PayPal and the Cost of Downtime update from August 2009

PayPal has provided additional details on Monday's performance problems, which  interrupted transaction processing by merchants and left some users unable to log in. "At around 10:30 am PT Monday, a network hardware failure resulted in a service interruption for all PayPal users worldwide," senior vice president of technology Scott Guilfoyle wrote on the company blog. "Everyone in our organization focused immediately on identifying the issue and getting PayPal up and running again. We accomplished that in about an hour. By approximately 3 pm PT, full service was restored across our platform. We’re now working to fully understand how we can prevent such a service interruption from ever happening again."

How much did the outage cost PayPal's customers? The cost of downtime is often hard to calculate. But Pingdom ran some numbers on Monday's outage, noting that eBay has said that PayPal processes about $2,000 in payments every second. A one-hour outage would add up to $7.2 million in lost transactions, and the intermittent performance problems during the recovery period would likely boost that number even higher.

Those losses are manifested as lost sales opportunities for PayPal's merchant customers, rather than loss of fees to Paypal. Did all those frustrated customers come back later and complete their purchases? Some may have done so, limiting the overall impact of the outage. But the value of continuous uptime is never having to ponder those lost sales opportunities.