Digital marketing is a diverse landscape. Digital marketing agencies can serve as one-stop marketing shops for their clients, or they can niche down and offer solutions for specific areas of contention.
Although a generalist vs. specialist agency is not necessarily better, looking at how your agency makes money can help you predict what your future is going to look like. Your marketing agency revenue determines the future of your company. It decides whether you have the means to scale your brand.
As such an important key performance indicator, it makes sense to take a deep dive into your marketing agency revenue before looking into other potential KPIs.
Why is keeping track of your agency revenue important?
If all of your revenue comes from one income stream, and something happens to disrupt that stream, your company could easily buckle under the pressure. But if you measure your digital marketing impact more critically, you may be able to find ways to future-proof your brand against an uncertain future. This may look like bringing in new revenue streams, or it may look like doubling down on the revenue streams that are currently turning profits. But until you track your agency revenue, you can’t begin to make those distinctions.
By taking a critical look at your agency revenue, you can gain a more complete understanding of what your future entails. Instead of operating on instinct alone, tracking agency revenue allows you to look at the facts of how your business operates and then use those facts to safeguard your future. Once you know where your money is coming from, you can preserve those revenue streams while diversifying your company to provide security in the future.
Consider, for example, a marketing agency that might have specialized in newspaper advertising back in the 1990s. At the time, newspaper marketing looked great. Agencies couldn’t know that the internet was on the way in, or that newspapers would soon take a back seat to other marketing avenues.
By tracking how their dollars were being spent, however, these same marketing agencies could notice when newspaper advertising began to be less effective. Instead of doubling down on those efforts, they would realize they needed to find other marketing avenues to bring in additional revenue.
The current landscape of agency revenue streams
Experts estimate that by 2026, the global digital advertising and marketing market will be worth $786.2 billion. And based on a recent survey of 579 marketing professionals in the US, agencies increased their revenue by an average of 54% in 2021.
While these statistics seem promising, they also point to an increased level of competition for marketing agencies. With so many marketing agencies doing well, agencies that are struggling may soon find themselves shouldered out of the market altogether unless they find ways to improve their agency revenue.
For agencies that are doing well already, the research shows that there’s plenty of room to grow. The current digital marketing landscape is in a good place, which means that now is the time to commit to finding new ways to generate agency revenue and scale your business.
Average digital marketing agency revenue
So how do you know if your digital marketing agency is doing well or needs some help? The first step is to look at how your agency’s revenue compares to other digital marketing agencies around.
How much money does a digital marketing agency make?
The size of your digital marketing agency will have a major impact on your annual revenue. It’s estimated that about 70% of the market makes less than $1.5 million annually, while large companies can make upwards of $30 million each year.
What is a good profit margin for a digital marketing agency?
Looking at your profit margin may be a more realistic way to analyze your agency’s success, especially if you’re a smaller agency and aren’t looking to compete with major agencies in terms of annual revenue. The average profit margin for a digital marketing agency is anywhere from 10% to 15%. If you’re on the higher end of that average, you’re probably doing well, while if you’re on the lower end — or making less than 10% profit — you may need to up your game to keep pace with this demanding industry.
The importance of diversified agency revenue streams
Imagine going to a restaurant that only has one item on the menu. On the one hand, there’s something to be said for a restaurant that specializes. If you’re really craving soup, you’ll probably head to the soup store. But you’re unlikely to go there every day. And if you’re hosting a group get-together, you’d be more apt to visit a restaurant where everyone in your party can find something to enjoy.
This same principle applies to marketing agencies. If you specialize in one type of marketing, you will gain a portion of loyal customers who appreciate the one thing you do well. But you’re also missing out on customers who need marketing agencies to offer more than one thing.
In other words, if someone is looking to hire an influencer marketing agency, and that’s your specialty, great. But if they’re looking to hire a marketing agency for their general needs, you might be out a sale. Not only that, but you also miss out on their future recommendations. This means that if they know someone looking to hire a marketing firm in the future — even if the other person specifically wants an influencer marketing firm — the company you couldn’t help the first time around is more likely to think of the company they worked with, which means you’re out future sales as well.
Diversifying what you have on your “menu,” so to speak, allows you to scale your business, better satisfy existing clients, and bring in new clients. It also future-proofs your company by ensuring that even if your current marketing niche goes out of vogue, you still have a way to generate revenue and keep your company afloat.
There’s a difference between diversifying and being a generalist. Know the biggest pitfall of being a generalist marketing agency so you can diversify your business the right way.
Types of revenue streams in an agency
When you’re thinking of ways to diversify your revenue streams, it’s important to stay within the scope of what you already do. It doesn’t make sense for a marketing agency to suddenly begin offering accounting services as well. Luckily, there are numerous potential revenue streams even within the realm of digital marketing.
Social media marketing or social media content curation
Facebook. Twitter. LinkedIn. Instagram. TikTok.
These days, there are so many social media platforms to choose from. Finding the right content for social media posts, editing that content for brand consistency, and posting on a regular basis can be a full-time marketing project on its own. Tackling this revenue stream for your clients takes a major load off their shoulders while allowing them to compete against the numerous small businesses that don’t use social media regularly.
Marketing automation is all about setting up systems to handle routine marketing tasks so that no one has to do these tasks manually. Automation strategies may include creating automated emails that go out when customers take certain actions or text message reminders about upcoming sales.
Use Constant Contact’s marketing automation tools to drive sales and get more donations for your clients.
Search engine optimization and content creation
Search engines like Google direct organic traffic to websites that can best answer questions online. By specializing in search engine optimization and content creation, you can help your clients rank higher in Google and receive more organic traffic on a consistent basis. This may mean creating a blog for clients who don’t have one, or revamping existing blogs to better rank for specific long- and short-tail keywords.
Web design and website optimization
53% of mobile users will leave a website if it doesn’t load within three seconds. Web optimization helps websites load quickly while ensuring customers can navigate them on both mobile and desktop devices. And web design ensures that when those sites load, they look nice and represent the brand well.
Traditional marketing refers to non-digital marketing efforts, including TV, radio, and newspaper marketing. While digital marketing is a major player in the marketing industry, these traditional marketing efforts still have value — especially for small companies working to become larger names in their local communities.
Partnerships with other companies
Companies that partner together can benefit from each others’ clients. The key to doing this right is to partner companies that have similar target audiences but are not competing against each other. For example, a yoga instructor might partner with a company that sells health-food smoothies. Both companies have the same target audience — people who care about their health — but spending money on a smoothie isn’t going to detract from wanting to work out (or vice versa).
Partnerships can come in different forms. In the above example, the yoga instructor might have links to buy smoothies on their website, while the smoothie company might have coupons for a yoga class in each box of smoothies they sell. Both companies benefit, and the customers receive more value than they would from one company alone.
Inbound marketing is all about nurturing leads and helping them move through a company’s sales funnel. Combinations of personalized ads, informative content, and omnichannel marketing efforts provide value to customers, which makes them more likely to stay loyal to a company and make purchases down the road.
Increase your marketing agency revenue today
By diversifying your revenue streams, increasing social proof, and improving your current offerings, you can not only safeguard your business against the future but actively scale it in the present.
Get started today by creating a list of your agency’s current revenue streams. Then, brainstorm potential revenue streams you could use to diversify your income. Consider whether your current customers would benefit from any of the new revenue streams on your list.
Start by implementing one new revenue stream at a time. By doing a good job on a new revenue stream, including incorporating social proof in the form of case studies, you can slowly expand your offerings while maintaining quality.
If you handle online marketing for more than one account and would like to manage and access them all from one login, become a Constant Contact Solution Provider and take advantage of the many benefits of being our Partner.