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Marketing efficiency ratio (MER) and POAS calculator.

Marketing efficiency ratio is total revenue divided by total marketing spend. POAS, profit on ad spend, is the gross profit your ads bring in divided by what they cost. Enter last month's numbers to see both against the break-even line your gross margin sets.

The formulas

MER = total revenue ÷ total marketing spend. Break-even MER = 1 ÷ gross margin.

POAS = gross profit from ads ÷ ad spend. Break-even POAS = 1.

Result

Marketing efficiency ratio

5.00x

Break-even MER: 1.82x. Above the line.

Profit on ad spend (POAS)

1.65x

Break-even POAS: 1.00x. Above the line.

Marketing as share of revenue

20.0%

Gross profit after marketing

$87,500

Before rent, wages and other fixed costs.

ROAS the platforms report

3.00x

POAS is this number multiplied by gross margin.

Gross profit from ads, after ad spend

$26,000

Reading the result

MER is 5.00x, above the 1.82x break-even line your margin sets. Marketing costs 20.0 percent of revenue and leaves $87,500 of gross profit after marketing.

POAS is 1.65x: by the platforms' own count, each $1 of ad spend brings back $1.65 of gross profit, or $26,000 in total after paying for the ads.

The platforms claim 48.0 percent of all revenue. If that looks high next to what you know about repeat and organic sales, check the tracking before you trust POAS.

Break-even ROAS calculator Gross margin calculator Contribution margin calculator

Worked example

MER and POAS for a store turning over $250,000 a month.

These are the numbers loaded in the calculator above: $250,000 of revenue, $50,000 of total marketing, $40,000 of that on Google Ads and Meta, $120,000 of revenue claimed by those platforms, and a 55 percent gross margin.

01 · MER = $250,000 ÷ $50,000 = 5.00. Marketing costs 20 percent of revenue.
02 · Break-even MER = 1 ÷ 0.55 = 1.82. At an MER of 5.00 the business keeps $250,000 × 0.55 minus $50,000 = $87,500 of gross profit after marketing.
03 · ROAS = $120,000 ÷ $40,000 = 3.00, by the platforms' own count.
04 · POAS = ($120,000 × 0.55) ÷ $40,000 = $66,000 ÷ $40,000 = 1.65. That is $26,000 of gross profit above the 1.0 break-even line.

MER vs ROAS vs POAS

What is the difference between MER, ROAS and POAS?

ROAS and POAS judge the ads by what the ad platforms report. MER judges the whole marketing budget against the revenue that actually reached the business. Use MER to set the budget, POAS to decide where it goes, and ROAS only next to its break-even line.

Definitions as used in this calculator. The break-even lines leave out fixed costs; the next section adds them.
Metric	Formula	What it counts	Break-even line	Best used for
MER	Total revenue ÷ total marketing spend	All revenue and all marketing. No attribution needed.	1 ÷ gross margin	Setting and checking the whole marketing budget
ROAS	Revenue from ads ÷ ad spend	The revenue each ad platform credits to itself.	1 ÷ gross margin	Comparing campaigns inside one platform
POAS	Gross profit from ads ÷ ad spend	Platform revenue after cost of goods.	1.0	Deciding where the next dollar of ad spend goes

Why is break-even MER 1 ÷ gross margin?

Because marketing is paid out of gross profit. Each dollar of revenue leaves the gross margin behind once the goods are paid for, and an MER of 1 ÷ margin spends every cent of it.

To cover fixed costs too, use 1 ÷ (gross margin minus fixed costs as a share of revenue). With a 55 percent margin and fixed costs at 25 percent of revenue, that is 1 ÷ 0.30, an MER of about 3.33.

Why is break-even POAS 1.0?

At 1.0 the gross profit from ads exactly pays for the ads. POAS is ROAS multiplied by gross margin, so a POAS of 1.0 is the same line as break-even ROAS, written in profit instead of revenue.

The break-even ROAS calculator draws the same line in ROAS terms, if that is the number your platforms and reports use.

Read with care

When does each number mislead?

MER counts revenue that marketing did not cause: repeat customers, organic search and word of mouth all land in the top line. A strong brand can post a high MER while the paid campaigns lose money, and cutting spend can lift MER for a month or two while new customer numbers shrink.

POAS is only as good as the revenue the platforms claim. If Google Ads and Meta both take credit for the same order, POAS overstates the profit. When the platforms claim more than the business sold, a tracking audit is the place to start, and our guide to marketing attribution explains why the numbers drift.

Frequently asked

Five questions about MER and POAS.

How do you calculate marketing efficiency?

Divide total revenue by total marketing spend for the same period. That is the marketing efficiency ratio (MER). $250,000 of revenue on $50,000 of marketing is an MER of 5.0, so marketing costs 20 cents of every dollar of revenue. Take revenue from your store or accounts, not from the ad platforms.

What is a good marketing efficiency ratio?

One that clears your break-even MER, which is 1 ÷ gross margin, with room left for fixed costs. At a 55 percent margin the break-even MER is 1.82. If fixed costs run at 25 percent of revenue, MER has to reach 1 ÷ (0.55 minus 0.25), about 3.33, before the business makes any profit.

What is a good marketing ROI ratio?

Judge it against your own margin, not a rule of thumb. Measured on revenue, the floor is break-even MER or break-even ROAS, both 1 ÷ gross margin. Measured on profit, the floor is a POAS of 1.0, where the gross profit from ads equals what the ads cost. Above those lines marketing adds profit; below them it costs money.

What is a typical return on ad spend?

There is no typical figure worth aiming at, because the ROAS each business needs moves with its gross margin. Break-even ROAS is 1 ÷ gross margin: 1.82x at a 55 percent margin and 3.33x at 30 percent. Compare your ROAS with your own line, then use POAS to see the profit behind it.

Break-even ROAS by industry

Do companies actually make money from ads?

Only when the gross profit the ads bring in is bigger than what the ads cost, which is a POAS above 1.0. A healthy-looking ROAS can still lose money when the margin is thin: a 2.5x ROAS at a 30 percent margin is a POAS of 0.75, so every $1 of ads brings back 75 cents of gross profit.

Related calculators

The numbers either side of MER.

Every calculator we use in client work is on the free tools page. If your MER and the platforms tell different stories, the free profit audit call is where we work out which one to believe.

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