Insights · Full-funnel media planning
MER vs ROAS: which number should run your DTC ad budget?
The short answer
MER (net revenue divided by total paid media spend) tells you whether paid media is working for the business. ROAS (revenue a platform attributes to itself divided by its spend) tells you how campaigns compare inside one platform. Set budgets on MER and new customer CAC, and use ROAS to run campaigns day to day.
- MER is net revenue over total paid media spend, read from Shopify.
- Platform ROAS double counts, because every platform claims the same sale.
- Use ROAS inside a platform, MER and new customer CAC across platforms.
- Watch new customer MER too, so returning customers do not flatter results.
Every ad platform reports its own return on ad spend. Add them up and most DTC brands find their platforms claim more revenue than Shopify recorded. Blame attribution: each platform takes credit for any sale it touched.
So which number should decide your budget?
What MER is
MER (marketing efficiency ratio) is net revenue (after discounts and returns) divided by total paid media spend, over the same period. Revenue comes from Shopify, spend comes from every platform added together.
It’s blunt on purpose. It cannot double count, it does not depend on pixels or attribution windows, and it answers the question the business actually cares about: for every dollar spent on ads, how many dollars came in?
What ROAS is
ROAS (return on ad spend) is the revenue a platform attributes to itself, divided by what you spent on that platform. Each platform defines it differently, with different click and view windows.
ROAS is useful inside a platform. It tells you which campaign, ad set or ad is doing better than another. It is much less useful for deciding how much each platform should get, because every platform is grading its own homework.
How to use them together
| Question | Use |
|---|---|
| Is paid media working for the business? | Blended MER |
| Are we actually growing, or just reselling to existing customers? | New customer CAC and new customer MER |
| Which campaign or ad is doing better on this platform? | Platform ROAS and CPA |
| Should this channel get more money? | New customer CAC by channel, plus a holdout test when in doubt |
Watch new customer MER too
Blended MER can look healthy while acquisition is stalling, because returning customers buy without any help from ads. Split revenue into new and returning customers, and track new customer revenue divided by ad spend. That is the cleanest read on whether ads are growing the business.
When platform ROAS and MER disagree
They usually will. A channel like CTV or TikTok might show a weak ROAS in its own dashboard while MER rises after it launches, because people see the ad and buy later through search. Retargeting often shows the opposite: a great ROAS, and almost no change in MER when it is switched off.
For brands that also sell on Amazon or in retail stores, Shopify MER understates what ads do, because some of the demand they create is bought elsewhere. Read that halo separately rather than ignoring it.
When the numbers disagree and real money is at stake, run a holdout. Turn the channel off in some regions, or for a random slice of the audience, and measure the difference. That gives you a number you can set a budget on.
The short version
Set budgets on MER and new customer CAC. Run campaigns on ROAS. And never add up platform ROAS and call it revenue.
To turn this into a budget, see how to split a DTC ad budget across channels, or how we set up full-funnel media planning.