Some online sites let you use any old five-character string as your password for as long as you like. Others force you to pick a new password every six months and it has to match a complicated set of requirements — at least eight characters, mixed case, containing digits, letters, punctuation and at least one umlaut. Also, it better not contain any substrings that are legal Scrabble words or match any past password you’ve used since the Bush 41 administration.
A recent paper by two researchers from Microsoft concludes that an organization’s usability requirements is the main factor that determines the complexity of its password policy.
We examine the password policies of 75 different websites. Our goal is understand the enormous diversity of requirements: some will accept simple six-character passwords, while others impose rules of great complexity on their users. We compare different features of the sites to find which characteristics are correlated with stronger policies. Our results are surprising: greater security demands do not appear to be a factor. The size of the site, the number of users, the value of the assets protected and the frequency of attacks show no correlation with strength. In fact we find the reverse: some of the largest, most attacked sites with greatest assets allow relatively weak passwords. Instead, we find that those sites that accept advertising, purchase sponsored links and where the user has a choice show strong inverse correlation with strength.
We conclude that the sites with the most restrictive password policies do not have greater security concerns, they are simply better insulated from the consequences of poor usability. Online retailers and sites that sell advertising must compete vigorously for users and traffic. In contrast to government and university sites, poor usability is a luxury they cannot afford. This in turn suggests that much of the extra strength demanded by the more restrictive policies is superfluous: it causes considerable inconvenience for negligible security improvement.
h/t Bruce Schneier