AER

AER is a metric that reflects the percentage of a company’s revenue that constitutes its advertising budget. AER helps assess how effectively a business spends money on advertising and whether the advertising pays for itself.

What is AER

AER is the ratio of advertising expenses to revenue, expressed as a percentage. Essentially, this indicator shows how many rubles a company spends on advertising to earn 100 rubles in revenue.

The metric is widely used in e-commerce, marketplaces, performance advertising, and direct sales.

AER Calculation Formula

AER = (Advertising Expenses ÷ Revenue) × 100%

Example:

• Advertising Expenses: 150,000 RUB
• Revenue: 1,000,000 RUB
• AER = (150,000 ÷ 1,000,000) × 100% = 15%

This means the company spends 15% of its income on advertising.

Purpose of the AER Metric

• Evaluating Advertising Effectiveness: Helps understand whether the cost of generating sales is too high relative to the revenue received.
• Monitoring Profitability: If the AER is too high, the company’s profit decreases—even with high turnover.
• Budget Planning: Helps determine the optimal level of investment in marketing.
• Comparing Traffic Channels: Different advertising sources can have different AERs, allowing you to disable inefficient ones and boost profitable ones.

Typical AER Values

• E-commerce: 10–25% (depending on margins).
• Marketplaces: 5–15%.
• Services: 5–20%.
• High-margin products: AER can be higher.
• Low-margin products: AER should be lower, otherwise advertising is unprofitable.

Factors Influencing AER

• Product margins.
• Traffic quality.
• Website or product page conversion rate.
• Competitiveness of the niche.
• Seasonality.
• Cost per click/impression.
• Brand strength.
• Presence of repeat purchases.

How to Lower AER

• Improve website or sales funnel conversion.
• Optimize advertising campaigns (negative keywords, audience segments, ad creatives).
• Work on Customer Lifetime Value (LTV) and repeat sales.
• Strengthen brand search presence.
• Set up retargeting.
• Improve product listings on marketplaces.

How AER Differs from Other Metrics

• CPO: Shows the cost of a single order.
• CAC: The overall cost of customer acquisition, broader than AER.
• ROMI/ROI: The return on marketing investment, the final result.
• AER: A simpler metric answering the question: “Is advertising becoming too expensive relative to turnover?”

Conclusion

AER is a key metric for assessing the efficiency of advertising expenses, showing what portion of revenue is occupied by the marketing budget. It helps control profitability, optimize campaigns, and make informed decisions about budget allocation.

If AER is rising, it’s a signal to check advertising effectiveness and sales conversion.