The Spam King Is Back, And His New Recipe Clicks

Sanford Wallace was once the most hated man on the Internet. His sin was spam, those annoying junk e-mail messages, and he was good at it.  He sent so much -- an estimated 25 million e-mail messages a day -- that he was effectively banned from cyberspace.

Now Mr. Wallace is back, bigger than ever. His new business, SmartBotPro.Net (www.smartbotpro.net), has quietly climbed the charts to become the Web's 40th-most-trafficked site, visited by an estimated 4.2 million people in October, according to the Media Metrix ratings service.

The secret to Mr. Wallace's newfound success? Advertising by e-mail. But he says he has learned his lesson: He never sends electronic missives to anyone without first getting his permission. "I have a better understanding of people now," he says.

The rehabilitation of Mr. Wallace is a testament to how swiftly people can reinvent themselves on the Net. But it also shows how tolerant the Web has become toward marketing. When Mr. Wallace started his spam business, Internet users complained about any sort of online ads. Now, we're resigned to being pelted with cyberspace pitches.

Mr. Wallace's comeback also underscores the irresistible economics that gave rise to spam in the first place. E-mail is an ultra-cheap, ultra-simple way to get a message out. And that means we're stuck with spam -- and endless varieties of e-mail marketing -- for a long time to come.

This should be a self-correcting problem. When a marketer's message annoys people, they are less likely to become customers. But the Web right now is a giant land grab, with companies desperately trying to scoop up customers, no matter the cost.

Mr. Wallace's new business may not cross the line into spam, but his fresh success seems destined to inspire others to push the e-mail envelope.

Mr. Wallace dished out his first spam in 1994. A college dropout whose previous business ventures included a hotcake delivery service for a nearby International House of Pancakes, Mr. Wallace had just joined America Online. He was fascinated by the message boards that served as electronic classified ads for AOL members. Here, he thought, was a
market ripe for some direct-marketing tactics.

So he compiled a list of 8,000 e-mail addresses gleaned from the message boards and began mailing out promotional messages on behalf of advertisers. In two weeks he earned $10,000. Spurred by that success, he enlarged his list. Soon his company, Cyber Promotions, was beaming out one mass e-mailing after another for entrepreneurs hawking everything from insurance to vitamins.

The response was stunning. Internet users, irked by the cheesy ads piling up in their electronic mailboxes, vilified Mr. Wallace as "Spamford" and "Spam King." Big online services sued him, saying the onslaught of spam overtaxed their systems and annoyed their members. By 1997, he had became a pariah, unable to find a company willing to supply him with the Internet connections he needed to send out his spam.

Now, with SmartBotPro, the 31-year-old Mr. Wallace is back in the e-mail business. Here's how it works: Anyone who wants to promote anything by e-mail can go to www.smartbotpro.net and sign up for a free account. Account holders get an e-mail address that they can put on business cards, Web pages and ads, usually with a suggestion to e-mail the
address for more information about a product or service.

When an Internet user e-mails one of those addresses, the SmartBot system leaps into action, sending out a canned message on behalf of the account holder. Account holders can also program the system to send out follow-ups at regular intervals. Most of the SmartBot users I found on the Web were pitching offers like this one: "Do You Want to Become a
Millionaire? This site can put $400,000 in your bank account within 4 short months! All you need is 30 like-minded people...."

So how is this different from spam? Simple, Mr. Wallace says. The SmartBot messages are never unsolicited. They can be triggered only by an Internet user sending a message to one of the special addresses asking for information, or "opting in."

For account holders, the service is free -- with a catch. Every e-mail message sent out by SmartBotPro includes a giant plug at the top of the message for, you guessed it, SmartBotPro. The tactic is intended to drive recipients to the SmartBotPro site, where Mr. Wallace displays a huge page of ads for such products as the NextCard Visa, which pays a bounty of $20 or more for each new card customer recruited by an affiliate site like SmartBotPro.

Mr. Wallace says the approach is paying off big time. The entrepreneurs who want to use his e-mail robot for free wind up doing his marketing for him. (He got the whole thing going by sending an e-mail to former customers of his spam service.) Now there are 600,000 SmartBotPro accounts, Mr. Wallace says. He estimates December revenue will be
$400,000 and says he's on track for $5 million next year. Costs are low:

He runs the business with three clerical helpers.

Of course, Mr. Wallace isn't the only one who has figured out that e-mail marketing is powerful and cheap. Big sites like Yahoo! routinely include statements on their registration forms like "Contact me from time to time about specials and new products," with the option thoughtfully checked off for you already. Dodging the e-mail ads requires you to uncheck the box.

As long as the targets have somehow agreed to the marketing assault -- no matter how tenuous their assent -- junk mail has come to be considered acceptable on the Internet.

"I'm in the same business I was before," Mr. Wallace says. "Now I just get permission first."