Tuesday, August 2, 2011

For those with no memory....

I get really annoyed when people start mouthing myths as facts, particularly when they fly *against* all actual facts.

That the current deficit is somehow due to the democratic party or their priorities is simply and obviously not true to anyone who actually looks at the facts:

Fact: We had a national budget surplus when Bill Clinton left office.

Fact: The current debt is *entirely* due to George W Bush fighting two wars on credit.

If you don't believe me, look it up in any honest and unbiased source for historical news.

Friday, July 15, 2011

Business, F2P, MMORPGs and basic math

My past two columns have been digging into Zynga numbers from their S1 statement to see what we can learn about the real F2P business. Today, I'm going to do some basic math with the, Don't worry, its nothing worse the multiplication, division, addition and subtraction. just those simple tools can generate some very interesting results.

The big squawk in the MMORPG space right now is about MMORPGs turning to F2P/Micro-transaction models. Its being hailed as some great new trend, but I've always maintained that the economics were fairly clear. That this isn't a viable way to make money in this space. Why then do it? Because, I contend, in all these cases you have failed MMORPGs with sunk costs to recover and some income is better then none.

With the hard Zynga data, we can explore this topic a little bit better.

Two columns ago, I dug out of Zynga's numbers a clear data point-- that Zynga grossed $3.21 per year per active account in 2010; Last column, with a bit deeper analysis, I concluded that they see a raw margin over operating expenses of about 20%. This means a net before marketing and such of about $0.64 per active account.

So, lets make a few assumptions:
(1) Zynga is the master at this and represents a best-case long term return (a fairly reasonable assumption i think.)

(2) Your MMORPG costs $40M to develop. (Age of Conan was $40m as per http://forums.ageofconan.com/showthread.php?t=149585&page=3, Wow cost $68M to develop http://www.raphkoster.com/2006/06/13/what-wow-cost/. So that seems conservative.)

(3) Your MMORPG has a life-span of 5 years and maintains peak usership for all 5 years. (A very generous assumption.)

(4) Your MMORPG has no more cost of operation then Zynga's casual games and can reach the same profit margin. ( A very very generous and almost certainly false assumption.)

In this perfect storm, how many users does it take til you break even?

Well 20% of $3.21 is about $0.64 a year per active account. Over 5 years thats $3.21 again for the 5 years (not surprising, 5 is 20% of 100).

$40M/3.21 = 12,461,059

SO to even make back your investment in this model, you need to sustain an active user base of almost 12.5 million users over 5 years.

Seen many MMORPGs do that recently? WoW only has 11.4M current subscribers, took years to get to that point, and spent a lot of money on marketing in the process that isn't accounted for in the above overly-generous model.

Real F2P MMORPGs are sometimes a desperate way to get some revenue out of a failed product with sunk costs. But as a way to even break even its a fantasy, not a business model.

Saturday, July 9, 2011

More Zynga Analysis - Profit margin

One of the unanswered questions for a long time has been "how much money does Zynga actually make?" They have been happy to release gross figures, but not net. What is their actual profit margin. A friend of mine used to joke "We lose $10.00 on every sale but we make it up in volume!" Obviously, it doesn't matter HOW much money comes in the door if it costs you more then you are taking in to get it.

This is particularly highlighted by the revelation of my last blog. Zynga is taking in about $3.00 per active user account per year. Now, the economics of online help here a little. Your operational costs are mostly based on concurrently connected users, or CCU. Each concurrently connected user has a cost associated with supporting that user's online session. So its really the return per CCU that matters in your final economics.

It is a rule of online entertainment that your peak CCU is 5% to 10% of your total active user population. So, lets be generous and multiply Zynga's $3.21/yr/active account by 20. That gives an actual income of $60/peak CCU/year or $5.00 per peak CCU/month.

Thats *not* a lot of money to runa service on. A $5.00 per month subscription MMO generates $100/peak ccu/month by the same math. a $15.00 one generates $300 per peak CCU/mo. So, how much of that $5.00 a month is beign spent to get support that user? What is left is what is called the "margin", and thats where your profit comes from.

We can get a rough guess from this, more complicated chart from the S1:

In particular we are interested in this line, gross revenue:

And this line, which is profit after operating expenses:

What we can see from these charts is that, in 2010, Zynga took in $597,495K or just about $597.5M.
Not bad, but what was left after expenses? from the second line we see that, before taxes, it was $127,059K or about $127M.

From that, we can compute a rough margin, using the formula margin% = 100*net/gross. Thus Zynga had a profit margin in 2010 % of about 100*127/597.5 = 21%. Thats not a great margin, but its not razor slim either. As long as they can hold their costs even they aren't in a bad place.

And there is the rub. Because entertainment that stays the same bores its audience and dies. Every other platform and niche in game playing has seen a fairly rapid escalation of complexity and cost in games. The casual space is not likely to be any different. So, can Zynga meet the future challenges it faces on $5/ccu/month? Its a good question. if i had the answer I'd be making a lot more money then I do now (which isn't too shabby as it is.) One thing is for sure, you cant run a game as complex as a modern MMORPG on that. Not without drastic compromises in security.

Another interesting thing emerges from the Zynga documents however, which is that in 2009, with $127M of income, they actually *lost* money. Now a lot of that may be attributable to marketing spends to get themselves to their current $600M of revenue. But if 2010 is benefitting from last 2009's deficit, it calls into questions how sustainable the current margin really is.

No easy answers, but an interesting read. One thing is for sure-- this is not a financial model that supports server-heavy game designs. Unfortunately, those server heavy designs are also the only way to make complex games secure.

All in all I suspect it will be an interesting future for Zynga.

Thursday, July 7, 2011

Real Zynga Numbers

There has been much speculation about Zynga's numbers over the past few years. They gave out tantalizing tidbits but never enough to really know what they were making. As the acknowledged leaders of the F2P space, this is important information and, in the absence of real information, speculation ran wild.

However, in order to make a public offering, you have to "lift the skirts" as they say and so, buried deep in Zynga S1 filing with the SEC are these interesting tidbits:

This is a chart showing Zynga's gross income. The magic bar is the darker blue "revenue" bar as thats the actual money they took in.

This by itself is not much news, but when combined with this next chart, also in the document, it starts to paint a picture:

Looking at a total 2010 income of $698M and an average DAU of 217M, thats about $3.20 per active user account per year.

Honestly, thats better then I thought, though obviously a lot less then the $60 - $180 per account per year a subscription MMO returns.

Tuesday, June 28, 2011

AARP under right wing attack

The AARP, traditionally a strong supporter of medicare and social security and a pain in the ass to conservatives wishing to cripple or eliminate these programs, is currently under the same kind of low-political and propaganda attack we just recently saw leveled at PBS.

If you appreciate the AARP but are under 50 years of age, you might want to show support now by becoming an associate member for $12.50.

As a little fore-warned is fore-armed reading, the right is quoting this article BADLY out of context and in very misleading ways. if you think you might have to discuss it with someone, its worth reading in its entirety...

Monday, June 20, 2011

Just because you say it often, doesn't make it true....

One of the most common of logical fallacies in modern society is the Availability Heuristic. This is the tendency in the human mind to believe most strongly that which is most available in memory. This biases us towards decisions based on the most recent experiences, and the easiest ones to remember.

Its not an unreasonable bias to be built into us as animals. The most recent experiences have the greatest likelihood of pertaining to where we are right now. Furthermore, repetition increases memory and the speed at which memory is recovered, and this too is reasonable. If something happend 10 times recently its a lot more likely to be relevant then something that happened just once.

Generalities are also easier to remember then specifics. It can be argued that this too at one point in time was adaptive in that we are unlikely to encounter the exact same situation twice but we might well encounter many that have important things in common.

Unfortunately, today we live in a finely crafted soup of experience designed specifically to drive our decision making in directions those who pay for the soup want us to go. From all of the above comes a very simple and well known advertising maxim: the more times people hear your message from apparently different sources, and the simpler that message is, the more likely they are to base their decisions upon it.

The Bush administration raised this to a fine art in the political arena by coordinating many right wing radio and talk show hosts around daily messages. Each day they would send all these people a short list of bullet point "messages of the day' to tell their listeners, with the Fox news network at the center driving it home. (http://www.opednews.com/wade_071604_outfoxed2.htm)

A less directly coordinated, but no less insidious, effort has existed since the 1970s and has continued to exert its influence to day. (An examination of its approach to Welfare as an issue can be read here: http://www.publiceye.org/welfare/Decades-of-Distortion.html)

To me, one of the most insidious distortions that has been created through continued repetition of a falsehood is the idea that this is a "Christian Nation."

Nothing could be further from the actual truth. This nation was founded by expatriates from Europe, a place of legitimate Christian nations-- which is to say nations whose Kings claimed their right to rule on Christian religious precepts and which defined Christianity as their state religion.

In stark contrast, our founding fathers did *not* by and large identify themselves as Christians, but rather were part of a movement that has come to be called "enlightenment deism" by theologians and historical scholars. This was founded in the notion that god was represented in the natural order and could be found there, and not in institutions and religions created and run by men. (http://en.wikipedia.org/wiki/Deism)

They enshrined that belief in one of the most amazing and daring propositions of their day: that *all* men were created equal by their maker, and that freedom of religion was an individual right that should be held totally separate from the matters of governance. By doing so, they were declaring war not just on England, but on all the European notions of state religion.

This is NOT a Christian nation, nor has it ever been one. This is a nation that exists independent of any religion. That it happened to be majoritively occupied by Christians, at its founding or today, was not a reason to make that the state religion.

That was what our founders thought. Thats what the constitution says. And if you didn't know that, maybe you should read it again.

Friday, June 17, 2011

Non-news and real-news in the industry.

In the non-news category we have this totally incorrect but sure to be talked about blog....


The idea that this is some kind of end-run of one giant around another is entertaining, but also complete and utter bollocks. Anyone who actually researched and thought about the situation could see that.

Jobs is no fool. There is a reason why Apple allows HTML5 on their
platform but does not allow web Flash content.

HTML 5 is played under the control of the browser, which means they
have total control and can chose to block anything that interferes
with their business. Flash on the web is played by the Flash plugin,
and is under the control of Adobe and *not* apple. The Flash plugin
could be used to load arbitrary third party content onto the iOS
device and there is nothing they could do about it.

Jobs relented as far as allowing Adobe AIR apps because they cannot be
used to load third party content onto the phone and thus are not a
threat to Apple's control.

Microsoft taught the industry that the key to ultimate power is in
the hands of he who controls access to the user. Jobs learned that
lesson well.

Now in the real news department we have this salvo by Microsoft:

Make no mistakes, this is total FUD. The two "independent" reports cited in the article were released on the same day, less then 2 hours apart from each other (the writer acknowledges this correction in the comments below his article.) But it is important because it marks Microsoft's first offensive on a very real battlefield. Microsoft fought long and hard to kill OpenGL on Windows because they could not control it. And they had just about succeeded in getting the entire industry to relent and use the APi they *do* control, D3D.

But the unlikely partnership of Apple and Google have re-opened the entire fight for the desktop with HTML5. And a critical part of this is WebGL. So critical that IE9, while supporting much of HTML5, is conspicuously lacking this feature. This is a battle Microsoft could lose, they are losing market share as is to Chrome. The perception that they lag behind in features could accelerate that loss.

Microsoft is responding true to form. What they don't want to do, they attack with misinformation and fear tactics to scare customers and try to kill the market for. They did this relentlessly with Java. I'm sure they have done it many other times.

Expect their next move to be an "alternative" WebD3D based on the "industry standard" (in the sense that they own the industry currently) Direct3D API for desktop apps.

What happens after that will be up to consumers.

Wednesday, June 1, 2011

"You are at a cross-roads, you can go east or west."

We are at a potential cross-roads in online games in the United States, and its important the consumers understand the stakes.

Here's a simple question:

Its a given in a capitalist society that either you run a business to make money or you don't have a business very long.
Therefor in business, the primary motivator for any decision is "how do we make money."

Would you rather the developer of your favorite game's primary motivation be to provide an entertaining game that motivates and keeps subscribers, or a game that motivates you to "buy stuff."?

To put it simply, do you want to be entertained or sold to? Because thats the real choice. Ironically, as an important online developer, I find myself in the position of the salesman today when I really want to be an entertainer.

What do YOU want me to be?

Either way, you the consumer *will* be paying for it or there will be no more games. Your choice of ways to pay makes the difference in what we as developers become.

Yes Virginia, AOC is in trouble

This month, Age of Conan went to a mixed F2P/Micro-Transaction/Freemium model.

There has been a lot of arguing back and forth as to whether this is some brilliant financial strategy, or a desperate hail mary attempt to keep the game alive.

Unfortunately, all the real data suggests the latter.

Despite the gushing exuberance of Micro-transaction supporters, if you actually push them you will find their statements are based on little to no actual data. This isn't entirely their fault, the industry has purposefully kept meaningful data to itself. The wide-eyed perceptions being much better for business and funding.

As an actual participant in the industry, I've worked pretty hard to get a realistic picture. Based on what reliable information is available, what is said behind closed doors, and my own experiences, this is the picture I've come to:

Fact: Peak concurrently connected users (PCCU) is the metric that drives your operational costs. Thats what you need to support on your back-end.

Fact: F2P games are typically measured in DAU or Daily Active Users. DAU is 2 to 4 times PCCU as a rule.

Industry Knowledge (backed by real experience): Only 3% of your users of an F2P/Micro-transaction game ever spend anything. The result is that an F2P game is considered successful if it generates between $3.00 and $15.00 per DAU per month, which is $6.00 to $60 per PCCU. The vast majority being in that $6.00 to $10.00 range. (Thats successful games, unsuccessful games generate far less.)

Fact: By contrast, subscription games typically generate $5.00 to $15.00 per account. PCCU is reliably 5% to 10% of total accounts. That means a guaranteed income of $50.00 per PCCU on the low end to $300.00 per PCCU on the high end, with the majority actually being in the $150 - $300 range.

Conclusion: Subscription games generate roughly ten times the income per PCCU than do micro-transaction games.

So, how do people like Zynga make money in this market?

The answer is that casual game developers design and build their games to use absolutely *minimal* server resources, and thus support maximal PCCU per box. When we built ZooKingdom our target was 10,000 CCU per server box, and only one server box to support that 10,000 users. With Oregon Trail, we went to 30,000.

So called "hard-core" MMORPGs however are not built this way as a rule.

Instead, they are typically built to handle between 300 and 1,000 CCU per server box and require clusters of boxes to support a single virtual "server".


The simple fact is that the economics don't work. The ONLY way it makes economic sense for an MMORPG to go F2P/Micro-transaction is if your subscription sales are so low that you have unused capacity on your servers. In that case, any incremental income you can get for that capacity is worth it.

But for that to be the case, you have to have fundamentally failed first as a subscription game.

The other argument you hear is that players will 'demand" free to play and micro-transactions in the hard-core MMORPG space. Not only is there strong existence proof evidence to the contrary (WoW and DCU just to name two games being very successful right now with subscription pricing), but in fact there is even evidence that the subscription model will play in traditionally casual markets such as mobile.

(See this article for one example of such a success: http://www.gamesindustry.biz/articles/2011-06-01-order-and-chaos-online-makes-USD1m-in-20-days#justposted)

Addendum 2: If you needed any further evidence my call was right...

Saturday, May 21, 2011

And the myths keep coming...

The latest greatest right wing talking-lie is that the Obama administration does not care about our troops.

We could start by asking, "who has worked the hardest in the past dozen years to get them OUT of harms way and bring them home?" And "who has actually funded them with decent equipment to do their jobs." But maybe thats too esoteric.

Instead, here are just a few counter data points on legislation the democratic administration has already passed or is working to pass...



If you ask me, the Republican party and their right wing mouth-pieces owe military families a sincere and heartfelt apology for taking those brave volunteers' grief and hardship and trying to turn it into a political football for their own advantage.

And they owe the American public an apology for the constant stream of manipulative lies they have been telling for about a dozen years now.

As a bumper sticker I recently saw said,"If you aren't outraged, you aren't paying attention."

Tuesday, May 10, 2011

The Right's New Myth

During the GWB administration, Carl Rove crafted a network of coordinated and centrally controlled right-wing mouth-pieces that is still alive and well today.

Thus, its no accident that the right's latest attempt to deflect attention from the a fact that the rich are continuing to grab more and more of the american pie hit all over the country at the same time.

Just one example: http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

The implication that somehow, the poor are taking advantage of the rich is absurd and unconscionable.

I'd like all people and corporations with a gross income this year over $100,000 who would like to trade situations with a family whose income was under $30,000 so they can pay no income tax to please form a line to the left... (Never mind that GE, with a gross income of $19bn last year paid no income tax, either.)

Thursday, April 14, 2011

Who are the rich and do they need tax breaks?

In today's america, 1% of the population owns 42% of the wealth. What does that really mean? Well, lets look at some numbers.

There are 311,167,353 Americans today. So 1% of that is 3,111,673 Americans.

At the end of 2010, Americans owned $56.8 trillion in wealth. A trillion is one million million, 42% of that is 23.4 trillion. So if 3 million Americans owned 23.4 trillion dollars of wealth, thats an average of about 8 million a piece. Not bad huh?

So what does that leave for the rest of us? About 33 trillion. For about 308 million Americans. That averages out to about 0.1 million, or 100 thousand dollars.

8 million v. 100 thousand.

Who do YOU think we should tax?? I'll give you a hint... letting those with the most money, those who are getting the most benefit from our society NOT pay taxes is a *great* way to "go broke."

Monday, April 11, 2011

Government through Anarchy

I remember a time back when all the right wingers were shouting "No negotiating with terrorists."

Well, today they want us to negotiate with terrorists.. and they *are* the terrorists.

The republican party has apparently decided that politics through brinkmanship is the way to their ends. First they held the country hostage to a governmental shutdown, and now they are doing it again with a vote they have never opposed in the past but, if not taken now, will cause the immediate financial collapse of the government.

"These increases to the limit are a yearly occurrence. In fact, many of the Republicans who railed against this bill voted to raise the debt limit by more than $6.4 trillion under President Bush. "


Is it really good politics to try to appease someone just because he is sitting in a room full of gasoline and playing with matches?

Or maybe they aren't actually in the room with us at all. The *true* constituency of the republican party has a lot less to lose by a US financial meltdown then you might think. The richest Americans have been quietly taking their money *out* of our system and investing it in others:


Supposedly-American multi-national corporations keep most of their wealth outside the US to avoid US taxes. (See my previous blog on GE paying no taxes. of $14B in revenue last year, $9B of that never saw US shores.)

SO, maybe its not so crazy for them to threaten financial anarchy when all it will really harm are you and me.

But last time I read the document they like to wave in the air more then actually read (the constitution) this wasn't how we were supposed to be governed-- by threat of anarchy.

Monday, April 4, 2011

I'm Changing my name to General Electric

Back in the 80s, after Chrysler got a huge government hand out to help it stay in business, Tom Paxton wrote the song "I'm changing my name to Chrysler..."

Well, think you are taxxed too much? Then change your name to General Electric.

The marching myth of the neo-right right now is "we need to reduce taxes to encourage employment."

That would be a good trick, since GE who had a $14B year in 2010 paid NO corporate income tax.

Exactly how much lower the $0 is necessary to work this miracle?

Maybe if we actually started taxing our richest individuals and corporations, we wouldn't be so "broke" after all...

Wednesday, March 23, 2011

Debunking American Myths

I love it when someone shows that a point of common wisdom is total nonsense. In this case, its a bit of common wisdom I've had my own doubts about for a long time... that low taxes and correspondingly low social services are somehow good for small business.

Thats utter bollocks, as INCs recent study of entrepreneurialism in Norway clearly shows.

Norway has some of the highest taxes in the world AND the highest % of entrepreneurs in its population. Why? Because, with all their human needs taken care of by a strongly socialist government, people with an idea have the freedom to explore it without fear of them or their dependents ending up penniless on the street.

Doesn't that make simple, obvious sense, now that you think about it? Not only that but those who are paying the most in taxes are by and large happy to pay them because they see what they are paying for on a daily basis.

More information on the study can be found here...


Friday, February 25, 2011

High in the clouds

So... is the world really as stupid as marketers think it is?

I don't believe so. I hope thats not a fatal error. \

An associate recently showed me a press release from a company that was totally devoid of content and asked me what I thought. I asked him "what is it?" He answered "Cloud service for Unity." At which point I simply told him he hadn't answered the question. What does it do? Why do i care? He wasnt able to answer those questions.

And then there is onlive. You can join gamefly or gametap for $8.00 a month OR you can join OnLive and get access to less content thats delivered in poorer quality for $10.00 a month. But Onlive is "in the cloud"! Lets all go "oooooh" together shall we?

Honestly, this cloud nonsense reminds me nothing more then an episode I saw of MSTK3000 where Crow is into EXTREME philately (stamp collecting) because, as he put it, "everything is better when its EXTREEEEEMEEE!"

Apparently todays marketers think you will think everything is better if its "in the cloud."

The question is... do you?

Sunday, February 6, 2011

So.... I liked Kagi more then they liked me. Apparently my ambitions aren't big enough for them as they declined to take me on as a customer.

Ergo, its back to Digital River.

With some more poking around I found out that oen of Digital River's other services also does digital distribution-- RegNow. Its more expensive then the service I was looking at (SWREG), costing me about $1.70 per sale BUT for the convenience of not having to worry about setting up my own distribution server, I can live with that.

Unlike Kagi, they take all comers so being rejected isn't an issue. The only problem I've run into is that RegNow seems to be built solely with software downloads in mind. This wouldn't be a problem except that there is no way to tell their system your product does not fit into a "software category." I've sent them an email asking for more information about that. I'll report back what I find out.

Saturday, February 5, 2011

Selling Stuff Cheap 2: Digital Stuff

I decided I wanted to offer just the DVD for "These Cards Don't Count" as a digitial download for DIY types. There are a lot of advantages to that for me. I dont need to spend money on either a DVD+R blank or building the props myself. I don't have to deal with shipping. And it takes me no time to prepare. All that is worth money, so I figured I could sell the digital version for half off the hard version's price.

Both Google and Pay Pal claim to be able to handle digital merchandise, but when you dig into it all they are really able to handle is selling a code and pointing someone at a URL. All the code creation/verification and download you have to build.

Now, its not that hard to build if you know some PHP BUT that requires a server that allows server-side scripting. Google sites doesn't. Furthermore, it means development time on my part, which is a cost. So i went searching for a no upfront fee digital download service I could use. I found two, Digital River and Kagi. Neither is cheap on fees. For my product its about $1.25 - $1.50 per sale, but with my other costs reduced so far I could afford that. The decider for me was that Digital river still does not host your content for download, while Kagi says they will (for free.)

I am currently awaiting approval of my Kagi merchant account. Then I'll report on how that went....

Friday, February 4, 2011

How to sell stuff cheap

So, I've started (another) little side business.

I've been involved on and off with Magic since grade school. In high school I was semi-pro, pulling down about $5.00/hour doing street magic at a time when my friends were making $3.25/hr slaving at McDonalds. The hobby sort of dropped off my radar post-college and, while i still carried coins in my pocket and would occasionally do a few tricks when the subject came up, I wasn't really actively pursuing it. About 2 years ago however I started gaming with a very nice fellow named Jeb, who was ALSO a performing magician and I got the old itch back.

Since then I've done a handful of shows and developed a number of my own props and routines as well as become a regular hanger-on at The Magic Cafe, a wonderful online magic forum community. I've been encouraged by friends there to release my most recent little creation for other magicians.

Which is all a long way of getting to the point that I needed a sales presence on the web. This is an inexpensive packet trick however, and its my only product right now, which means from a sane-business perspective I had to watch what I put into marketing it. The magic market isn't huge to begin with and there is no guarantee I'll take even a medium share of it. Accordingly, I had to find inexpensive (eg cheap) ways of doing *everything*-- from making and packaging the product, to selling and shipping it.

Enter Google and Pay Pal. For $10/yr I got the domain catcofx.com and web and email service from google. All that was left was to be able to take and process orders. Both Google and Pay Pal offer payment services that have no set-up or monthly fees, you just pay them their fee for each order processed. They also make it VERY easy to place a "Buy Now" button on your web site.

I started with Pay Pal alone, but discovered one thing missing i needed. Both Pay Pal and Google have their strong points, but the big thing missing from PayPal was the ability to offer "coupons." This was important to me as part of my marketing strategy is to set my price point for retail at a place where I can still make money after distributor mark-down, but then offer my friends at The Magic Cafe a reduced "VIP" price if they ordered directly through me. Google checkout has that feature though, so I am supporting both payment methods on the site.

After a day of researching and set up, the first version of Catco Magical Effects is live on the web at http://www.catcofx.com

Total investment by me, $10.00

Thursday, January 27, 2011

New Facebook with SECURODYNE!

Although it is a well known adage that "noone has ever lost money by underestimating the intelligence of the average american" people have lost more then money by making their disdain for their customers' intelligence apparent.

Today, Facebook released a press release that reeks of such disdain. Facebook PR has been plagued with security issues, both real and imaginary. Their answer? To quote today's announcement:

If you’ve ever done your shopping or banking online, you may have noticed a small “lock” icon appear in your address bar, or that the address bar has turned green. This indicates that your browser is using a secure connection (”HTTPS”) to communicate with the website and ensure that the information you send remains private. Facebook currently uses HTTPS whenever your password is sent to us, but today we’re expanding its usage in order to help keep your data even more secure.

Translation: Either we don't know what HTTPS actually does, or we are hoping desperately that you don't!

HTTPS does not somehow make your account magically secure. It is a very specific remedy to one very specific kind of attack. It prevents third party "man in the middle" attacks. What are these? These are where someone in between you and facebook is snooping the packets of information sent between you and Facebook, and digging information out of them. This has to be either someone on your local network or someone with access to your ISP's routers. It does nothing to prevent programs running on YOUR computer (viruses, key loggers and so on) from extracting such information. It also does nothing to prevent the myriad of other ways people can get your information, including breaking into Facebook's computers themselves.

To my knowledge, although many people have had their facebook accounts hacked and IDs stolen, none have been through such man in the middle attacks. Finally, as they say, they already DO use https for the critical transfer of name and password.

So, today Facebook proudly did nothing of note to make you any more secure.

But they are hoping you don't know enough to know that.