Hi Ant,
The Auth0 acquisition closed just 3 weeks ago, on May 3. So the Q1 results did not include any dollars from Auth0, and Okta’s 37% YoY revenue growth was all organic.
For this current (2nd) quarter, they’re expecting to hit $297M, of which Auth0 will contribute 2 months worth of its revenue. Assuming Okta by itself grows 7% QoQ, we can calculate that Auth0 will contribute another $30M this quarter, or about $15M per month. For 3Q, assuming Okta again grows 7% QoQ and Auth0 conservatively grows 10% QoQ, we can estimate total revenue to be at least $336M. So, by 3Q this year, this company should be at an annualized $1.35B revenue run rate.
Auth0 has always been a private company, but we know it grew revenues 70% YoY in 2019. Was the $6.5 billion that Okta paid to acquire Auth0 worth it? I think the answer is yes, because Auth0 doubles Okta’s TAM. Let me explain.
Workforce Identity vs Customer Identity
Okta started out as a Workforce Identity provider. What does that mean? Well, let’s say you work at American Megacorp, Inc, and your company has arranged benefits where you have to log into cloud provider Concur to submit expense reports, log into the Teladoc portal to video chat with a doctor, and log into ADP to look into what got taken out of your paycheck, and cry about it.
Well, the last thing they want is for you to retain access to all those accounts when you leave the company. That’s a big security risk. And you want to have the convenience of logging in to various benefits portals without having to remember 10 different passwords. That’s where Okta comes in. Your company stores its employee directory in Microsoft AD (or in Okta’s directory), and you go to a special URL where Okta authenticates you, and redirects you to the Website you want, without you having to enter a password.
Okta saves your company’s development team (and the benefits providers’ development teams) from having to build all these custom identity integrations. If you leave the company, they just remove you from the Microsoft AD, and Okta ensures that you automatically lose access to all the benefits Websites.
That’s what Workforce Identity is all about, and the TAM for this is estimated at $20B annually. This is what the original Okta excelled at.
So why did Okta spend $6.5B to acquire Auth0, whose revenue was less than $200M but growing rapidly? The reason is that Auth0 is a leader in customer identity And customer identity is all about you using your Web or mobile device to sign up or log in to a brand new app (like, say, Tinder), without entering a password. Because Auth0 made it easy for the app developer to allow you to choose to log in via Google or Facebook or LinkedIn. Auth0 does all the authentication with the social identity provider, and even gives you the code to implement “Forgot password”, or send a code to your mobile for 2-factor authentication (through Twilio, of course). (If you have any other questions about Tinder, I know nothing about it, OK? 
Now, it turns out that the TAM for customer identity is about $30B annually. So that’s why Okta paid $6.5B for Auth0. They are more than doubling their TAM, from $20B to about $50B. Given that their revenue now is only at a $1B run rate, you can see how early things are in the world of workforce and customer identity. There’s a huge runway ahead.
I also wrote some time ago that Twilio grows virally because developers download it, try it out, get stuff running with minimal code and tell their friends about it. No Twilio sales team needed. Auth0 is growing virally among developers in exactly the same way. I know, because I was one of those developers.
-Ron