It’s Day 1 of OpenID Being Viable for Business

Yesterday was an important day for OpenID and business on the net. Before yesterday, OpenID was an intriguing, but largely irrelevant technical curiosity for web business. Since yesterday, it’s viable for business. And in a short while, it will be a key weapon in the fight for customer attention and market share.

Starting yesterday, it’s time for web businesses to pay attention to OpenID.

Let me explain … and I need to start with describing what advantages OpenID brings to a website that implements it in a business-friendly manner:

First-time visitors to the site have to type their OpenID to register and authenticate, but no password. That’s one text field, instead of at least four (desired user name, desired password, password repeat, e-mail address). Removing one field from a sign-up form increases sign-ups by how many percent? What about removing 3 out of 4 text fields? Substantial…

Net result: an increase of sign-ups to the site.
Repeat visitors to the site do not have to type anything, neither OpenID nor password nor anything, and they are instanteneously and securely authenticated. This compares to a username and a password: either or both will often have been forgotten by the visitor. How is zero compared to two and a click? Compared to several clicks and a password reset, waiting for the e-mail to arrive, resetting the password and so forth? Even if the customer remembers, it’s still a lot more work. And customers might not do it because of a fear of phishing, which in this case, does not exist for OpenID.

Net result: a dramatic increase of authenticated visitors. Which means a dramatic increase of visitors that can be sold to with one click, that can be targeted with just the right advertisements, to which the site can be customized as well as possible. In other words: a lot more revenue.

These are great benefits, and I won’t be too surprised if some sites managed to double — yes, I said double — their business some time down the road by having migrated their user base to OpenID authentication.

But these benefits, before yesterday, were theoretical. Because while it’s great to have 63 million AOL users with OpenID and so many million from Orange and LiveJournal and so forth, a site’s P&L does not change if life is better just for a small part of their user base. So sites didn’t jump the hurdle of implementing OpenID, and nobody can fault them for it.

So what happened yesterday? Yahoo! happened, that’s what happened. Yahoo! brought a quarter billion new OpenIDs on-line. Which completely alters the picture:

Instead of being a technical curiosity, web businesses can now assume that the majority of their visitors have an OpenID. Okay, Yahoo and AOL and Blogger and all of the existing implementations don’t add up to more than 50% of internet users, but you can bet that more telcos become OpenID providers for their broadband customers, as Orange showed, and that all major internet portals, Microsoft and Google included, will offer OpenIDs with each of their accounts shortly. (It’s easy for them to do, and they don’t want to lose even one of their subscribers for the reason that they didn’t add a small bit of code to their site, that, boy, might even benefit them strategically, and not just create competitive parity.) It’s a very safe assumption for web businesses that by the time they can do anything about OpenID, regardless how fast they move, more than 50% of their visitors will have an OpenID, and Yahoo!’s move yesterday made that a virtual certainty.

Since yesterday, the strategic planning assumption is: most of my important customers and prospects have an OpenID. Likelihood: indistinguishable from 100%.

The questions for web businesses are simple:

Do I want to increase the percentage of first-time visitors who sign up with my site? Answer: yes, of course: a delta of X creates X times more average lifetime revenue per customer for my site. With zero more marketing dollars.
Do I want to make it easier for existing customers to buy things on my site? Answer: yes, of course: a delta of Y increases the lifetime revenue per customer by Y. With no reduction in security.
Do our customers have OpenID? Yes!!, they do because yesterday happened.

Final question: can I take this to the chief marketing officer? You bet. He’d be insane not to listen. While yesterday, I would have been insane to take it to him.

That’s what changed yesterday. This is why it is Day 1 for OpenID in a business sense. And that’s why Yahoo!’s announcement is hugely significant. It completely changes the dynamics of business on the web.

And guess what happens to your competitors who don’t get this as fast as you do. Or if they OpenID you. But that’s the subject of another post some other time.

[Shameless pitch: contact me if you do business over the web.]