Stats project that digital advertising will reach $US678.80 in 2023 alone, accounting for 66% of global ad spend.
Do you know what these figures mean?
The staggering stats can only imply one thing — there's a ton of money to be made with a digital advertising agency.
So, if you've been thinking of starting your own agency, there couldn't be a better time to hop on the bandwagon.
Like any business, however, you must build a solid foundation to increase your chances of success.
In this article, I'll lay down what you need to do to start an advertising agency and, most importantly, drive it to prosperity.
I'll start by validating the idea of venturing into the advertising agency industry.
Note: For clarity, this guide focuses on starting a virtual advertising agency.
How Much Can You Make with an Ad Agency?
For starters, an advertising agency makes money by running ad campaigns for clients.
That said, the amount of money and profit margin you can generate with your own advertising agency depends on several factors, including:
- The size of your advertising agency
- The number of services you're offering
- The number of clients you're servicing
- Your pricing model
- Your marketing strategy
The common pricing practice in the advertising agency industry is to charge on a commission basis. If your client spends $500,000 in advertising per year, you'll earn $50,000 as an annual commission.
In addition, most people offering advertising agency services have an hourly charge. The average hourly rate is $100 to $200 per hour. So, if your client accumulates 20 billable hours per week at $150 per hour, you'll earn an additional $144,000 in annual revenue.
As you can see, how much you charge your clients is critical in determining your potential earnings.
It is always advisable to do a market analysis to determine how other agencies charge potential clients. As a startup, you want to ensure you're within a reasonable range of the industry standard rate.
You can revise how much a client pays as you gain more exposure and testimonials.
How to Start a Virtual Digital Advertising Agency?
Launching an advertising agency is one thing. However, raking in profits is entirely different. So, how do you make sure everything falls into place?
Here's how to start a successful advertising agency.
1. Get the Skills
Before starting an advertising agency, you must arm yourself with the necessary skills.
Why? Because in an industry as competitive as advertising, expertise isn't negotiable — it's a requirement.
Here's why gaining the right digital advertising skills should be the first thing you do:
- You'll Gain a Competitive Advantage: Mastery of digital ad tools, techniques, and strategies will give you an edge over those who take a more haphazard approach.
- You Can Guarantee Quality Service Delivery: Clients seek agencies that guarantee results. With proper skills, you can serve clients better, delivering efficient and effective advertising campaigns.
- You'll Make Better Decisions: Understanding the intricacies of advertising and industry trends ensures you make choices rooted in knowledge rather than trial and error.
- You'll Build Trust: A potential client is more likely to trust and pay your agency if you can showcase its competencies and track record.
Some places you can acquire the skills you need to start an advertising agency include:
- Online Learning Platforms: Coursera, Udemy, and LinkedIn Learning are excellent online platforms for learning digital ad techniques and business management.
- Workshops and Seminars: Industry experts often hold practical tips to run thriving advertising agencies.
- YouTube: Many renowned advertising professionals and agencies have YouTube channels where they share tutorials, case studies, and insights into the advertising world.
- Blogs/Websites: Websites like AdAge, HubSpot, and Marketing Land frequently publish valuable content that can help refine your skills and stay updated on industry trends.
2. Zero-in On Your Target Market
You have the skills. The next step is to determine who your ideal client is. You want to know who's likely to require your services.
When you determine your advertising agency's clients, you can implement the appropriate marketing strategy. The point is that you'll struggle to start and run a profitable virtual ad agency without a well-defined target audience or a specific niche.
Here's a list of potential target audiences for your advertising agency. While this rundown isn't exhaustive, it should get your juices flowing.
- E-commerce Businesses: Online retailers often require advertising services to drive store traffic and increase sales.
- Tech Startups: New tech companies, especially those launching apps or software platforms, need advertising to generate awareness and attract customers.
- Local Small Businesses: From local cafes to boutique shops, these small business owners may be looking to expand their digital presence and reach a larger audience online.
- Real Estate Agencies: Realtors and property management companies often seek to advertise listings to attract potential buyers or tenants.
- Health and Wellness Brands: Companies selling health supplements, fitness equipment, or wellness services might need ads highlighting their unique selling propositions.
- Educational Institutions: With the rise of online courses and e-learning platforms, institutions often require advertising to attract students and participants.
- Non-Profits and Charities: These organizations need advertising to spread awareness about their causes, campaigns, or fundraising events.
- Travel and Hospitality: Hotels, airlines, and tour operators look to advertising to showcase deals, promote destinations, or highlight their services.
- Entertainment Industry: Movie studios, music labels, book publishers, and streaming platforms often require ads to promote new releases or upcoming events.
- Fashion and Beauty Brands: To launch new products, highlight seasonal collections, or reach new market segments, these brands frequently turn to digital ad agencies.
3. Get Your Website Up and Running
You're starting a virtual advertising agency, which means your business will be based online. You'll therefore, need a website to showcase your services.
You don't have to be a web developer to launch a professional website. You'll only need to know which tools and services to use.
Here's a quick guide to help you get started with your website:
- Choose a Domain Name: Pick a memorable, relevant name for your website (e.g., YourAgencyName.com). Consider the domain as your business name.
- Register the Domain: Purchase your domain. I recommend Namecheap because of the massive domain name collection, affordability, and easy-to-navigate user interface.
- Select a Hosting Provider: Choose a reliable web hosting service. Siteground is an excellent hosting provider for your advertising agency. It's fast, secure and affordable.
- Pick a Platform: Decide on a website platform. WordPress is a popular choice, but there are others like Wix and Squarespace.
- Install a Theme: Choose a professional-looking theme or template that aligns with your brand. ThriveThemes is a great platform for advertising agencies.
- Customize Your Site: Add your logo, brand, and colors. Then, adjust the layout to fit your preferences. ThriveThemes comes with an intuitive Thrive theme builder to enable you to tailor your website to your needs.
- Add Essential Pages: Include Home, Services, About, Portfolio, and Contact.
- Integrate Features: Add plugins or extensions for added functionalities (e.g., contact forms, social media feeds).
- Optimize Your Website for SEO: Use keywords relevant to your services, add meta descriptions, and ensure your site is mobile-friendly. RankMath is a top plugin for Search Engine Optimization.
- Test the Website: Before going live, test all links, forms, and functionalities to ensure everything works smoothly.
- Publish & Go Live: Once satisfied, make your website live for the public to see.
4. Get the Right Tools
You must get the right tools to succeed with your advertising agency business. In fact, you cannot talk about how to start an ad agency without mentioning the tools to help you do the heavy lifting without the hefty ongoing expenses.
You see, running advertising campaigns can be overwhelming, with many bits and pieces to connect to achieve success for your clients.
Most advertising agencies have a collection of tools to implement their marketing plan and, most importantly, get customers the desired results.
As a startup advertising agency, your top priority is to get clients. This means you want to choose tools to help you get the job done without incurring startup costs, hefty ongoing expenses, or hiring a big initial team.
While there are many tools designed for advertising agencies, AdCreative and SEMRush are top on the list of must-haves.
Here's a rundown of what the two platforms bring and why they should be part of your business plan.
As a new advertising agency, you want to create and run effective advertising campaigns for your clients.
Without prior experience, creating compelling, high-converting ad creatives can be challenging. But it doesn't have to be.
AdCreative is an artificial intelligence-powered platform to help you create ad conversion-focused ads quickly. You can use it to generate ad designs and social media posts in seconds.
The speed can be precious if you're running your agency as a sole proprietorship and don't have a big team or a lot of time. Besides, the software is user-friendly, allowing you to create stunning ads even if you don't have graphic design experience.
AdCreative is data-driven, which means it can help you create ads that are more likely to succeed and, by extension, generate a positive ROI for your client's business. This is great for new advertising agencies eager to show their clients they can deliver good results.
Besides helping you save time, reduce costs, and produce quality ads, AdCreative can help you scale and grow your new business faster.
And the best part is you can try AdCreative risk-free to explore the platform features without financial commitment.
Read my full AdCreative review to learn more about the tool and how it can help ad agencies streamline their businesses.
SEMrush can be an instrumental tool in shaping your ad agency's trajectory. The platform can help you understand market dynamics, competition, and client needs, which is crucial for a new advertising agency.
SEMrush offers a comprehensive feature suite that provides the actionable insights needed to run a successful business.
You can leverage the platform's keyword research capabilities to uncover high-value keywords and optimize ad campaigns. Meanwhile, the audit feature can help ad agencies ensure that their clients' creatives and websites are optimized for search engines through SEO.
Another excellent feature for advertising agencies is the competitive analysis. With this function, you can take a sneak peek into competitors' strategies, allowing you to develop an even more powerful marketing campaign.
Furthermore, if your advertising agency offers PPC services, SEMRush can help you understand where your competitors spend their ad budgets. That way, you can craft a data-backed ad spend for your campaigns.
SEMRush offers a 7-day free trial, which allows you to test out all of the platform's paid features. That way, you can have enough time to determine how to use the tool to best position your business for growth.
5. Market Your Advertising Agency
Accomplishing the four steps above is a great achievement in your new virtual advertising agency business plan. However, the biggest part of the setup is getting clients who want to work with you.
Having a solid marketing strategy is essential to starting any startup, and this is where most businesses get it wrong.
For an advertising agency, you want to ensure you're putting your business in front of potential clients. You also want to make sure it is easy for customers to find you.
That said, here are marketing strategies you can implement to put your marketing agency on the map.
Social Media Marketing
Begin by setting up profiles on Facebook, LinkedIn, and Instagram. Ideally, you want to establish your presence on social media platforms where your potential customers are likely to hang out.
Regularly post about your projects, client feedback, and industry insights. Engage with your audience by sharing the results of campaigns you've managed, insights into advertising trends, and client testimonials.
You want to use your social media accounts to showcase your agency's successes to entice potential clients.
As your agency grows, you can consider using ads targeting businesses needing advertising services.
Engaging meaningfully with your target audience on social media can build a formidable brand image and, most importantly, draw the right clients for our agency.
Your agency's website should be a resource hub. Introduce a blog section with articles on advertising best practices, case studies, and strategy breakdowns.
The idea is to position your agency as a thought leader, making businesses more inclined to choose you for their advertising needs. In addition, share your articles on other platforms to increase visibility and drive organic traffic. You can also offer downloadable resources to capture leads.
While you can work with a content marketing agency, your startup costs might pile up, which is not good when starting an advertising agency yet to get clients.
When starting an ad agency, it is crucial to focus on lead generation, the process of attracting potential clients and encouraging them to use your services.
A strategic way to facilitate this is through the integration of a lead magnet—a tool that offers valuable content or service to prospective clients in exchange for their contact details.
By consistently providing valuable content, perhaps through a downloadable e-book or an exclusive webinar, and showcasing your agency's work, you build trust and create a direct channel to nurture potential clients, progressively guiding them toward choosing your services.
Leverage Word of Mouth Marketing from Existing Clients
Happy clients are the best advocates.
Encourage your customers to spread the word about your exceptional services. Offer incentives like discounted future services or other perks to motivate them.
The strategy allows you to maintain a healthy relationship with current clients and bring in new businesses, solidifying your agency's reputation in the market.
Other strategies you can use to attract clients include:
- E-mail marketing
- Attending networking events — works well when you've established your agency and want to meet clients or local businesses.
Ad Agency vs. Digital Marketing Agency
While a digital ad and digital marketing agency may appear the same, they differ significantly.
Digital ad agencies focus on creating online ads. Think of those banners you see on websites or short video clips before a YouTube video. Their main goal is to get quick and immediate attention from viewers.
On the other hand, digital marketing agencies handle a bigger scope of work. They deal with tasks such as writing website articles, improving search engine rankings, and managing social media accounts. They aim to build a brand's presence online over time.
Why a Digital Ad Agency Over a Digital Marketing Agency?
You'd want to start an advertising agency over its marketing counterpart for several reasons. The former:
Is Relatively Easy to Start
You don't need an intricate legal structure to have an advertising agency up and running. Sure, you will need to register a business and a business bank account to help you separate personal funds from money to run your startup, but there's not much to get started.
As I've discussed above, starting an advertising agency is a five-step business model that doesn't involve a lot of planning. Once you have the skills, you're good to go.
The Expenses Are Relatively Low
You don't need office space to start an online-based advertising agency. The startup costs of ad agencies are relatively low. The biggest differentiator is the number of tools and the support network you need to get started.
Let's say you're offering content marketing, SEO, project management, and web development with your agency. In that case, you may pay for several tools to help you do the heavy lifting.
The more the tools you need, the higher your business expenses.
As I have demonstrated above, you can start an advertising agency with two or three tools and stable internet access.
It's Easier to Scale
It's easier to master your skill if you start an advertising agency focusing solely on one service. Clients want to deal with an agency that knows what it is doing, and you're likely to land high-paying customers if you can show mastery in your craft.
With premium clients comes an increase in annual revenue, giving you the resources you need to expand your business.
Besides, focusing on one area makes getting client testimonials and referrals easy. While you can still scale your digital marketing startup, it might take a little longer, especially if you don't have a high-paying customer base.
Plus, the more services you offer, the more employees you need to help you deliver tasks in good time.
Frequently Asked Questions (FAQs)
How Do Ad Agencies Make Money?
Ad agencies make money primarily through commission-based pricing models, charging a percentage of the ad spend they manage for clients. For instance, if a client allocates $100,000 for advertising, the agency might take a 15% commission, earning them $15,000.
Additionally, agencies might charge fees for specific services, like creative design or market research. Some opt for a retainer model, where clients pay a fixed monthly or annually for services.
Some charge hourly, depending on the work's complexity and duration. The pricing model often depends on the agency's size, expertise, and client preference.
Which Ad Agency Is the Most Profitable?
Full-service advertising agencies often enjoy a steady income from long-term contracts with big brands.
Media planning advertising agencies specializing in ad placement, on the other hand, can achieve good margins through bulk purchasing.
Creative boutiques, concentrating on design and copywriting maintain profitability with lower overheads. Furthermore, specialized agencies targeting niches, such as healthcare, can command higher fees.
How Hard is it to Start an Advertising Agency?
Starting an advertising agency, like any new business, requires careful planning and research. Besides having a detailed business plan, you must establish a need for your services. You must nail down who your customer is and gauge your competition as well.
You don't want to get into a too competitive advertising niche because winning your first customer will be hard.
That said, the entry barrier for an advertising agency isn't high as long as you have the skill, a good marketing plan, and the will to work.
Go Start Your Advertising Agency
You now know what it takes to start an advertising agency. The next step requires actions on your part. While you may not land your first client overnight, the advertising industry is vast - you only need to keep at it.
Winning your first customer is half the battle, though. You must ensure you deliver stellar results with your ad campaigns. Advertising agencies rely on customer trust and referrals to retain clients and get new business.
With tools like AdCreative, SEMRush, and others I've highlighted in this post, you can launch your advertising agency and generate some good money within months.
So, go out there and start your advertising agency. To your success!