Part I: The Truth about RoAS in Influencer Marketing

At The Cirqle, we’re on a mission to unite every brand and creator to build and grow a profitable business on social, together. In this two-part series. we're dedicating our insights, learnings and studies of the last few years to defining what RoAS is when it comes down to influencer marketing.

The Background

With the value of social commerce sales in 2022 estimated to hit $958 billion and the Creator Economy Market Size estimated to reach $104 Billion in 2022, getting RoAS right is incredibly important. Here's to Part I of our two-part blogseries, covering RoAS. "The Truth about RoAS in Influencer Marketing":

In this blogpost, we’ll aim to have a closer look at:

  1. Why is RoAS so important in Influencer Marketing?
  2. What constitutes a “good” RoAS
  3. How to institute a RoAS approach in your business
  4. How Color Street achieved 6.3x RoAS with influencer marketing
  5. Why is RoAS important?

1. Why is RoAS so important in Influencer Marketing?

The best metric to assess an influencer, creative or campaign’s impact on your business is Return on ad spend or RoAS for short. And yet, most influencer marketers shy away from reporting RoAS, because it’s so hard (but definitely not impossible) to track. In fact, 71% of influencer marketers view EMV, or earned media value, as a proxy for ROI; however, EMV is a weighted metric representing top-funnel stats (impressions, likes, comments and shares) that doesn’t speak about true return, as quantified by revenue.

Based on our data, we can clearly state that EMV is not representative of ROI or some form of return in any way. We’ll walk you through how we’ve arrived at this conclusion in a minute but before doing so, let’s look at why RoAS is important.

RoAS  indicates whether your marketing channels/influencer efforts are worth the investmentby answering burning questions like:

  • How much revenue is generated from every dollar that you dedicate to your influencer marketing campaign?
  • What influencer generated creative is driving the most sales, revenue and/or conversions for your business?
  • Which influencer is driving the most sales, revenue and/or conversions for your business?
  • Is Instagram, Facebook, TikTok, Youtube, Snap or Pinterest driving the most sales, revenue and/or conversions for your business, as a result of your influencer efforts?
Here is a concrete example of a RoAS calculation

A beauty brand spends $30,000 on an influencer campaign and generates $90,000 in revenue. That would infer the RoAS = $90,000 (revenue) / $30,000 (cost of campaign) = 3:1. This means that for every dollar spent on the influencer campaign, $3 was generated in revenue by partnering with influencers.

In short, RoAS answers a simple but extremely powerful question most marketers tend to shy away from, which is: “for every $1 spent on influencers, how much money am I generating in revenue/sales?”. If that number is > 1, it means you’re breaking even or making a (healthy) return on your investment, which is ultimately what we’re all after. If it’s negative, it means it's costing you money to acquire customers, which can be a tactic but will definitely not hold for the long term.

RoAS can also be used to compare one influencer campaign with another to help you identify which one of them is performing better. , That said, it’s only one part of a much broader spectrum of metrics you should continuously monitor. For instance, ROAS falls short of measuring shifts in consumer behavior which are critical to assess as well. Regardless, RoAS is the leading metric in determining campaign success, especially when viewed for longer campaign periods.

Here’s a screenshot of our platform indicating the RoAS for a client hitting 7.8 between July 1st - 22nd

2. What constitutes a “good” RoAS

A good “RoAS” ladders back to your business success to-date and the growth stage of your business. If you’re just launching your business, RoAS may be out of reach while you build awareness; in which case, a ratio of $0.70 earned to $1 spent may be brilliant. However, if your business is further along in its growth and you already have a naturally occurring RoAS of $3 earned to $1 spent, you would reasonably expect influencer marketing to build off of that momentum to yield >$3 while typically seeing an increase of 25% in comparison to your business as usual strategies and ads.  

That said, there are a few factors to consider which enable you to assess  what a good ROAS is for your business. They are:

  • Profit margins
  • Acquisition costs (CPA)
  • Average cost per click (CPC)

Most companies aim to achieve a ratio of 4:1 which in today’s day and age is extremely daunting due to iOS 14.5 and increasing competition in the ad space. However, the average ROAS is around 2:1 which means you make $2 in revenue for every $1 spent in marketing. While some startups may need a higher RoAS to cover costs and achieve financial growth, established companies can survive if the RoAS is low or even negative (<1).

3. How to institute a RoAS approach in your business

What’s most important is that you assess where your RoAS is today for your business overall. Then, establish a measurable to improve upon that RoAS in a reasonable period of time. We typically see that full RoAS momentum is built over 3-6 months depending on the current momentum of the business. So, be sure to keep this in mind as you set achievable goals for your team. It is not easy to define what a good RoAS is for an influencer marketing campaign. Additionally, you’ll want to start holding all of your marketing efforts to the same standard so you can effectively compare their contribution to your business to one another. Brand marketers absolutely want to make sure they’re comparing apples-to-apples while looking at performance and costs across all their marketing channels. For example, a ratio of 0,7 : 1 may be brilliant for some, for others, it might mean total failure and may lead to a total rejigger of their campaign(s).

4. How Color Street achieved 6.3x RoAS with influencer marketing

For our client Color Street, we’ve driven a RoAS of 6.3 which means we’ve driven $6.3 dollars for every $1.00,- spent on influencer marketing. The 12 creative pieces that were included in the campaign have been produced by 3 influencers and we’ve leveraged content formats including IG Stories, IG In-feed and IG Carousel, driving more than $1 mln dollars in total revenue. The formats that outperformed were 80% video based and only 20% photo. A consistent pattern we’ve started to recognize across all our campaigns.