eBay Slammed by 10-Hour Outage

A year after implementing a costly hardware upgrade designed to prevent downtime, the main site of online auction leader eBay (Nasdaq: EBAY) suffered outages totaling approximately 10 hours Wednesday.

Morningstar.com analyst David Kathman told the E-Commerce Times that while the outage could inflict short-term damage to eBay’s profits and stock value, the company’s long-range outlook remains sound.

“Overall I think eBay will be fine,” said Kathman, who learned of the outage when he tried Wednesday night to check on auction bids he had placed. “A lot will depend on whether they have more outages.”

Other analysts reportedly have said that eBay is likely to benefit from a decision by Yahoo! to charge a listing fee for its auction site, which draws fewer visitors than eBay.

Three Systems Down

San Jose, California-based eBay said that the outage — the longest for eBay since a 22-hour shutdown in June 1999 — began at about 11:30 a.m. PST. The problem stemmed from a “series of unrelated issues” that affected the main and backup systems used to run the site, and was not related to heavy site traffic or a hacker attack, eBay said.

eBay noted that the problem was quickly recognized but spread to a backup system when it was used to restart the site. A third system was used to bring the site back up for about 40 minutes at around 5 p.m., but then also failed.

“While we have known for a while that a potential problem existed in our shared disk hardware, we chose to delay the recommended upgrade because we had developed a series of work-arounds that had previously proven effective,” eBay said.

The problem was fixed by 10 p.m. Wednesday. eBay said it had extended all auctions that were due to end during the period by 24 hours and had moved to refund any fees for auctions affected by the downtime.

Tough Timing

eBay acknowledged that the outage was due in part to “a decision to delay the replacement of certain hardware components in an effort to avoid disrupting service during the busy holiday season.”

In its statement, eBay said it will immediately move to complete recommended hardware upgrades, which will require about six hours of scheduled downtime in coming weeks.

The outage came just a week after eBay began peppering national television in the United States with its first-ever nationwide advertising campaign, as part of a bid to attract new users to the site.

It also arrived at a time when many longtime eBay sellers are venting their frustration over the company’s newly announced intention to enforce policies restricting the ways users can direct shoppers to non-eBay sales.

Minimal Financial Impact

While eBay insisted that the financial impact of the outage will be minimal, past downtime has proven costly. The lengthy June 1999 crash cost the company as much as US$5 million in returned fees and, along with the subsequent hardware investments, prevented eBay from turning operating profits in two quarters.

However, Kathman noted that those outages occurred when eBay was still feeling its way toward consistent profits.

“Even if there is a financial impact now, eBay is now in much stronger financial shape than it was in 1999,” Kathman said. “They’re better able to withstand any negative fallout.”

Shares of eBay, which had enjoyed a nearly $10 price boost during the buying spree that followed the Federal Reserve’s interest rate cuts Wednesday, were down $1.61 to $37.75 in early trading Thursday.