Attacking the economics of scams and misinformation

We see so many scams and so much misinformation on the internet because it is profitable.

It's cheap to create bogus accounts. It's cheap to use hordes of accounts to shill your scams and feign popularity. Posting false customer reviews easily can make crap look like it's trustworthy and useful.

Bad actors are even more effective when they manipulate ranking algorithms. When fake crowds of bogus accounts like, share, and click on content, algorithms that use customer behavior -- such as trending, search, and recommenders -- think crap is genuinely popular and show it to even more people.

Today, the FTC announced rules that change the game: "Federal Trade Commission Announces Proposed Rule Banning Fake Reviews and Testimonials."

These rules make it much more risky and costly to create fake reviews of your products. About a third of customer reviews are fake!

These new rules also make it much more costly to manipulate social media using fake accounts and shills. From the FTC: "Businesses would be prohibited from selling false indicators of social media influence, like fake followers or views. The proposed rule also would bar anyone from buying such indicators to misrepresent their importance for a commercial purpose."

Important is this changes the economics of spam for the bad guys. Before, faking and shilling was free advertising for the bad guys and often profitable. Now businesses that shill and use fake followers face risk of much higher costs, likely tipping the balance into making a lot of scams unprofitable.

A paper from a decade ago, "The Economics of Spam", describes how difficult it is already is to make money as an email spammer. Then it summaries interventions like the FTC's recent action brilliantly, saying, "The most promising economic interventions are those that raise the cost of doing business for the spammers, which would cut into their margins and make many campaigns unprofitable."

More risky and less profitable means less of it. This action from the FTC is great news for anyone who uses the internet.