By Bruce Einhorn The U.S. has no shortage of people looking to blame China for America's economic problems. The flight of manufacturing jobs is China's fault. Who's to blame for the deflationary pressure that prevents companies from raising prices? China. Now that deflation worries are giving way and the U.S. economy is picking up steam while China runs the risk of overheating, who's to blame for inflationary pressures? One guess.
The China critics surely aren't always right, but they have a point. Beijing certainly has a much greater impact on the U.S. economy now that China is a growing power. But Gideon Mantel, the head of an Israeli company that tracks e-mail traffic, says China is also a major source for another American ailment -- spam. Not the meat, of course, but unwanted, aggravating e-mail. The majority of those messages telling you how to increase your penis size or get a discount mortgage or get rich on eBay are trying to get you to visit Web sites based in China.
Mantel is CEO of Commtouch Software (CTCH), a Nasdaq-listed company with offices in Silicon Valley as well as the Israeli city of Netanya, about midway between Tel Aviv and Haifa.
"AMAZING" NUMBERS.Commtouch helps companies filter spam messages from the e-mail accounts of their employees. It's hard work, given the size of the spamming epidemic. "We're talking now about 350,000 to 400,000 unique spam attacks a day," says Mantel. He defines a "unique spam attack" as one that goes to at least 50,000 recipients. The problem is getting worse and worse, he adds. "Since Jan. 1, we've seen probably a 30% to 40% increase" in spam traffic, Mantel says.
About a year-and-a-half ago, Mantel and his colleagues decided they wanted to learn more about all the spam people were getting. About a dozen Commtouch employees began a project, which tries to trace the location of destination sites advertised in spam. They surveyed 300,000 sites in spam messages and found that 71% of the Internet protocol (IP) addresses for them were based in China.
"The numbers are amazing," says Mantel. "When we saw them, I was so shocked, we checked and rechecked the numbers three times." The Commtouch team looked at the URLs embedded in the spam messages and then checked the IP addresses that those URLs pointed to -- and they clearly were Chinese.
MYSTERIOUS ORIGINS. He explains how it works. "Suppose you have a sex site, and you want to advertise it. You send a spam that says 'Come and see XYZ on this URL.' The host computer of this URL is based in China." Mantel isn't saying that the spammers themselves are Chinese. Chances are, they're probably American or European. But whoever they are, they're finding China to be a convenient base to host their Web sites from.
"Maybe there's a redirect -- I don't know," Mantel says. "Maybe the host computer in China is sending [user traffic] to Korea, or somewhere else, to confuse law enforcement." But there's no doubt in his mind about the location of that first link. "The host computer is Chinese," he says. It's not hard to identify an IP address as Chinese, he adds, since every one has about 10 digits and the first two or three are the indicator of the country.
How could this be? After all, China is notorious for its Internet censorship efforts, and Beijing doesn't take kindly to pornography of any sort. Mantel says the Commtouch people had a hard time making sense of the figures. "We started to scratch our heads. We said 'wow, that's an amazing number.'" One thing that's particularly odd: While China is the host of so many sites promoted in spam, the spam e-mails themselves aren't coming from China.
"NOT NORMAL." Mantel says the spammers are sophisticated enough that they know how to hide the origin of an e-mail. And since many filters identify messages as spam if they come from addresses that already have sent similar junk mail, the same spam is being sent simultaneously from hundreds of IPs.
Site hosting is different, however. It doesn't jump around. And while Beijing has strong anti-porn policies, the economics of Web hosting work in favor of the spammers. It's inexpensive to host a Web site in China, and it just makes sense to operate from there, regardless of whether it's strictly legal. Moreover, as Net usage soars in China -- it's now the world's second-largest Internet country after the U.S. -- the government has a harder time keeping control of everything, Mantel points out.
Now that the survey is done and Commtouch has fingered China as a major problem area, Mantel is trying to win business helping companies fight the spam. He hopes to announce some deals in the months ahead. For the meantime, though, add him to the list of people surprised by the growing clout of China. The 71% figure "is an amazing number," he says. "If it were 5%, 6%, 7%, you would say that it's normal. This is not normal behavior."
When it comes to China, extraordinary is the norm. Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online
Einhorn is a Hong Kong-based correspondent for BusinessWeek