Paul GrahamVerified account

Many businesses sign up for PayPal accounts, get paid a bit, and then “go dark.” We found that most of them are small / occasional users who don’t really need the product every day. That’s 1. Not much revenue and 2. Not addressable anyways. Off the list.

What about new signups with legit businesses who have a bad first experience? That’s a serious problem! But it’s not churn. It’s an onboarding & activation problem. (That may sound like splitting hairs, but it’s an important distinction…)

(If you go on a first date with somebody, and they ghost you, that is not a “divorce” it’s an “activation” problem.)

We also had “false positives” who stop transacting for a while, and then predictably re-start. (e.g. halloween costume stores, monthly billers, Burning Man, etc.) Also, a bit of churn is “non-regretted”: people we kicked off the platform for bad behavior. Rule them out.

So now we’re down to tenured, well-behaved, non-seasonal merchants who “go dark.” Unfortunately, that’s still hundreds of thousands of accounts. We need to make another cut.

PayPal’s B2B revenue is quite concentrated: ~90% of revenue comes from ~10% of their merchants. So we focused on revenue churn rather than account churn. That narrowed the problem considerably! - maybe a couple hundred merchants per year.

So what’s left? Large merchants who have been with PayPal more than 3 months, and transact regularly. What’s happening with them? I wish it were that simple…

PayPal long ago fixed the major customer experience “killers.” Now it’s all “death by a thousand paper cuts” scenarios. How do you find a thousand paper cuts? You get a summer intern, that’s how!