What is MER?

In today’s world of paid media, it is increasingly difficult to measure the impact of various campaigns. With complex conversion and attribution tracking, multiple digital advertising platforms, constant A/B testing, long sales cycles, and compounded LTVs, marketers are often faced with a heavy burden to calculate return on investment and identify their most effective channels. 

Media Efficiency Ratio (MER) empowers marketers to step back for a big picture view of their paid advertising landscape. It is a very simple calculation that focuses solely on advertising spend and gross revenue.

MER = Total Gross Revenue / Total Ad Spend

For example, if a company’s total gross revenue was $300,000 and their total advertising spend was $100,000, their MER would be 3 ($300,000 / $100,000 = 3).

How is MER different from ROAS?

Return On Ad Spend (ROAS) calculates the return on investment from specific campaigns or channels. ROAS factors in distinct advertising costs and conversions to determine which avenue is producing the best results. However, MER views all marketing efforts as a united front. MER gives a high-level insight into how profitable paid advertising is overall.

Problems with MER

While MER is seeing an increase in popularity due to its simple and actionable nature, it also has limitations. For example, MER does not separate revenue generated by non-paid advertising channels, such as organic search, cold-calling, or offline conversions. While it can be argued that paid advertising still impacts overall revenue in other channels, it may be an oversimplification for some business models.

MER also does not consider new vs. existing customer acquisition, which may be an important factor to consider for digital advertising budget allocations.

Final Thoughts

MER is not a perfect metric, but is a powerful tool in a world with complex data. It will not replace ROAS or Conversion Rates, but it will allow marketers to have a simple calculation to help determine how to get the most out of their advertising budgets.