' share, fighting the legal battles, etc. I realize that compute power is cheap but $0.0001 per transaction where each mistake costs real money strikes me as considerably beyond the state of the art.

posted at: 16:11 :: permanent link to this entry :: 0 comments
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