As the albatross of spam e-mail chokes businesses, entrepreneurs are rushing into a crowded market to battle the costly problem.
In recent months, more than 50 companies — ranging in size from relatively unknown startups, such as Qurb Inc. of San Mateo and FrontBridge Technologies of Marina del Rey, to established companies, including Network Associates Inc., EarthLink Inc. and Symantec Corp. — have targeted e-mail spam.
Facing a sluggish economy and lured by huge market demand, established computer-virus combatants are joining the spam-fighters. Three weeks ago, antivirus company Trend Micro Inc. of Cupertino joined the fight by launching a major antispam initiative using technology from e-mail manager Postini Inc. of Redwood City.
Market researcher Radicati Group Inc. of Palo Alto predicts 13 billion spam messages will be sent each day this year, making the spam-fighting market worth more than $650 million by year’s end. Assuming no new laws prohibiting unsolicited e-mail go into effect, by 2007 spam-fighting could grow to a $2.4 billion market, Radicati predicts. The potential has venture capitalists taking notice.
“We talk to a lot of big, Fortune 500 companies to see where [information technology] spending is taking place and all the time the first thing that comes up is spam and e-mail management,” says Mark Fernandes, a partner with Sierra Ventures of Menlo Park. “Spam, viruses, instant messaging — how do you control all of that for large enterprises? Yes, consumers face the problem. But, I think on the business side it’s a bigger issue.”
Government and industry estimates that businesses worldwide will spend $10 billion this year combating spam.
“It’s hard to quantify the costs of spam,” says Margie Arbon, director of operations for nonprofit spam fighter Mail Abuse Prevention System LLC (MAPS) of Redwood City. “Spam affects costs in server storage, bandwidth, personnel costs of deleting e-mail and possible missed business communications when mail boxes become full or mail servers clog and shut down.”
Spam-fighting companies either sell software to consumers and businesses or sell spam resources to other spam fighters. MAPS and Spam Cop of Seattle operate as spam resources that maintain and sell lists of spam-origination points to companies blocking incoming spam. However, most spam fighters, particularly providers of Internet e-mail services such as EarthLink Inc., America Online and Microsoft’s MSN, focus on consumers. Some software vendors offer filters that detect spam after it arrives in a personal computer or corporate e-mail server. For example, Network Associates of Santa Clara offers a range of McAfee-branded spam-and-virus filter combinations for consumers and businesses.
Many software and technology analysts are supportive of broad-based e-mail management software or services that eradicate spam, e-mail viruses and other unwanted incoming Internet communications before they reach a company’s servers and with little or no personal computer software installation needed. With dozens of products and vendors from which to choose, more businesses, including Xilinx Inc., Morrison & Foerster LLC, Pinnacle Systems and The Rand Corp., have turned to e-mail management services to defeat spam.
“It’s a very crowded market ripe for consolidation,” says market analyst Maurene Grey with Gartner Inc. of Stamford, Conn.
She believes spam-fighting startups have little chance at long-term success because e-mail management will consolidate into one or two big players that contract to handle spam and virus filtering in a one-stop shopping manner.
Sierra Ventures agrees and backs e-mail manager FrontBridge Technologies because it offers a service, instead of a product needing maintenance by an on-site information technology (IT) department. Anti-virus giant Symantec Corp. of Cupertino, owner of Norton Utilities, has a business partnership with FrontBridge. Symantec also owns about 12 percent of spam-fighter Brightmail Inc. of San Francisco and has a seat on its board of directors. Brightmail lists Microsoft Corp., EarthLink and Verizon Communications Inc. among its customers.
“Once spam gets through your firewall, if you’re a bank, federal regulations force you to archive it for many years,” says Sierra’s Fernandes. “We felt that a service offering was very interesting from the point of keeping spam from entering your enterprise to begin with; filtering it before it got in.”
But the thought of someone or something going through e-mail is hard for some business owners to stomach.
“It’s a good business model, but I don’t think a lot of companies would want to do that,” says market analyst Masha Khmartseva of Radicati. “It’s a pure psychological factor. A lot of companies don’t want their e-mail to go through anybody.”
E-mail manager Postini, which is roughly 20 times bigger than FrontBridge, says it faces the question all the time.
“For a lot of customers, there is a concern and typically, when they dive into it and realize that your mail already floats around a half dozen mail servers before it gets to you, one more step hardly matters,” says Doug McLean, Postini’s vice president of marketing. “Valid e-mail is very secure on our service. It is never copied to a disk, gets analyzed in memory only and it put right back out on the wire. It’s only here for half a second.”
With antispam still developing as a market, e-mail management startup companies, such as Postini and Frontbridge, are betting their technology will be needed for years to come.
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