Always. Be. Calculating. These are the fundamentals, or ABCs, of marketing. How much spend will deliver how much profit? We answer this question for content creators, talent agencies, media agencies, and brands alike using our Sponsorship Intelligence platform. Below we’re outlining how to measure ROI, hit your CPA or ROA (there is a key difference: keep reading!), and ultimately how to define success for your brand, whether that be as an advertiser or publisher.
ROA (return on adspend) and CPA (cost per acquisition) might seem like the same thing on paper: they’re just ways of measuring the performance of your branded content campaigns, right? The main difference between ROA and CPA is whether your company offers a product or service. ROA is designated for products: with a product, the consumer pays right away (even if the promotion is free shipping and/or a discount). Brands with this business model are able to view adspend as the primary cost to drive profits. Other companies that provide a service, however, such as a freemium app like BetterHelp or Epidemic Sound, often view adspend as the cost to generate a qualified lead, rather than a one-time or upfront sale. Therefore, they measure campaign results based on CPA, or cost per acquisition.
There are some similarities between these two KPIS: ROA and CPA help answer some basic questions like how many units (product sales, or app installs, for example) do I need to achieve? How much do I need to spend? Also, ROA and CPA are both dependent on CTRs (click-thru rates) as the final unit sale/install can only be completed after the content is viewed and clicked on.
So how can you find the potential ROA/CPA when pricing out creator channels as an advertiser? YouTubers usually charge by CPV (cost per view) and, similarly, podcasters by CPM (cost per mille, or cost per 1000 downloads). How does the number of views translate all the way down to the bottom line of your brand’s returns?
So, to review:
CPA = total adspend / total # installs
ROA = total revenue / total adspend
CPV = cost / view
CPM = 1000 X cost / views
Keep in mind, CPV and CPM are how media is sold, whereas CPA and ROA are how media performance is measured.
To go from CPV to CPA, the last thing you need to know is your average landing page conversion rate: how many people who make it to your website then translate to a sale (if measuring by ROA) or download/signup/install (CPA)? If you measure by ROA, be sure to keep track of your average sale amount and whether that fluctuates based on audience/demographic.
Once you have your conversion rate, it’s all plug-n-play:
The one thing that might not be easily available for all marketers is the click-thru rate - many influencers are provided external links directly from the advertisers and have little to no insight on the true number of clicks they achieved for the brand.
Next week we look at how to use Sponsorship Intelligence to crunch the numbers further and determine any brand’s testing success rate!