Feedback loops exist. Spend drives Sales, but Sales also funds Spend. Or Facebook drives Search. Standard regression assumes everything is a one-way street. VAR treats every variable as potentially influencing every other variable.
"Does Facebook spend drive Google Search volume?"
"How do Sales and Marketing feed each other?"
"What is the ripple effect of a budget cut?"
It's a system of equations where each variable depends on its own past lags AND the past lags of all other variables.
The Problem
Siloed channel measurement.
What It Reveals
That 30% of Search value originated from Social.
Decision Enabled
Credit Social appropriately in the budget.
Used in Sales & Marketing Efficiency to untangle the web of interactions between different growth levers.
Impulse Response Functions: Graphs showing how a shock to "Facebook Spend" causes a ripple in "Search Volume" over the next 14 days.