Digital marketing agencies make money by charging clients fees for their search engine optimization, social media marketing, content creation, and online advertising services.
There are several different pricing models ranging from $500 for a small service to upwards of $5000 for a comprehensive package.
Specializing in a niche and demonstrating expertise can influence how much your agency will earn. In this article, we'll review 11 ways for digital marketing firms to earn an income, including some unconventional ones.
1. Digital marketing services
Digital marketing services are a primary source of revenue for agencies. Marketing agencies often have different tiers or models for how they operate and what they offer.
They can sell packages of services at various price points or evaluate the client's needs and create individualized pricing. A digital marketing agency's pricing model will depend on it's services, expertise and scope of work.
Marketing agencies usually offer various services such as
- SEO
- content marketing
- social media marketing
- email marketing
- outdoor marketing
- influencer marketing
- paid ads
Digital agencies usually have a diverse client base and execute different projects for them from start to finish. Your agency should define its main areas of expertise and focus on them before branching out to other revenue sources.
Some unconventional ones may include experiential marketing, influencer partnerships, and virtual reality campaigns.
For instance, an influencer agency might find brand deals related to their niche and reach out to influencers on social media.
Your agency's digital marketing income will depend on your client's location and needs.
Monthly retainers can cost $5000, while single projects can range from $1000 to $50,000 depending on the scope of work.
The most popular pricing models for digital agencies include hourly billing and monthly retainer or subscription-based models. Another popular approach is a value-based pricing model that determines the service cost after completing the project.
Value-based pricing models work best if your agency has a documented track record and there is a high chance that the outcome will exceed the client's expectations.
Choosing the right pricing model is essential for digital marketing agencies to accurately charge for their services and reflect the value of their services.
Setting realistic profit margins that will cover the costs of all your operations and allow your agency to grow is vital.
The most crucial thing is to make it clear to the client what they can expect from you, regardless of the pricing model you select. If clients know what they are getting and the expected results, the agency can build trust, leading to upselling or client referrals.
2. Commission-based services
Another popular strategy a marketing agency can use to make money is by earning a commission.
Digital marketing agencies act as intermediaries between their clients and various digital platforms. The agency negotiates and buys ad space or impressions on other websites on behalf of the client.
Often, advertising agencies will apply a markup to the actual media cost.
For instance, if the agency buys ad space on a website or newsletter for $1 per click, they may charge the client $1.20 per click, keeping the $0.20 difference as their commission.
The commission is sometimes a percentage of the total media spend and serves as a form of compensation for the agency's efforts in negotiating and managing the ad placements.
Note that this is different from online advertising on ad platforms like Meta and Google.
In traditional advertising, such as television, radio, print, and outdoor ads, agencies could earn a commission from the media channels where they place the client's advertisements.
While media commissions have been a common practice in traditional advertising, the digital marketing landscape has evolved to emphasize transparency.
These services are provided for a fee, as we discussed earlier. For example, a client's monthly ad budget may be $10,000 on Facebook but this doesn't include the agency's service fee.
All the $10,000 will go towards ad clicks.
Clients often expect clear visibility into how their advertising budgets are allocated and want to know the exact amount spent on media versus agency fees.
Often, advertising agencies will apply a markup to the actual media cost.
For instance, if a digital marketing agency buys ad space on a website or newsletter for $1 per click, they may charge the client $1.20 per click, keeping the $0.20 difference as their commission.
3. Paid consultations
Digital marketing agencies also make money from paid consultations. The goal of marketing consulting is to provide expert advice, help create marketing strategies, and plan the next steps.
How do digital marketing agencies make money from audits and strategy calls?
The agency may earn a small income from the hour based price of the call but will really benefits from converting that hour into a long term contract.
A consultation can act as a gateway to your agency's funnel.
It's a lower commitment for potential clients, allowing them to get a taste of your expertise and build trust before committing to a larger project.
A strategy call allows you to present follow-up services to turn consultees into clients. You can also use other incentives, such as a digital marketing bundle or curated services.
Don't use your consulting calls to sell. Rather, think of it as a way to educate a potential customer on solving their problem.
They will naturally convert to customers if you offer them valuable advice that they can understand, and see results from.
To successfully run paid consultations, you may need several digital tools to help you manage and schedule your appointments.
Google Calendar is a popular choice for scheduling software, but many organizations use Calendly, which offers more features.
To help you organize information on different clients, you can use project management tools like Asana or Trello. Platforms where you can host consultations include Zoom, Google Meets, or Microsoft Teams.
4. Outsourcing work
Using freelancers and contract workers can help agencies save money, even if they won't make them any additional income.
Digital agencies usually outsource various services because they can rarely do everything in-house. This way, they can offer a broader range of services without hiring experts in every field.
Many digital marketing firms outsource services like content creation, website development services, or graphic design.
These services don't need to be within the agency's competencies but can be a significant part of their service portfolio.
Outsourcing these services allows the agency to offer a comprehensive solution to their clients.
For example, an SEO agency may focus on content strategy and outsource link building and content writing services. This way, the agency can provide all-around SEO services.
An advertising agency, for example can include social media management as part of its services for marketing campaigns.
Outsourcing allows the agency to offer these services without investing its own resources.
Having access to a network of freelancers and contracters allows marketing agencies to expand their service offerings and cater to a wider range of client needs and demands.
5. Client referrals
Agency referrals aren't the main source of revenue, but they're crucial to digital agency growth. Client referrals can reduce the cost of acquisition while growing your customer base.
Customers who tell others about your business can spread the word about it, which naturally boosts the agency's reputation.
This can lead to increased trust and credibility among potential customers, ultimately driving more business and revenue for the agency.
You will find that the best agencies don't follow aggressive lead generation methods.
Instead they focus on building long-term relationships and providing quality service which nets them referral business.
Referrals reduce the need for aggressive marketing efforts. They also help to lower the overall cost of acquisition while growing your customer base. tab
To ensure that your clients will want to refer their friends to your creative agency, you must provide superior customer service, promote transparency, and deliver results.
Agencies can also set up a referral program to track how many new customers buy their services based on the recommendation code or link. Then, a client who sends you new business can get something in return.
Digital marketing firms are built on reputation, so acquiring client referrals can become easier as you grow.
6. Digital assets
Creating digital assets is a way to share expert knowledge with a wider audience and boost the credibility of an agency. It's also a great source of passive income that can be produced with little use of resources.
Digital products can include e-books, online courses, webinars, or workshops. They should be of high quality and include actionable insights for your target audience.
There are many free digital assets available, so your product needs to stand out so you can charge for it.
Digital assets also pose great upselling opportunities.
For example, if you sell online courses, you can demonstrate your ability and expertise to potential clients, turning them into long-term customers.
You can use various online course platforms, such as Podia or Teachable, that offer platforms to sell online courses, webinars, or other video material.
You can use payment processing tools like Stripe or Paddle if you want to host video content on your website or sell other digital products.
Build a dedicated landing page where you will sell your products.
You can get the word out about them through email marketing, paid advertising campaigns, social media platforms, and inbound marketing. The success of your material and your return on investment (ROI) will depend on how you market it.
7. SaaS products
One of the more advanced ways digital marketing agencies can make money is by creating SaaS products.
Such products can help clients automate certain marketing processes for a one-time fee or subscription.
InBeat is a great example of a SaaS tool created by a marketing agency. They are an influencer agency that has developed a database of influencers. It works as a search engine for micro-influencers, so businesses can find them in seconds.
When creating a SaaS product, you should think of a tool that fills a gap in the market and that people will find useful.
Before investing significant resources, validate your SaaS product idea.
Reach out to potential clients and industry contacts to gather feedback and assess their interest in your proposed solution.
The product should also fit in the agency's area of expertise, so it's well thought out and executed. This can ensure a deep understanding of the target audience.
It can also boost trustworthiness among prospective clients if the agency can vouch for the product that ties into their ongoing services.
Of course, the costs of developing a SaaS tool are significant, and such an investment should be carefully calculated.
However, the ROI can be high once the product is properly promoted and well received.
8. Affiliate marketing
Affiliate marketing involves paying third-party publishers commissions for promoting your services. You will earn a commission for every new client that purchases a product through your link or code.
Affiliates earn a commission for each sale or lead they generate, incentivizing them to drive traffic and conversions.
Affiliate marketing is a great way to earn additional passive income, and a marketing agency has the right channels to promote other companies products and services.
You can seek out other businesses to partner with you.
Think about companies you already know or have done business with. When you work with businesses you trust, your chances of making a sale and getting a commission go up.
For example, you can sign up for Surfer's affiliate program if you are an SEO agency.
That way, every time you recommend Surfer's products or services to your clients, you can earn a commission.
Keep in mind that the affiliate relationships need to be transparent to the audience, and they should be informed that you earn a commission from their purchase.
Also, remember to avoid conflicts of interest with your existing clients. Avoid sharing affiliate links to your client's competitors' products, for example.
9. Partner with other agencies
Partnering with other agencies is another way to boost the revenue of the marketing agency. By combining the resources of two agencies, businesses can expand their service offerings, reach new markets, or handle larger projects.
This can be a strategic move to grow and diversify the business.
- Collaborating with other agencies has additional benefits, such as:
- Working with experts outside your service niche
- Filling competency gaps in the agency
- Focusing on your core competencies without losing clients with bigger needs
- Increasing lead generation
Partnering with other marketing agencies is about contributing to your area of expertise, so the partnering agencies should provide complementary services rather than cover the same skills.
You want the agencies to collaborate, not compete with each other.
Agencies can have both short- and long-term partnerships. Some businesses collaborate on individual projects or clients, while others create more strategic relationships.
These partnerships work as referral agreements, where one agency recommends the services of another but isn't invested in the process.
In such cases, a commission can be paid for a new client coming into the agency.
In some cases, agencies join forces to work on projects together.
One popular model of this is white labeling.
In this case, an external agency offers its services under another agency's brand name.
The client continues their relationship with one agency without the knowledge of the mutually beneficial relationship between the two marketing firms.
This is a popular model because the main agency doesn't lose the client to a competitor. The second agency benefits from the additional client fees, and the client benefits from the combined expertise of both agencies.
Joint ventures require more extensive agreements that state the competencies of each agency and how the revenue is shared.
Partnering businesses should have the same values, client profile, and quality to collaborate successfully. It's also vital to properly communicate and coordinate workflows so as not to interfere with existing processes.
Communication in partnership is key, so you should decide on the leadership and division of responsibilities and profits early on. This way, you can successfully carry out your projects, which benefits both agencies and clients.
10. Equity deals
Marketing agencies can strike equity deals with startups or businesses, taking an ownership stake in exchange for services. This way, a company can secure marketing operations for extended periods, and an agency can invest in promising ventures.
These deals align agency success with the client's growth, sharing risks and rewards.
The potential for high returns is unmatched if the client's company is successful.
Equity deals may be seen in rare occurrences where cash flow may be limited, fostering a long-term partnership and financial upside.
You can also look for companies that are on the rise and have great potential, but whose valuation is still relatively low.
Equity deals are not common.
However, the most likely scenario for an equity deal is when the agency also has influencer capacity in the industry and has exhibited success previously.
When choosing the company to partner with, remember that the business you're interested in should have significant benefits from your agency's services.
Evaluate the gaps in their current strategy and present the potential upsides of having constant access to your services.
It's important to conduct due diligence before entering into an equity deal. It's best to use the services of an external auditor. Agencies should also consult with lawyers about the terms of the agreements that are best for them and the client company.
11. Hosting events
Industry events are a great opportunity for creative agencies to promote their services and introduce their businesses to industry professionals.
Events such as conferences, expert panels, community events, or workshops can help you reach more people in the marketing industry and establish your business as an authority.
They can also help you enhance your brand's exposure and generate high-quality leads.
Industry events are also great if you want to position your agency as an accomplished B2B service provider.
Digital agencies can sponsor or co-host an event if they don't have enough resources to organize it on their own. However, event organizing can bring additional revenue from ticket sales, sponsorships, and merchandise.
Remember that hosting an event requires an upfront investment and proper resources. You should establish an event budget and contact potential sponsors and partners.
You must do proper industry research, create a strategy, and plan the event in as much detail as possible.
You will need to establish a reputation for the event, which can take years.
Promoting your event to other partners, agencies, and freelancers can be crucial for the success of your endeavor.
You can encourage them with commissions or special deals to share information about your upcoming event. This can help spread the word and attract more attendees, ultimately leading to a larger turnout and increased revenue.
Creative agencies can greatly benefit from organizing industry events, as they can boost trust and authority.
It is an effective form of marketing that can help build your reputation in the agency world. Start small by contacting businesses that organize such events and finding out if you can participate in them.
Key takeaways
- Digital marketing agencies should prioritize finding the right niche and focusing on the services they excel at before adding other revenue streams.
- The most popular and safest ways to diversify revenue streams for marketing agencies are by adding commission-based services and paid consultations.
- A great way to earn passive income for marketing agencies is by entering an affiliate program or creating digital products such as courses or ebooks.
- Partnering with other agencies and outsourcing can be a medium-risk strategy to generate revenue that also brings networking opportunities.
- Equity deals and developing SaaS products are the riskiest ways to gain profit, but they also have the highest potential ROI.
Conclusion
As an agency, diversifying your income channels can reduce risks and ensure long-term stability and growth in the industry. You may begin by selling marketing services as your primary source of income. As your agency grows in status and credibility, you will find that there are many possible avenues for income generation.
