The Massive Internet Outage May Have Cost Digital Platforms Up To $150 Million In Lost Sales
On June 8th, 2021 a huge number of websites and online services, including well-known businesses like Amazon couldn’t be reached and were rendered useless. The root cause could be traced back to an outage at Fastly CDN that started at 09:58 UTC on June 8. The outage at the CDN provider was apparently resolved at 12:41 UTC on June 8, leaving the Internet partially offline for more than two hours. After 2 hrs and 43 minutes the issue got resolved.
The impact was huge. Millions of people reported on Tuesday afternoon that multiple, widely-used websites couldn’t be reached - sites such as Amazon, Paypal, Spotify and many media outlets. No purchases. No payments. No sales. Funny enough “The Verge” published a workaround using Google Docs.
Some websites went offline completely while others such as Amazon.com could still be reached but the customer journey was destroyed and purchases could not be made.
When visiting Amazon.com, would-be shoppers were shown this mess:
How does the Fastly CDN work?
A content-delivery network is a 3rd party system used by nearly all digital platforms to deliver content quickly and efficiently to a global users regardless of location. A CDN caches website information and data on nodes close to end-users to ensure a low-latency experience.
By definition, this 3rd party system is not managed by the digital platforms that rely on them. If these CDNs experience significant downtimes, their clients risk losing visitors and potential customers who want to complete transactions.
CDNs are an essential part of the digital supply chain that delivers content to internet users and facilitates online transactions.
What are the financial implications of outages?
During this particular outage, Amazon.com was down for somewhere more than two hours. This may not seem like a very long time, but only if you don’t calculate how many sales Amazon makes every minute!
We have done that by taking the revenue figures of 2020 from companies impacted yesterday and calculated the implication to these digital platforms just for one event like this CDN issue.
Only a selected sample of digital companies gives already a good overview about the financial implications and potential maximum losses. For instance, for Amazon.com we calculated a potential loss of up to $119.7 million with the downtime as reported by Fastly.
Missed sales are not the only consequence of internet downtimes. There are also productivity losses, reputation risks and potential IT-recovery costs.
This upper-bound estimation is a high-level estimation by using the revenue figures of 2020 as a proxy and doesn’t claim to be exhaustive.
How can insurers close this protection gap?
The digital industry is highly fragmented and built on interconnecting backbones. E-Commerce sites are using CDNs to deliver low-latency content and create great customer shopping experiences. FinTechs rely on CDNs as they build out Banking-as-a-Service offerings which require rock-solid connectivity. A failure of the digital pipeline could have dire consequences for any business where connectivity is essential.
It is neither reasonable nor affordable to control every aspect of internet resilience in-house as even the biggest players employ CDN services and suffer the same fate as smaller players when CDN outages occur. There may be solutions to build redundancy and multi-vendor strategies but this is typically only a strategy for the biggest players.
Digital platforms are clearly exposed to these new risks and they are not going away soon. There is a billion dollar protection gap currently not addressed by insurers. Riskwolf is the platform that insures the digital economy’s emerging risks by enabling insurance companies to offer connectivity coverage in a way that is Simple, Reliable and Fast.