What happens to password managers?
How password managers fail?
Disclaimer: Opinions expressed are solely my own and do not express the views or opinions of my employer or any other entities with which I am affiliated.
I’ve written in the past about how certain companies might fail or certain categories of companies might fail. I was thinking of writing something similar here, but password managers are an interesting space because they involve both enterprises and consumers. Sometimes, they intertwine… So, this post might be a bit rambly, but it walks through my thoughts on the password management space and how it could succeed or fail — I’m not picking a side as I usually do.
What are password managers?
To say the least, they are interesting products, and it makes one wonder why they weren’t more popular before. Is it because more online products require passwords? Have enough passwords been leaked so people now want unique passwords for each site?
Regardless of the reason, password managers are my favorite type of security product. Using a password manager actually makes life easier for the customer — the customer doesn’t have to type in the password, it auto-fills. On top of that, it makes it easier to create unique passwords, thus increasing security. In other words, using a password manager makes password entry easier and increases security. That’s the best of both worlds!
Of course, users can find their own ways to manage passwords, such as spreadsheets, notebooks, or even building their own managers. However, password managers have delivered good value because they provide “expertise.” It’s based on a reasonable assumption that users themselves aren’t good at security or managing passwords because it’s hard. As a result, for a small price, you can have someone else with expertise do it for you. This seems like a great security product! (Of course, sometimes, they mess up, such as LastPass, but that’s better than
So, what’s the problem?
Several problems make this market hard. First, users only want one password manager. It doesn’t make sense to have more than two because it becomes confusing, which password is in which manager. As a result, this is definitely a “winner takes all market,” making it hyper-competitive. Markets like these require a lot of sales and marketing as well as efficient product development. This means that the company will likely have to burn a lot of capital in pursuit of growth, making it unclear when the company will be profitable, especially just as a singular product.
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