E-Business Critical Analysis: ROI Measurement Barriers in Social Media

This essay critically examines the validity of measuring Return on Investment (ROI) in e-business, particularly concerning the impact of social media. It begins by defining ROI and its traditional applications, then delves into the growing role of social media in e-business and its influence on brand reputation and customer behavior. The essay explores the effectiveness of typical ROI metrics in the context of social media, referencing the AIB framework and expert opinions. A case study example of a web-portal is presented to illustrate ROI calculation, highlighting the uncertainties and risks involved. The discussion draws upon peer-reviewed articles and industry examples to support its arguments, ultimately concluding that while ROI measurement is crucial, its uncertainty significantly impacts e-business decisions, and a combination of web analytics, buzz monitoring, and community management is essential for understanding the business environment. Desklib offers a wide array of resources, including past papers and solved assignments, to aid students in their studies.

Running head: E-BUSINESS MODELS
E-Business Models
Name of the Student
Name of the University
Author’s Note

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Table of Contents
1. Introduction..................................................................................................................................2
2. Discussion:...................................................................................................................................2
2.1 Impact of Social media in E-business....................................................................................2
2.2 Effectiveness of Typical ROI metrics on Social Media........................................................3
2.3 ROI Measuring Process for an E-Business............................................................................4
3. Case Study Example....................................................................................................................5
4. Uncertainty..................................................................................................................................7
5. Conclusion...................................................................................................................................8
6. References....................................................................................................................................9

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1. Introduction
Conceptually, Return on Investment (ROI) could be described as a percentage of the net
output of the project that would be divided by the total input of the project. The input is sum of
all investment such as hardware, software cost. It is used as a measure of performance, which
would be able to scale in order to evaluate the efficiency of an investment or would be compare
the efficiency of different form of investments. IT executives always tries to track down the cash
inflow and cash outflow rates in order to measure the rate of failure or success within their
business. Generally, business executives are depends on the IT employees to calculate the ROI.
However, the real value of ROI cannot be measured as it totally depends on the business goals
and dictate whether the project will survive or perish (Fisher 2009). The impact of ROI within
the use of social media has long term of disagreement, and this would seem to likely become
ever more so, with the equally lightning spread of both savage cuts and use of social media
within the estimated budget of the sector of business.
2. Discussion:
2.1 Impact of Social media in E-business
The market of E-Business is growing rapidly in recent years. There is a huge level of
competition within the existing market. The use of social media has been a common place to
advertise and target customers who make use of the e-business platform for enhancing their
quality of the business and gaining huge level of profits within the business. With the help of
social media platform, the customers are interacting with the actual product. USMRW (Universal
McCann's Social Media Research Wave) had circulated a survey report where the analyzed
approximately 17000 internet user in allover 29 countries. The report shows that social media
can impact dramatically on the reputation of the brand. 34% post associates with brands and

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products based on their personal blog and 36% of them think more confidently about those
companies, which have blogs. The major influence of social media on the customers are also
analyzed by DEI and they proposed following interesting statics:
 Approximately, 70 per cent of customers had visited the social media platform in order to
gather information about products.
 Among the 70 percent customers, 49 per cent decides to buy certain product based on the
data they get from social media.
2.2 Effectiveness of Typical ROI metrics on Social Media.
The ROI measure used to be very simple to calculate the impact of inline advertising. It
professionals used to analyze the page views, unique visitors and cost per click in order measure
the ROI. However, the complexity occurs after introduction of new variables in the E-business.
By breaking down every factor into quantifiable pieces is a simply matter of developing and
understanding a method for calculating them. Managers needs to determine the returns, savings
and cost of every variable in order to calculate the total ROI. AIB’s social media ad metrics
definitions filled some gap by providing a clear framework. This framework can assist the
business to gain best ROI (Barger, Peltier and Schultz 2016). It helps business to target their ad
effectively across the blogs, social media sites and social media applications. However, it is
getting a mixed review from experts. Some experts believes it is very effective as it is like
measure the weather by thermometer rather open the window to check whether it is cold or hot.
However, others were not so overwhelmed by the approach while deciding on the fact whether
the qualitative based aspects based on the measurement of social media was entirely
circumvented.

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2.3 ROI Measuring Process for an E-Business
Jeffery and Leliveld (2002) had conducted a survey on the CIOs of the Fortune 1000 and
e-Business companies. It was found that among the 130 respondents of CIO, 59% of them had
uploaded a report that their firms had repeatedly calculated the factor of ROI based on several
different IT based projects prior to making some form of decisions based on the investment
factors. 45% of the respondents had also reported that the ROI factor was a much crucial
component based on the process of making decisions. Hence, ROI could be considered as an
essential factor based, which is based on the investment decisions within the department of
information technology in many large companies. The overall calculation is pretty much
straightforward. It is usually conducted by measuring the revenue of base case and cost
expectation based on future predictions. Then the flow of cash is been calculated includes
potential savings of cost and total revenue. Finally, the cash flow are deducted from the projected
flow of cash within the project. The result of the subtraction value is known as incremental cash
flow. The total IRR is then calculated from the incremental value. There are also another
approaches where the additional cash flow is been calculated in order to achieve the incremental
cash flow directly. In the case of complex project, the whole process can be much due to the
uncertainty of multiple variables. It is hard to calculate the incremental cash flow by separating
the additional benefits.

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3. Case Study Example
Figure 1: Assumptions for the Web-portal case example
Source: ((Bojanc and Jerman-Blažič 2013))
Web-portal is an e-business site where consumers can buy products from the portal. The
front end of the portal act as customer interaction interface where the back end used by IT
developers. The cost and revenue are assumed in order to illustrate on the ROI calculation.

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Figure 2: Case example based on ROI analysis: (a) The base case free cash, (b) the free
cash calculated including the Web-portal initiative, (c) the incremental cash flows, NPV
and IRR calculation, and (d) the calculation of payback period.

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Source: ((Bojanc and Jerman-Blažič 2013))
4. Uncertainty
In the example, the IRR is calculate as 22 per cent which may not be appropriate
comparing to the obtained IRR of the project. There are many assumptions in the analytical
model and unpredicted risks may impact the project ROI as well. The whole calculation is
conducted by a single estimation. Managers will not able to take crucial decision based upon the
information. The primary theme within this chapter is that the business drivers rather than the
particular technology, are often mostly crucial for any kind of analysis based on ROI. However,
there are several types of risks within the implementation of the technology within projects,
which could also have a substantial impact on the use of ROI (Murimbika and Urban 2013). As
mentioned within the section of productivity paradox, it could be confirmed that the majority of
larger projects within IT would majorly fail to deliver within the estimated budget and within
proper time factors. Factors like risk and budget issues also has a huge impact on the ROI.
Generally, Most of the IT project fail to deliver in the time and on budget. The risks factors
which are frequently occurs as follows:
 Conflict between user departments
 Insufficient/inappropriate staffing
 Introduction of newer form of technology
 Lack of solid requirements
 Lack of required professional skills or knowledge within the project personnel
 Changing scope/objectives
 Failure to manage expectations of the user
 Lack of acceptable involvement of users

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 Misunderstanding within the requirements
 Failure to gain commitment from users
 Lack of commitment from the top management within the project
5. Conclusion
E-business, which is popularly known as electronic business is defined as the conduction
of the processes of business within the Internet platform. The processes of electronic business
would include the buying and selling of products, services and suppliers, serving customers,
management of the control of products, collaboration with business partners, recruiting and many
others. The e-business comprises of a wide range of services, functions and models. The e-
business model would be able to describe the functions of an organization, the process of
providing of services and the ways of adaption to the newer technologies within the market. All
the models of business are necessarily needed within a particular business in order to work
together with a supportive and cooperative fashion. However, the uncertainty associated with the
ROI measurement impact the business from the core. The perfect value of ROI is very hard to
calculate. However, with lot of effort the estimated value can be conducted that assist business to
gain the clear idea of peoples. Though it is not a perfect science, every business used their
available system to measure the ROI. Web analytics, buzz monitoring, community management
listening are very useful in order to understand the business environment.

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6. References
Barger, V., Peltier, J.W. and Schultz, D.E., 2016. Social media and consumer engagement: a
review and research agenda. Journal of Research in Interactive Marketing, 10(4), pp.268-287.
Bojanc, R. and Jerman-Blažič, B., 2013. A quantitative model for information-security risk
management. Engineering Management Journal, 25(2), pp.25-37.
Fisher, T., 2009. ROI in social media: A look at the arguments. Journal of Database Marketing
& Customer Strategy Management, 16(3), pp.189-195.
Murimbika, M. and Urban, B., 2013. Strategic management practices and corporate
entrepreneurship: A cluster analysis of financial and business services firms in South
Africa. African Journal of Business Management, 7(16), pp.1522-1535.