How Much Do Digital Marketing Agencies Make?

As digital marketing has grown in complexity, the role of specialized agencies has become increasingly important. Many organizations, particularly small and medium-sized businesses, don’t have the in-house marketing knowledge required to compete. Instead, digital agencies meet their needs with a suite of tools, services, and solutions.

Unlock the key to profitability with this million-dollar pitch deck for selling digital solutions to local businesses. Download the rebrandable sales deck now.

Whether you’re thinking of starting a digital marketing agency or you want to get a pulse check on how much others in the space make today, this blog post is for you. We’ll dig into the profitability of digital agencies and cover potential revenue streams you can implement to ensure your agency is at the top end of that profitability scale.

How much money does a digital marketing agency make in 2024?

In 2024, digital marketing agencies can expect o to generate over $163K for every full-time employee (Promethean Research). Given this figure, the potential range for a given agency can vary from around $100K to well over a million dollars. This is based on recent historical agency revenues, which have been trending up over the past decade and saw a major bump in the wake of COVID-19. While revenue and other metrics have normalized since that bump, the trendline continues in a positive direction.

The same Promethean Research report found that, on average, digital marketing agencies are getting larger: the total number of agencies has increased, but so has the share of agencies with 11-50 full-time employees, while the share with 0-10 full-time employees has come down by about 10% between 2018 and 2023. Average profit margins typically range between 10-15 percent (Constant Contact).

What does all of this mean for aspiring or growing agencies? The increase in digital marketing service providers is a strong indicator of bolstered demand in this field, and the increase in the average size of agencies suggests winners in the space are agencies with the capacity to diversify, offering multiple services and solutions. How much digital marketing agencies make varies according to size and service bundle, but diversifying your agency’s revenue streams is a great way to maximize earnings by providing more value to clients.

Are digital marketing agencies profitable?

Digital marketing agencies are profitable businesses thanks to their relatively low startup costs and the increasing demand for marketing services. While agency startups may face some challenges getting established, the potential for long-term relationships in this field means that businesses can enjoy consistent, recurring revenues from clients once trust and performance have been established.

The reality for SMBs today is challenging

 digital marketing is no longer optional, but running successful digital marketing campaigns requires increasingly specialized knowledge. Most small businesses don’t have the capacity or time to master the skills required to effectively market themselves online. Digital marketing agencies are in a unique position to leverage their skills and expertise to deliver measurable results for clients.

The good news for agencies that rise to the challenge is that in recent years the overwhelming majority—99%—say the future looks rosy and they expect to grow in the year ahead (Search Engine Journal). Check out this video on Agency Profitability 101 for a more in-depth discussion:

10 revenue streams for digital marketing agencies to leverage

Regardless of how much your digital marketing agency makes today, you can boost your revenues by adding more streams of income. Consider the reality facing SMBs: digital marketing isn’t a single service. It’s a complex activity with many moving parts, and these tend to work better when applied synergistically. If a single agency can provide multiple services, those services are more likely to be well-integrated and complement each other.

Let’s take a look at 10 revenue streams to add to your digital agency in 2024.

1. Client retainer fees

Digital marketing agencies often charge clients a monthly retainer fee for ongoing services. The fee structure is determined by factors like the scope of work, the complexity of the services provided, and the agency's expertise.

This predictable revenue model benefits both agencies and clients, offering clients the peace of mind that comes with consistent support while allowing agencies to plan for the future based on a reliable income stream.

To maximize your retainer fee potential, consider creating service bundles based on popular combinations of tools or solutions you sell. By bundling your offerings, you create an incentive for clients to consolidate more of their monthly spend with your agency rather than dealing with multiple digital service providers.

2. Project-based fees

Specific, one-off tasks or campaigns are best paid for through project-based fees. Setting fees on a project-by-project basis gives your agency flexibility in pricing and scope, accommodating client needs. While this revenue stream doesn’t have the built-in reliability of client retainer fees, it allows for an individualized approach that clients appreciate for one-time projects, like new websites.

A common challenge agencies face when using a fixed-fee model is scope creep: clients agree to a scope of work, and little by little ask for extra services or changes to the agreed-upon deliverables. Before you know it, your profit margin on the project can take a hit. Avoid this by setting clear project parameters, agreeing on key performance indicators (KPIs), and communicating transparently before and during the project.

3. Performance-based fees

Some digital agencies have agreements where their pay is based on achieving KPIs or results achieved for clients. Due to the inherently risky nature of this model—results are never 100 percent guaranteed—it’s less common than the other structures we’ve looked at so far. However, it’s worth being aware of this setup, since it does a good job of aligning agency goals with client goals. The better you perform, the more your agency gets paid.

To avoid taking on all of the risk, you might consider combining a performance-based fee with a flat fee to ensure your agency still gets paid a minimum amount for services rendered.

4. Affiliate marketing

In addition to selling solutions and services, digital agencies can boost revenue by engaging in affiliate marketing—promoting and selling products or services for a commission. By strategically aligning other businesses offering complementary tools or services, agencies can monetize their influence, audience, and industry expertise.

A key consideration for agencies looking to add an affiliate marketing revenue stream is ensuring the businesses they partner with are well-aligned and add value to clients. For example, if your agency offers website-building services, it would be appropriate to promote and gain an affiliate commission on a popular plugin that enhances website functionality.

5. Social media advertising

Regardless of your agency’s niche, there’s a good chance social media advertising should be one of your revenue streams. Between, Facebook, Instagram, TikTok, and other smaller platforms, there are social media advertising opportunities for just about every target audience your clients may have.

Agency services can range from creating a custom PPC dashboard where clients can manage their own social media ads, to full-service social media ad campaign creation and management. If you don’t have the in-house capacity to manage campaigns for multiple clients, hiring a white-label digital marketing agency will enable you to scale this revenue stream.

In addition to advertising on social platforms, clients often require support managing their social media accounts, from content creation to interacting with audiences. This is another revenue stream that can be added on its own or bundled with social media advertising.

6. Search engine optimization (SEO)

SEO services help clients get discovered by optimizing websites for improved organic search visibility. This revenue stream involves conducting keyword research, handling on-page optimization, and planning backlink strategies.

Unlike some other digital marketing strategies, SEO takes time to mature and come to fruition. Educating clients on the long-term benefits of SEO and showcasing success stories can enhance client retention even if they don’t see an immediate boost in their search engine rankings.

7. Pay-per-click (PPC) advertising

We’ve talked about PPC for social media so far, but that’s not the only place agency clients can run ads. Google Ads is another major platform that can be used to drive traffic through targeted ads.

Much like social media advertising, services in this area can be delivered in several tiers: your agency might provide the tools and support to help an SMB client run and monitor their ads, or you might handle the complete process.

When offering PPC advertising services, make sure you have analytics properly set up to help you and your clients understand campaign performance, so you can make informed, strategic decisions.

8. Content marketing

A perfect complement to SEO services, content marketing is an effective revenue booster for digital agencies. By creating strategic, SEO-optimized content, agencies can attract and engage target audiences organically—that is, without ad spend.

To deliver value to clients,  focus on producing high-quality, relevant content that aligns with their business goals and audience. Since this can be a time-consuming task to handle in-house, it’s a perfect candidate for white-label outsourcing.

9. Email marketing

Email may not be a shiny, new technology, but still delivers impressive results. Agencies can create a reliable revenue stream and drive meaningful results for their clients with the right email marketing strategies. These include:

• Audience segmentation: Creating custom email flows for different customer profiles or stages of the sales cycle.
• Personalization: Using customer data to make emails feel more like a one-to-one conversation. For example, businesses might send unique offers based on past user behavior.
• Automation: Set up email flows that put email marketing on autopilot. Use A/B testing to improve their results over time.

10. Web design and development

Agencies can provide clients with responsive, user-friendly websites that align with their branding and goals. Revenue potential lies in project-based fees for website development, as well as retainer fees for ongoing maintenance. Bundling this service with SEO optimization can help agencies maximize profits while ensuring the best result for SMBs.