Editor's note: This article was updated on Aug. 12, 2009, to reflect PayPal's refund offer.
Shoppers around the world were unable to make purchases using PayPal for an hour Monday morning, when an internal failure caused the service to go offline.
The outage began at about 10:30 a.m. Pacific Standard Time and lasted for more than four hours. During the first hour, no transactions could be completed, according to news reports. Most users regained service by 12:40 p.m., but problems continued until just after 3 p.m.
The failure was due to an internal network hardware failure, notes Scott Guilfoyle, PayPal's senior vice president of technology.
Once the problem was reported, "everyone in our organization focused immediately on identifying the issue and getting PayPal up and running again," he writes on PayPal's blog. "We're now working to fully understand how we can prevent such a service interruption from ever happening again."
PayPal has since offered to reimburse businesses that lost revenue as a result of the outage. Merchants are advised to contact PayPal through the contact form on the company's site.
An outage in 2004 resulted in PayPal customers losing access to the service for five days, according to news reports.
PayPal notes it contacted retailers to inform them about Monday's outage. The online payment service has more than 75 million active accounts around the world, and processes about $2,000 in transactions every second, according to the company.
It's unknown how costly the outage was, but some retailers don't think it hurt their businesses too badly.
"We didn't feel a huge bump," reports Stormy Simon, senior vice president of marketing and customer care at Overstock.com.
She estimates most customers who were affected by the outage either paid using other means, or returned later on to make purchases—although she admits some customers were probably frustrated and didn't return.
"People at retail often have problems [paying for transactions] and are forced to pay cash when systems at the credit-card processor are down," Gilbert Fiorentino, chief executive of Systemax Inc., tells reporters.
He says PayPal quickly contacted Systemax Inc. to alert the company about the issue.
"We take our commitment seriously to provide our customers a safe, secure and convenient way to pay and be paid online," writes PayPal's Guilfoyle. "Nothing is more important than our relationship with our customers and the trust [they] have in PayPal."
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Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.