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How Much Do Website Outages Truly Cost?

February 15, 2013 By Jason Abate
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Downtime affects all websites at some point or another, and even the best prepared sites will encounter problems that will impact visitors. At the same time, any number of vendors remain ready to provide the latest and greatest infrastructure, claiming to eliminate every potential problem. Each level of additional complexity can cut out another fraction of potential downtime, but eventually sites reach the point of diminishing returns and the investment becomes worthless. So how do retailers decide which investments will provide a positive return? Would investing in $12,000 of redundant servers be worthwhile?

The best way to decide is to build a model of the financial impact of outages and use that to compare the costs with the investment needed to avoid them. How should an e-commerce site calculate the cost of downtime? The best approach will vary from site to site, but even a simple model should always include three fundamental components:

  • direct sales loss from people that are unable to complete their transactions;
  • indirect sales loss from browsers that are turned off from your site and never get to the purchasing phase; and
  • the increased operational costs of responding to traditional and social media inquiries during and after the outage.

Direct Sales Loss
An outage creates a direct loss of revenue in a very simple way: the outage, whether it occurred due to malicious intent, high traffic load or poorly managed server updating, shuts down every visitor's ability to access the checkout stage of shopping. Most retailers sell items which can be purchased at a competing site, meaning any downtime results in not only a direct sales loss but also opens the door for the competition.

The cost of this type of outage can be estimated by the following formula: Cdirect = avg hourly sales volume x (outage duration in hours + avg purchase session length in hours).

The average purchase session length is critical because it addresses anyone already in the checkout flow prior to the outage. For example, in a $10 million per year business ($1,141/hour) where the average customer takes five minutes (.083 hours) to purchase, the direct cost of a hour-long outage equals $1,236.

Indirect Sales Loss
Outages affect browsing consumers similarly by denying them access to the products they're interested in and might purchase. Imagine shopping in a brick-and-mortar store when a sudden power outage not only turned off the lights but causes all of the merchandise to disappear as well.

 

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