How much money did Amazon really lose today?
This irresponsible math has to stop
Amazon was down again today, for 30 minutes. Every time this happens the pundits like to do some napkin math and throw a wild guess about how much money Amazon is losing. Needless to say, most of this math is highly suspect.
Let’s try a more data-driven analysis of how much money Amazon loses every second it’s down.
Amazon did about $35 billion net sales in North America in 2012. There are 365 days in a year, around 31.5 million seconds. So our baseline sales per second is $1,111. On average. Amazon was down for half an hour, so that’s almost $2 million in sales lost, as a rough starting figure!
But there are some caveats to consider here.
Amazon’s net sales include “non-retail activities,” which are things like Amazon Prime and Amazon Web Services, which powers a large chunk of the internet and appears to still be up. Amazon is notoriously unwilling to break their net sales down, so all we can do is speculate about what portion AWS accounts for. For the purposes of this analysis, we’ll simply ignore it.
We also don’t know how many people are actually trying to use Amazon at this moment. Since it’s early morning, shopping volume is probably lower than average. That it’s Monday morning and near the end of the month probably reduces shopper volume too. Analysts have a much better idea of these numbers than I do, so I won’t include this in my analysis.
Another important caveat is that many, probably most, would-be shoppers will simply return later to complete their purchase. In reality, Amazon’s per-second-loss is likely much lower, and probably negligible. I’ve chosen to omit this data point for simplicity, but keep it in mind.
And there’s one more less intuitive factor to consider here: the Wall Street Journal just confirmed a gold iPhone will be released this year. My research into shopper sentiment analysis shows two important results: 1) the color gold stimulates the dopamine receptors in shoppers’ brains, making them more prone to increased spending, and 2) the imminent release of a new gadget can make shoppers spend more in general, a kind of new toy-induced spending fervor. Both of these points are well-supported by my extensive research, which I’ll update this post with a link to later. (If you can’t wait, buy my book HERE.) But for now, my proprietary algorithms show that this would trigger about a %2000 increase in average spending.
So what does it all mean?
Amazon, with 95% certainty, lost about $4 billion during its 30 minutes of downtime today.
