How do digital marketing firms make money?

Rfps, pitches, hourly rates, project based fees, etc. 

Charging by the hour is the original method advertising agencies used .

Digital Marketing firms are having many resources through which they can make money, there are having various techniques in digital marketing, if you are having excellent knowledge in particular techniques like SEO or SMM then you can easily make money by exploring your ideas for different projects through specific techniques. Digital marketing is the process of promoting any product or brand from the electronic channel. So in today’s digital world there are many opportunities for digital marketing firm because most of the people all over the world are want to explore their business, people are showing more interest in online business this is also a plus point for digital marketers. Nowadays every single person living in rural or urban area are search for specific products before purchasing, the customers become smart, they have the strength of internet, no one can make them fool, they are preferring to search the things, know about the products or brands and then take final decision of purchasing it. During this time period, playing a great role in changing the customers by their great effort and strategies they are putting while promoting the products or brand. So marketing firms are very essential for online business and these only help them to generate a great revenues and making money.

Digital Marketing is booming business and have enormous No. of areas to make money

But will state some for you..

- Starting by platforms that provide digital marketing such as Google,Facebook,YouTube...etc

they get their money directly against your Ad that posted in their websites

- Affiliate market, which is another category, these are similar for 1st one but with lower rate

such as blogger, deals and promotion sites and these mostly got percentage of selling value against drive traffic to your websites

- Digital marketing consultant, these are the professional of field, who can handle your business digital marketing campaign against agreed deal or employment as in big companies  

hope that can give you some insight about what you looking for 

Digital marketing is extremely wide area, covering digital communications and consulting, web design and development, media planning and buying, public relations on the web etc.. each area makes money on a different model, and answering your question would fill a book ;) For non-digital marketing people, digital world is still a blackbox, and digital agencies are taking advantage of that, thus they are not happy to reveal how they make their money and just how much of it they make ;) Thanks for asking me anyway, I am enjoying (answering) your questions.