What is MER?

A store takes A$400,000 of revenue in a month and spends A$100,000 across every channel. MER is 400,000 ÷ 100,000 = 4.0. The individual platforms, added together, claim A$520,000 of revenue for the same period — 130% of what the business actually took — because several of them are crediting the same orders. The 4.0 is the figure that reconciles with the bank; the platform sum is the figure that reconciles with nothing.

Media efficiency ratio divides all the revenue a business took in a period by all the money it spent on advertising in the same period. Nothing is attributed to anything. Organic orders, repeat customers, word-of-mouth purchases and sales from channels with no advertising behind them are all in the numerator, and every dollar of media is in the denominator.

Stated that way it sounds like a mistake — a metric that credits advertising with sales it had nothing to do with. It is a deliberate one, and it exists because the alternative has a worse failure mode.

Attributed metrics are built from claims. Each platform reports the conversions it believes it caused, under its own attribution window, its own view-through rules and its own modelling of the conversions it could not observe. Those claims overlap. A customer who saw an ad on one platform, clicked one on another and searched for the brand afterwards can appear in three separate reports as three separate successes. Add the platforms together and they frequently account for more revenue than the business actually received.

The blended ratio starts from the figure in the bank. It can be wrong about causation, and it cannot be wrong about the total.

It cannot be double-counted. This is the whole point. However enthusiastically the platforms claim credit, the numerator is what the business took.

It survives measurement loss. Consent restrictions, tracking prevention, in-app browsers and modelled conversions have all made attributed figures less reliable and more volatile over the past several years. None of that affects total revenue or total spend.

It responds to everything at once. A scaled budget, a new channel, a creative that worked, a landing-page change and a price rise all show up in it, without anyone having to decide which of them to credit.

It aligns with how the business is actually run. Most companies have a total advertising budget and a total revenue target. This is the ratio between them.

It has no channel dimension. It cannot say where to put the next dollar, which is the question a media team actually has to answer. Used alone it leads to no action beyond spending more or less in total.

It moves with things advertising did not do. A press mention, a seasonal peak, a competitor's outage, a strong email programme or simply a large base of returning customers all raise the numerator. A business whose repeat revenue is growing will show an improving ratio while its acquisition gets steadily worse, and nothing in the metric will warn about it.

It is not comparable between businesses. Two companies with the same acquisition efficiency can report ratios that differ by a factor of three depending on how much of their revenue comes from customers who were never advertised to. Any benchmark for this number is a benchmark of business maturity rather than of media skill.

It is slow. Because it aggregates a whole period, it needs a whole period to move, which makes it a poor instrument for weekly decisions.

The most useful single refinement is to compute the ratio twice: once on total revenue and once on revenue from customers buying for the first time.

The second version is much closer to a measure of acquisition efficiency, because it strips out the repeat base that advertising did not have to buy. Tracked together, the two tell a clear story. Both rising means the business is acquiring well and keeping customers. Total rising while new-customer revenue is flat means the repeat base is carrying the result, and the acquisition engine is quietly stalling. New-customer revenue rising while the total is flat usually means a retention problem that no amount of media will fix.

Most businesses that get surprised by a growth slowdown were watching the first number and not the second.

There is a diagnostic hiding in the difference between this ratio and the platform-reported returns added together.

If the platforms collectively claim 130% of actual revenue, that 30% of over-claiming is a measurable quantity. Tracking it over time is more informative than arguing about which platform is right. A widening gap means the platforms are crediting more of the same orders — usually because windows lengthened, modelling increased, or retargeting grew as a share of spend. It is a measurement change, not a performance change, and treating it as a performance change leads directly to over-investing in the channels best at claiming credit.

Retargeting is the clearest case. It claims conversions efficiently because it advertises to people who were already going to buy. The attributed figures love it; the blended ratio is indifferent to it; an incrementality test settles it.

The honest position is that neither the blended ratio nor the attributed figures can run an account on their own, and the two fail in opposite directions.

Attributed figures guide allocation and are systematically optimistic about channels that intercept existing demand. The blended ratio guides total investment, is immune to that optimism, and is blind to everything below the aggregate.

The working arrangement most disciplined teams land on is to allocate with attributed figures, control with the blended ratio, and settle genuine disputes with a geo test or a holdout — which is the only one of the three that measures causation rather than correlation or claim.

Because no external benchmark transfers, the floor has to be derived internally, and the derivation is short.

Total contribution — revenue multiplied by gross margin — has to cover advertising, everything else the business spends, and whatever profit is required. Rearranged, that gives the minimum ratio at which the business breaks even, and the target sits above it by however much profit is expected.

A business running at a 40% gross margin and spending a tenth of revenue on advertising is comfortably clear. The same business spending a third of revenue on advertising is not, whatever the platform dashboards say about return on ad spend.

Return on ad spend is attributed: it divides the revenue a platform believes it caused by the spend on that platform. Media efficiency ratio is unattributed: it divides all revenue by all spend, including organic orders, repeat customers and word of mouth. The consequence is that they answer different questions. Return on ad spend tells you which campaign to feed, and it is only as trustworthy as the attribution underneath it — which is why platform figures can sum to more revenue than the business took. Media efficiency ratio tells you whether the business as a whole got more efficient, and it cannot be double-counted, but it moves with things advertising did not do: a strong organic month, a press mention, a returning customer base growing on its own. Use both, and treat the gap between them as a measurement problem to investigate rather than a discrepancy to reconcile.

• Track it against its own history, never against another business. The number depends on how much revenue comes from customers who were never advertised to, which varies enormously by company and by age.
• Read it beside the new-customer share. A rising ratio driven by repeat purchases from an existing base says nothing about whether the advertising is working, and it is the most common false positive here.
• Hold the denominator steady in definition. Whether agency fees, production and tooling sit inside advertising spend is a choice, and a ratio computed both ways in the same year is two different metrics.
• Use the gap against summed platform returns as a measurement diagnostic. A widening gap means attribution is crediting more of the same orders, not that the campaigns improved.
• Set a floor from contribution margin rather than from a benchmark. The ratio a business needs is the one at which total contribution covers total advertising and everything else.