MER calculator

Total revenue is what the business took over the period, from every channel, including orders no campaign touched. It comes from the business's own records — the shop platform, the accounting system — rather than from any ad platform. If returns are netted off, note it, and net them off every period you compare.

Total ad spend is everything paid to media owners over the same period, across every platform. Some businesses include agency fees and production here; that is defensible, and it is a different ratio from the media-only version. Pick one and label it.

Gross margin is optional, and without it the page can divide two numbers but cannot say whether the answer is affordable.

Every attributed ratio has the same structural flaw: each platform decides for itself which revenue it caused, using its own model and its own window. Two platforms can claim the same order, and frequently do. Add their returns together and the total exceeds what the business actually received, which is arithmetic that would not survive a second in any other part of the company.

The blended ratio cannot do this. One numerator, one denominator, both from the business's books. Every order is counted once, whoever claims it, and the answer is a statement about the business rather than about a reporting configuration.

That is also why it moves for reasons the media did not cause. A month with strong repeat purchase, a newsletter that performed, a press mention, a seasonal peak: each of them raises this ratio without a single change in any campaign. The figure is honest and it is not clean.

Efficiency has no meaning without margin. One divided by the gross margin gives the ratio at which the advertising pays for itself: a 50 per cent margin breaks even at 2.0, a 40 per cent margin at 2.5, a 25 per cent margin at 4.0. A business running at 3.0 is comfortable at the first margin and losing money at the third, and the ratio alone cannot tell the two apart.

The break-even line also sets the shape of the argument about growth. Spending more almost always lowers the blended ratio, because the cheapest demand gets bought first. The question is never whether the ratio will fall; it is how far it can fall before it crosses the margin's floor. That distance, rather than the ratio itself, is the room the business has to grow into.

The floor ignores everything below the gross profit line: rent, salaries, software, tax, the owner's return. A business sitting exactly on break-even is paying for its stock and its advertising and nothing else in the building.

The level of this number says more about the business model than about the media. The trend, held against spend, says something about the media that nothing else does.

Ratio flat while spend rises. Incremental spend is producing revenue at the same efficiency as the spend before it. This is the shape of headroom, and it is the argument for continuing.

Ratio falling while spend rises. Each additional unit is doing less than the last. Normal, expected, and the only question is whether the marginal unit is still above break-even — which the blended average cannot answer, because an average includes all the efficient spend that came before.

Ratio rising while spend is flat. Something outside the media is working: repeat purchase, a seasonal peak, a product that found its audience. Crediting the campaigns for it is the most common misreading on this page.

Ratio rising while spend falls. The efficiency improved and the business got smaller. Ratios cannot see size, which is why a media report that shows only this number can describe a shrinking company as an improving one.

Ratio flat while spend falls. The cuts came out of spend that was producing revenue at the average rate, which is the most expensive kind to cut. A reduction that does not improve the ratio has bought nothing except a smaller business, and it is worth finding out which campaigns absorbed it before the next reduction is made.

The two views answer different questions and the mistake is to pick one. The blended ratio answers whether the whole business is ahead. The platform figures answer which campaign to change. A month in which every campaign's attributed return improved while this ratio fell usually means the platforms are claiming credit for revenue that was arriving anyway, and that is a finding rather than a contradiction.

The practical routine is to hold this figure as the constraint and the campaign-level numbers as the controls. Set the blended ratio the business needs from the margin and the fixed costs it has to cover. Run the campaigns on their own metrics. When the two disagree, believe the blended one about the total and the attributed ones about the direction — and when the disagreement is large and persistent, the answer is an incrementality test rather than another report.