MER (marketing efficiency ratio)

MER takes both numbers from the P&L rather than from any ad platform, which is the whole point of it. Every platform credits conversions it touched, so per-channel ROAS figures typically sum to more revenue than the business actually made. MER cannot double-count, because it only compares money that genuinely came in against money that genuinely went out. When the dashboards and the bank account disagree, MER is the referee.

The unit matters more than anything else about this metric. We state MER as spend over revenue, as a percentage, where lower is better: 20% means a fifth of revenue went to ads. It circulates in the wild in the inverted form too — revenue over spend, as a multiple, where higher is better — and the two carry opposite directional instincts. A 20% MER and a 5.0x MER describe the identical business.

That ambiguity is not a trivia point, it is a live hazard the moment someone writes down a target. "Keep MER under 5" means run at a fifth of revenue on ads if you read MER as a percentage, and run at a fivefold return if you read it as a multiple. Those are instructions separated by a factor of twenty-five. Pick one convention, write it in the same document as the number, and state the direction out loud every time you set a target.

Your floor is contribution margin before advertising. A business keeping 45% of revenue after product, fulfillment, and fees can spend up to 45% of revenue on ads before the last unit of contribution belongs to the platforms; breakeven MER is 45%. Spend 30% and the fifteen-point gap is operating profit. This is the clearest argument for the percentage convention: it sits on the same axis as every other line on a P&L, so the ceiling is a subtraction rather than a conversion.

The relationship to blended ROAS is arithmetic, not conceptual. MER of 25% is a 4.0x blended ROAS; 20% is 5.0x; 50% is 2.0x. They are one measurement and a choice of direction, so a team arguing about which to adopt is arguing about presentation. What matters is that both are computed from total revenue and total spend, not from attributed values.

Two cautions in use. First, MER rises as prospecting grows — you are buying strangers rather than harvesting demand — so a rising MER during a deliberate expansion is the cost of the expansion, not a fault. Judge it against the floor, not against last month. Second, the floor is a blended average across the catalog, so a shift in product mix moves it without anyone touching an ad account.