ROAS is the ad buyer’s basic score. Google describes target ROAS as the average conversion value you want for each dollar spent on ads, and works the number out as conversion value divided by cost, multiplied by 100 to show it as a percentage (Google). A ROAS of 4.0, or 400 %, means $4 of attributed revenue for every $1 of spend.
ROAS matters to commission UGC in two ways. It tells the brand which creators’ videos deserve more budget, and it sets what a brand can afford to pay as a share of spend.
Example. A brand runs a creator’s video as a partnership ad. It spends $1,000 and the ad is credited with $4,000 of sales: ROAS 4.0. The creator is on a 10 % ad spend share, so the brand also owes $100, and the true cost is $1,100. ROAS on the full cost is 3.6. If the brand’s gross margin is 50 %, its break-even ROAS is 2.0, so there is room. A different video at ROAS 1.5 loses money before the creator share. Example numbers.
When brands use it. The pain this answers: “We paid $300 a video and nine out of ten never beat our control.” Brands set ad spend share percentages from their break-even ROAS. The higher the margin, the higher the share they can offer and still profit. They also use ROAS by creative to decide which videos to keep running, which is why creators on a share of spend care about ROAS even though they are not paid on it.
The creator’s view. Under a share of spend, the creator is paid on budget, not on revenue, so ROAS is the brand’s number. Under a share of sales, attributed revenue is the base, so the creator effectively lives on the same number. Either way, a creator can ask for the ROAS of their video; a brand that keeps scaling it is telling them the answer.