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Hello @mona6332 , Thank you for contacting us! Meridian utilizes spend data primarily for ROI computations (e.g., setting priors and for budget optimization), while the media unit (impressions) determines the causal relationship between execution and the KPI using Bayesian causal inference. Spend data is not strictly mandatory if your goal isn't accurate ROI estimates. In your situation, there might be two potential reasons for the drop in R-squared, which are linked: one is multicollinearity (redundancy) from including both Spend and Impressions, and the other is the extremely low CPM as you mentioned. A low CPM, representing the cost per 1,000 impressions, leads to significant fluctuations in impressions with only minor changes in spending. This makes it difficult for the model to accurately attribute credit between these two highly correlated inputs, destabilizing calculations and considerably reducing overall predictive accuracy (R-squared). It is important to remember that such goodness-of-fit metrics are merely confidence checks and not the primary measure of success for an MMM focused on causal impact. The best steps are to choose one input: use only Spend if you need accurate ROI figures, or only Impressions if you need clean causal impact. Sometimes CPM data can be very volatile. If you do wish to include CPM, please check for outliers before including it in the model. If you believe impressions contain crucial information about saturation and effectiveness that spend alone misses, you should not simply throw impressions into the model using a generic transformation. Log-transforming media variables is usually done only when necessary (e.g., multiplicative models in category analysis). Meridian handles the core non-linearity (diminishing returns) using the Hill function on the transformed media units, which accounts for saturation without manual log-transformation. Feel free to reach out for any further queries or feedback regarding Meridian. Google Meridian Support Team |
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Attaching Discord thread for reference: https://discord.com/channels/1397974595952185365/1430848727853305947 |
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I used to include only ad spend in my model, but when I added log-transformed impression variables, the model performance dropped.
Specifically, one of the media channels has an extremely low CPM — could that be causing the issue?
After including impressions, the R-squared value actually decreased from 0.8 to 0.5.
For example, when I used only ad spend, Google appeared to be the most effective channel and Facebook the least effective.
But after adding impressions, Facebook now looks like the most effective and Google the least.
How should I interpret this change, and what kind of analytical approach would be most appropriate here?
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