Few acquisitions in security software got as much discussion as the purchase of Auth0 by Okta. Rather than rehash figures that were reported at the time, it is more useful to understand why identity platforms that handle logins can be so valuable, and how businesses like this earn revenue. That helps explain the many questions people ask about Auth0’s revenue and similar numbers.
What identity platforms do
Every app that has users needs to answer the same questions: who is this person, and are they allowed in? Building that from scratch means handling password storage, resets, multi-factor authentication, social logins, session management and a constant stream of security patches. It is easy to get wrong, and mistakes are costly.
Identity-as-a-service companies offer these functions as a product. Developers add a few lines of code or a configuration, and the vendor takes care of the login screens, security rules and user database. For developers, this saves weeks of work and reduces risk.
Two kinds of identity
It helps to separate two markets. Workforce identity covers how employees sign in to company applications, using single sign-on and strong authentication, managed by IT. Customer identity covers how a company’s customers log in to its own apps and sites, with a focus on smooth sign-up, social logins, personalization and fraud prevention.
These two kinds of identity platforms need different strengths. Workforce tools emphasize administration and policy. Customer tools emphasize developer experience and conversion, because a clunky login loses sales. A vendor strong in one might buy a leader in the other to cover both, which is exactly the strategic logic behind combining such companies.
How identity platforms make money
- Subscriptions priced by the number of active users per month, often with tiers for features.
- Add-ons for advanced security, such as adaptive multi-factor authentication or bot detection.
- Enterprise contracts with support, compliance guarantees and custom terms.
- Usage-based fees tied to authentication volume.
The model is attractive because it is recurring and sticky. Once an application is built around an identity provider, switching means touching every login flow and migrating user records, which few teams enjoy. Revenue tends to grow along with the customer’s own user base.
Why acquirers pay large premiums for identity platforms
Strategic buyers value growth, customers, technology and market position. In software, valuations are often expressed as a multiple of recurring revenue, and high-growth companies in strategic categories can command high multiples. Buying a developer-loved product also brings a pipeline of customers who start small and grow. Customers matter more than code in these deals: one of these identity platforms that sits inside thousands of applications brings a base of companies that rarely leave, and that stickiness is exactly what the buyer is paying to inherit. Pricing power is the second prize, because a trusted vendor can add paid features over time.
There are risks. Integrating two products and cultures is hard. Developers can be suspicious of corporate owners of identity platforms, and overlapping features create confusion. Whether a deal pays off is judged over years, not at signing. How to judge a big tech acquisition sets out the questions worth asking, and how companies verify customer identity over messaging apps shows another place where identity checks are becoming a product of their own.
Reading revenue claims carefully
If you see a revenue figure for a private company, ask what it measures. Annual recurring revenue is a snapshot of subscription run-rate; it is not the same as recognized revenue over a year. Estimates from outside sources can differ widely, and companies disclose numbers selectively. Treat any single figure as approximate unless it comes from audited reporting.
For smaller teams, the acquisition question also raises a build-versus-buy lesson. Writing your own login system looks cheap at first, but the ongoing burden of security fixes, compliance reviews, breach response and new login methods such as passkeys is substantial. Buying identity as a service from one of the identity platforms moves that burden to a specialist, in exchange for fees that grow with your user base. Do the arithmetic at your expected scale, not only at launch, and decide with that in mind.
Open-source and self-hosted identity platforms also exist, giving more control at the price of operational work.
What it means for developers and buyers
If you rely on one of these identity platforms, an acquisition is a reason to review your position, not to panic. Check the roadmap commitments, pricing changes and support terms. Make sure you can export user data. Consider how deeply you depend on proprietary features, and whether standard protocols such as OpenID Connect and SAML keep your options open.
The bottom line
Identity is a quiet but essential layer of the internet, and identity platforms have steady, recurring revenue and high switching costs. That is why large vendors compete to own it, and why big acquisition prices, while dramatic, follow a recognizable logic.
