The formula
ROAS is sales divided by ad spend. A ROAS of 2.5 means $2.50 back for every $1 of ads.
- Take your price, and take away what the product, shipping, payment fees and returns cost you.
- Divide what's left by the price. That's your margin.
- Divide 1 by the margin. That's your break even ROAS.
| Margin you keep | Break even ROAS |
|---|---|
| 75% | 1.33 |
| 60% | 1.67 |
| 40% | 2.5 |
- The thinner your margin, the more each ad dollar has to bring back.
- Work it out per product. A bundle with a free gift has a thinner margin than the product alone. See the offers two brands put in their ads.
When brands accept less
- People buy again. If your customers come back, losing a little on the first order can still pay. Put the second order in before you set a target.
- Jones Road set its YouTube target 40% below its Meta target. Its tracking showed YouTube buyers come in later than Meta buyers, and more of them are new to the brand.
- While it scaled, Jones Road kept checking total sales against total ad spend, and its post purchase survey, to make sure the lower target still held.
- Jones Road's gifting program at least breaks even on its own, which makes the videos close to free as ads. On bigger paid deals it's buying the right to run the video as an ad, and it doesn't expect the influencer side to break even.
Judge each kind of ad against your average
A mistake we hear about a lot: founder videos come in at 5x on Meta, everyday creator videos explaining the product at 3x, so the brand drops the creator videos.
- Each kind of ad has its own job in the funnel.
- Judge each kind by whether it sits at or above your overall average, and above break even.
- Judge creator ads on the extra sales they add too. ROAS alone can't show that.
How we use it
- We don't take on brands that use ROAS as their main number.
- We can't promise a number up front. We start with a pilot and scale only the creators who hit your cost per sale.
See how much of your budget to put behind creators.
This audit comes from Influencer Advisory, our influencer marketing agency.