Igby Goes Down, And It Costs Him
August 21, 2006 12:11 PM Subscribe
Apropos of today's Amazon.com outage: how much, in dollars per second, does an outage cost a company like Amazon.com?
Of course, annual sales fall more heavily by season (think winter holidays) so you'd need to season these numbers to quarterly numbers via stock reports and the like.
posted by Blazecock Pileon at 12:21 PM on August 21, 2006
posted by Blazecock Pileon at 12:21 PM on August 21, 2006
Using this method, and starting with an annual revenue of $8.49B, we can estimate Amazon makes $269/second (net revenue).
However, it seems intuitive that at least SOME people won't just not buy the item, but wait for Amazon (or whoever) to open up shop again and THEN place the order.
posted by ifranzen at 12:26 PM on August 21, 2006
However, it seems intuitive that at least SOME people won't just not buy the item, but wait for Amazon (or whoever) to open up shop again and THEN place the order.
posted by ifranzen at 12:26 PM on August 21, 2006
Their expenses drop during such an outage (bandwidth, wholesale books, etc.), so revenue alone doesn't tell you the story.
posted by NortonDC at 12:34 PM on August 21, 2006
posted by NortonDC at 12:34 PM on August 21, 2006
Let's say the 2005 numbers are low, so it's $350/second in net revenue. A (completely arbitrary) margin of 10% is $35/second in profit, but let's say that 75% of people come back and try again to make their deal. 25% loss on $35/second profits with the site down for (an estimated) 20 minutes means they lost about $10,500 total.
Add in bad PR, the cost of training and hiring the replacement for whomever they fire today, along with some severance for the fall guy, and the whole thing will probably cost $50,000. Maybe they'll make it up with people who go to check if the site is running, and then order something.
posted by anildash at 12:37 PM on August 21, 2006
Add in bad PR, the cost of training and hiring the replacement for whomever they fire today, along with some severance for the fall guy, and the whole thing will probably cost $50,000. Maybe they'll make it up with people who go to check if the site is running, and then order something.
posted by anildash at 12:37 PM on August 21, 2006
I don't think they'll fire anyone. My friends have been witness to, and participants in, fairly big mistakes at Amazon, and have survived to tell the tale as Amazon employees.
posted by chunking express at 12:49 PM on August 21, 2006
posted by chunking express at 12:49 PM on August 21, 2006
Divide annual revenue by (365 x 24 x 60 x 60).
But that assumes that every sale that would have happened during the outage will not happen at all.
I expect that most customers affected by the outage will simply make their purchase at a later time.
posted by winston at 1:01 PM on August 21, 2006
But that assumes that every sale that would have happened during the outage will not happen at all.
I expect that most customers affected by the outage will simply make their purchase at a later time.
posted by winston at 1:01 PM on August 21, 2006
But that assumes that every sale that would have happened during the outage will not happen at all.
And that sales fall evenly across the year, among other model assumptions that weaken the result. I'm sure that August is a pretty slow sales month.
posted by Blazecock Pileon at 1:04 PM on August 21, 2006
And that sales fall evenly across the year, among other model assumptions that weaken the result. I'm sure that August is a pretty slow sales month.
posted by Blazecock Pileon at 1:04 PM on August 21, 2006
On the other hand, if (for example) correcting the outage requires the emergency purchase of hardware or services, the cost (above what would have been paid for a planned purchase of the same product or service) may be much higher than the amount you get with BP's formula.
posted by winston at 1:07 PM on August 21, 2006
posted by winston at 1:07 PM on August 21, 2006
Their expenses drop during such an outage (bandwidth,
If you think they're going to get a credit on their bandwidth bill for today... I'd say you're an optimist, if the rants I've heard from people on NANOG over the last 5 years are any indication.
posted by baylink at 1:24 PM on August 21, 2006
If you think they're going to get a credit on their bandwidth bill for today... I'd say you're an optimist, if the rants I've heard from people on NANOG over the last 5 years are any indication.
posted by baylink at 1:24 PM on August 21, 2006
If it's large enough to make news, it's effect will be large enough to move against the '24-hour mall' image they maintain, probably more costly in the long run than any material day-to-day concerns.
As an isolated incident, though, I bet they won't feel it.
posted by cowbellemoo at 1:59 PM on August 21, 2006
As an isolated incident, though, I bet they won't feel it.
posted by cowbellemoo at 1:59 PM on August 21, 2006
ah, but the mention of them in the news also draws new customers who might not have thought to buy from Amazon this week, so that would be new business.
posted by Megafly at 3:05 PM on August 21, 2006
posted by Megafly at 3:05 PM on August 21, 2006
What outage? I have had amazon.com, amazon,ca, amazon,fr, amazon.de and amazon.co.uk (don't ask) open all day without any problem
posted by TheRaven at 3:50 PM on August 21, 2006
posted by TheRaven at 3:50 PM on August 21, 2006
There was a ~30 minute outage on at least .com and .co.uk starting around 12:04pm.
posted by aye at 5:49 PM on August 21, 2006
posted by aye at 5:49 PM on August 21, 2006
This thread is closed to new comments.
Using 2005 numbers from Wikipedia, that would be roughly $269.22 of lost revenue per second.
posted by Blazecock Pileon at 12:20 PM on August 21, 2006