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McClure gets close to a good point but fails to convert. Here's his solution to password friction: "Make a brain-dead simple, frequent-use product. If users

McClure gets close to a good point but fails to convert. Here's his solution to password friction: "Make a brain-dead simple, frequent-use product. If users login a lot, then they don't forget their password." He then lists the following examples that solve this better than PayPal: Social Networks, Email, IM, Games, Music, Entertainment. I can't recall the last time I needed to use my password to login to Facebook, Skype, gmail, etc. The cookies are set to let me in. If I were a low-tech user, the password friction problem still exists as it always has. Amazon has me logged in; I can add books to my wish list without retyping my password. But to make a purchase, I have to type my password. The password friction problem does not go away.

jessep 17y ago
I think he's implying that your site won't have a password. You'll instead use one of these services for both auth and payment.
- jhancock 17y ago
  I understand what he's implying. His case is thin. PayPal is huge and can easily afford the customer service required by noobs forgetting their password. Can you think of another way to operate such a business? His solution implies that google, yahoo, facebook should be the next PayPal in this regard. OK, so now those organizations have to handle this type of support.
  - davemc500hats 17y ago
    >>PayPal is huge and can easily afford the customer service required by noobs forgetting their password nope, wrong again. ARPUs for PayPal users are probably only around $5-25 per year (excluding the minority of fanatic eBay regulars), and you can easily eat up all of that cost or more in telephone customer support.
    - jhancock 17y ago
      Really? Are you saying PayPal is not profitable and the lack of profitability is due to the costs of phone support for noobs forgetting their password? Don't throw ARPUs at me. Either they are profitable or they are not. I can certainly understand the argument that users of other sign-on systems "may" remember their passwords better than PayPal, but what evidence do you have of this? What extra margin of increased password remembrance makes for a more profitable model?
      - davemc500hats 17y ago
        no that's not what i'm saying. PayPal explicitly chose to not answer telephone support in order to keep costs down for low-value avg users (which is most non-merchants / non-eBay fanatics). it was deemed to be "cheaper" to just not deal with a minority % of password recovery cases (that might also occasionally be fraud) than to provide high-cost customer support for low-value average users. think about it: if you can cut a minority % of your customer base that causes a large % of the cost (or simply just more than they are worth) then you can make more money. this wasn't such a big mistake in itself, except that PayPal probably didn't consider the network effect of negative brand damage due to not providing very good customer service for such a large # -- though still minority -- of users. i'm saying this: 1) telephone support is expensive, and doesn't offset low-value ARPU 2)
    - patio11 17y ago
      To elaborate on Dave's point here, the ARPU for Paypal is low because Paypal's revenue is just a cut of the transaction value that they facilitate. For example, I pay them about ~$1.19 or so out of every $30 purchase. US-based customer services reps cannot complete a phone call for less than $7 fully loaded. You really, realllllly do not want to have a CS infrastructure taking multiple calls to resolve Mrs. Smith's inability to successfully use her computer when Mrs. Smith is probably going to be worth less than a buck fifty to you and will likely need more handholding next time, too.
      - jhancock 17y ago
        I understand the math. Every business since the world's first has prioritized customer support relative to the value of the customer; this is hardly a secret exclusive to PayPal. Dave's proposition that other sites may alleviate some of these costs seen by PayPal is interesting, but unproven. A more likely case than relying on "maybe users will remember their passwords better" is that Facebook could capture a larger part of transactions (say 30% as App Store does) which enables them to better cover support and fraud.
Splines 17y ago
Could you eliminate passwords altogether and validate via a back channel? Have a service that ties a phone number and a credit card number together, and allow people to confirm purchases via SMS. It looks like purchase notifications via SMS is already in play, not so sure if anybody has tried purchase authorizations yet.

jessep 17y ago

I think he's implying that your site won't have a password. You'll instead use one of these services for both auth and payment.

jhancock 17y ago
I understand what he's implying. His case is thin. PayPal is huge and can easily afford the customer service required by noobs forgetting their password. Can you think of another way to operate such a business? His solution implies that google, yahoo, facebook should be the next PayPal in this regard. OK, so now those organizations have to handle this type of support.
- davemc500hats 17y ago
  >>PayPal is huge and can easily afford the customer service required by noobs forgetting their password nope, wrong again. ARPUs for PayPal users are probably only around $5-25 per year (excluding the minority of fanatic eBay regulars), and you can easily eat up all of that cost or more in telephone customer support.
  - jhancock 17y ago
    Really? Are you saying PayPal is not profitable and the lack of profitability is due to the costs of phone support for noobs forgetting their password? Don't throw ARPUs at me. Either they are profitable or they are not. I can certainly understand the argument that users of other sign-on systems "may" remember their passwords better than PayPal, but what evidence do you have of this? What extra margin of increased password remembrance makes for a more profitable model?
    - davemc500hats 17y ago
      no that's not what i'm saying. PayPal explicitly chose to not answer telephone support in order to keep costs down for low-value avg users (which is most non-merchants / non-eBay fanatics). it was deemed to be "cheaper" to just not deal with a minority % of password recovery cases (that might also occasionally be fraud) than to provide high-cost customer support for low-value average users. think about it: if you can cut a minority % of your customer base that causes a large % of the cost (or simply just more than they are worth) then you can make more money. this wasn't such a big mistake in itself, except that PayPal probably didn't consider the network effect of negative brand damage due to not providing very good customer service for such a large # -- though still minority -- of users. i'm saying this: 1) telephone support is expensive, and doesn't offset low-value ARPU 2)
  - patio11 17y ago
    To elaborate on Dave's point here, the ARPU for Paypal is low because Paypal's revenue is just a cut of the transaction value that they facilitate. For example, I pay them about ~$1.19 or so out of every $30 purchase. US-based customer services reps cannot complete a phone call for less than $7 fully loaded. You really, realllllly do not want to have a CS infrastructure taking multiple calls to resolve Mrs. Smith's inability to successfully use her computer when Mrs. Smith is probably going to be worth less than a buck fifty to you and will likely need more handholding next time, too.
    - jhancock 17y ago
      I understand the math. Every business since the world's first has prioritized customer support relative to the value of the customer; this is hardly a secret exclusive to PayPal. Dave's proposition that other sites may alleviate some of these costs seen by PayPal is interesting, but unproven. A more likely case than relying on "maybe users will remember their passwords better" is that Facebook could capture a larger part of transactions (say 30% as App Store does) which enables them to better cover support and fraud.

Splines 17y ago

Could you eliminate passwords altogether and validate via a back channel? Have a service that ties a phone number and a credit card number together, and allow people to confirm purchases via SMS. It looks like purchase notifications via SMS is already in play, not so sure if anybody has tried purchase authorizations yet.