Mobile Spam Texts Hit 4.5 Billion Raising Consumer Ire

Gillian Brockell got so fed up with unsolicited text messages from a single spammer on her mobile phone that in a fit of frustration she called the sender back -- 20 times.

Turning the tables on the spammer in early April felt “satisfying,” she said. Still, it hasn’t stanched the flood.

“I don’t even get that much junk mail in my Gmail account,” said Brockell, a 31-year-old journalist who lives in Washington, D.C. “This is my phone. It seems more personal.”

The unwelcome messages that have been clogging e-mail inboxes for two decades have made the jump to handsets, as more people use smartphones in place of personal computers and texting becomes more popular. The number of U.S. spam text messages rose 45 percent last year to 4.5 billion messages, said Richi Jennings, an industry analyst. Spam phone calls also are proliferating. The surge is costing carriers money and frustrating users, who must pay for the messages and deal with potentially fraudulent texts.

Spammers can get phone numbers from the Internet, or use software or websites to randomly generate thousands or even millions of numbers in a particular area code. Often using prepaid phones that can’t be traced back to the sender, they can then use auto-dialing technology to reach recipients.

Photographer: Akos Stiller/Bloomberg

Spammers can get phone numbers from the Internet, or use software or websites to randomly generate thousands or even millions of numbers in a particular area code. Close

Spammers can get phone numbers from the Internet, or use software or websites to... Read More

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Photographer: Akos Stiller/Bloomberg

Spammers can get phone numbers from the Internet, or use software or websites to randomly generate thousands or even millions of numbers in a particular area code.

Costs for spammers are extremely low. Unlimited texting for a prepaid phone costs about $20 per month and can be used to spam millions of people. Yet for wireless customers without a texting plan, the cost of receiving constant spams can add up quickly. The typical fee is 20 cents per received text.

‘Volume of Abuse’

“Bad actors will go to the biggest installed base worldwide,” Greg Goldfarb, a managing director at Summit Partners, which manages more than $10 billion in assets, said in an interview. “The volume of abuse that comes to people around me has increased 50 times in the last 18 months.”

The spam messages can promise free Apple Inc. iPads, or claim the consumer won a $1,000 gift card at Wal-Mart Stores Inc. (WMT) or Best Buy Co. (BBY), according to SMSWatchDog.com, which lists spam reports. Clicking on links can install malware that collects information from the phone. Responding can also authorize charges to the subscriber’s mobile bill.

For wireless-service providers such as AT&T Inc. (T), Verizon Wireless and Sprint Nextel Corp. (S), texting is an important source of profits. Still, they are concerned about the escalation of spam texts. As users contact customer-service lines to fight fraudulent text-related charges to their phone bills, carriers may be spending $5 to $50 per spam text complaint, Goldfarb said.

Federal Cases

In response, carriers and the U.S. Federal Trade Commission have brought suits against at least three large-scale spammers, including an FTC suit that was settled last year. The FTC charged the spammer with transmitting at least 5 million unsolicited text messages to promote products such as loan- modification programs and debt-relief services. According to the suit, the spammer sent out text messages at a rate of 85 per minute, 24 hours a day.

Last year, the Federal Trade Commission received 2,600 complaints about mobile texts, about the same number as in 2010, said Christine Todaro, an attorney with the agency. Recently, the FTC Bureau of Consumer Protection created a special team to conduct investigations related to mobile issues, she said. In a lawsuit filed in March, AT&T claimed that spammers using 14 phone numbers made more than 20 million illegal phone calls to its and other carriers’ subscribers.

Anti-Spam Software

The carriers also are collaborating on a new anti-spam effort that will be unveiled this year, said David Diggs, a vice president at wireless-industry group CTIA. They’re also likely to sink billions into anti-spam and mobile-security software, said Goldfarb, whose company is ramping up investments in mobile-security companies.

“I think the market is going to be much larger than traditional e-mail security or PC security,” Goldfarb said in an interview. “The mobile-security threat is far more severe,” because of the greater number of devices involved, he said.

Hackers in the past had more often sought out financial transaction information, account and credit-card numbers on personal computers. Now they’re searching for the same information on smartphones, whose sales exceed those of PCs.

One in five Americans used a mobile phone for banking in the 12 months ended in January, according to a Federal Reserve Board survey of almost 2,000 consumers.

“You have to follow the money, where the most sensitive data is being used,” said Melissa Siems, senior director of mobile marketing at Intel Corp. (INTC)’s McAfee unit. McAfee Mobile Security software scans applications consumers download on their smartphones to flag fraudulent ones, which might access your contacts and send them spam text messages. Last year, Google Inc. removed a number of malicious programs from its mobile app store.

Acquisition Candidates

As carriers build their arsenals of anti-spam tools, it may offer a revenue opportunity for equipment suppliers including Cisco Systems Inc. (CSCO) and Juniper Networks Inc. (JNPR) The equipment makers may seek to acquire or invest in startups with mobile anti-spam technologies in the next few years, said Jeff Wilson, principal security analyst at consulting firm Infonetics Research.

One possible acquisition target is Cloudmark Inc., a San Francisco-based startup and an investment of Summit’s, which already sells mobile anti-spam software to the top four U.S. wireless carriers.

“There’s an opportunity for consolidation,” Wilson said. “Many companies want to have the expertise in-house. Everyone is trying to get the mobile carrier money.”

(This is the first of two stories on new types of spam.)

To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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