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Home » Finance Case Studies » eBay - Staying Online - Always

eBay - Staying Online - Always Finance Case Studies

In January 2001, eBay, the largest online auctioneer in the world, saw a major outage of its website, which lasted 11 hours. Company sources blamed the mishap on some problems with the storage hardware and database software. eBay CEO, Meg Whitman, blamed both the primary and backup infrastructure of the website. To add to the company's problems, it had to delay replacing some of its hardware due to the busy holiday season.The outage led to significant financial problems for eBay. The company had to extend pending auctions by 24 hours and refund the fees paid for all auctions that were scheduled to end during the outage period. According to an analyst, the outage cost eBay $450,000 in lost service fees about 0.3% of its total revenue for the first quarter of 2001. The next day, eBay's stock went down by 8.85% to $35 7/8. This was not the first instance of eBay's outage. The company had seen 15 similar outages between August 1998 and November 1999, including a major one in June 1999 that made the site inaccessible for 22 hours. During the two-day outage, eBay's stock came down from $182 to $135 reducing its market capitalization by $5.7 billion. The outage was prolonged as database files became corrupted and files had to be rebuilt before the system could be brought online.Experts said that eBay had failed to build a redundant storage hardware and scalable web architecture. They added that eBay had been functioning largely as a marketing-driven company, which placed far more importance on adding new features rather than having a core infrastructure to avoid outages.Background Note eBay's founder Pierre Omidyar (Omidyar) felt that an Internet auction site could create a highly efficient market. The idea seemed to have originated out of the difficulty that his fiancee faced while trying to collect Pez dispensers from the San Francisco Bay area. Omidyar launched Auction Web (the site's domain name was ebay.com) in September 1995 to enable people to trade.

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