3 min read How Much Do Digital Marketing Agencies Make?
So you’re planning to start a digital marketing agency but you don’t know if there’s money in it? If that’s the case, let me help you figure out how much do digital marketing agencies make.
In this blog post, I’ll show you different revenue models so that you can understand the fact that not every agency is earning the same. Some are earning more with less effort while others are earning less with more effort. So without any further ado, let’s jump right into it!
Factors That Influence the Income of Digital Marketing Agencies
Size of the Agency
From boutique firms to large corporations, the size of a digital marketing agency impacts its revenue. Larger agencies have more resources that enable them to offer a wide range of services, which eventually helps them attract bigger clients.
The markets and location can be major determinants of the agency’s income. After all, an agency in a large city or one serving international clients often asks for higher prices.
Services Offered
From SEO to content marketing, PPC, as well as social media management, services that a company can render might vary. Services in specific niches get higher fees than the general ones.
Experience and Expertise
An agency's experience and expertise in the industry tend to make them stand out. On the other hand, well-seasoned agencies enjoy such a high earning potential because of their proven track record.
Client Base and Industry Focus
An agency’s income can also be affected by its industries as well as the way it serves clients. Some sectors may be more lucrative than others, and long-term clients can serve as steady revenue.
4 Different Pricing Models in Digital Marketing
Project-Based Pricing
This model appeals to one-off projects. The agency looks at the needs of the project and provides a quote. Simple and transparent.
Retainer-Based Pricing
For ongoing work, a retainer-based model might be preferable. Clients pay a monthly retainer based on a retainer.
Performance-Based Pricing
In this model, the agency’s fees depend on its performance metrics. It's a win-win but can be risky for the agency.
Hybrid Models
There are some agencies that mix and match these models to create their customized pricing strategy that suits them, as well as their clients.
Average Income Breakdown of Digital Marketing Agencies
Digital marketing agencies operate at various levels and hence their incomes differ substantially. Here’s what the hierarchy looks like:
#1 - Entry-Level Agencies
They are generally very small teams or even sole practitioners in nature.
Revenue: Generally, $50,000 to $100,000 a year.
Main Clients: Small businesses, local clients.
Services: Often around one or two core areas like SEO or social media.
#2 - Mid-Level Agencies
These agencies have customers who can afford their services.
Revenue: $100,000 to $1 million per year.
Primary Clients: Small businesses to medium companies, possibly some large corporations.
Services: A wider range of services like SEO, PPC, content marketing etc.
#3 - Top-Tier Agencies
These are the biggest fish in the pond.
Revenue: Often tops $1 million a year.
Chief Clients: Corporations of larger size and multinational brands.
Services: Comprehensive services usually including advanced data analytics and AI-driven strategies along with others or simply modern strategies to drive the company’s growth.