If you’re debating the online business models of blogging vs. dropshipping then this post is for you!
And although I have never started a dropshipping business, I studied them closely back when I was debating which online business model to pursue.
Before I get started, here’s a quick refresher on how these two business models differ:
A blog is a content-driven website typically revolving around the written word as its primary information medium.
Blogs can monetize in any number of ways but usually do so with ads, information products, or subscriptions.
A dropshipping website sells a physical product manufactured by a third-party that also handles order fulfillment.
Both businesses are popular in today’s growing online economy but their business models are very different.
Let’s take a look at some qualities of each of these business models to see which is best for you.
Startup costs are an important factor when considering any business to pursue.
Thankfully, starting an online business doesn’t need to be expensive.
In fact, it can be nearly free.
You can buy a domain name for $1 in your first year and ~$15 per year thereafter.
And you can have free web hosting, though usually, bloggers pay $3-$8 per month from a company like Bluehost.
That’s all you need to set up a blog.
The startup costs to set up an online store to dropship can be the same as setting up a blog.
However, if you want to use a popular dropshipping platform like Shopify which handles web hosting and makes the dropshipping process very smooth, your monthly cost will be ~$30.
Blogging Vs. Dropshipping Startup Cost Winner: Tie
Bloggers usually require the following to succeed:
- Patience: It takes years for most bloggers to make any money, let alone a full-time income. For instance, my wife and I hit $3,000 per month in advertising income from her travel blog in December of 2020, and we started the blog in April of 2017.
- SEO Knowledge: SEO stands for search engine optimization. If you’re blogging, you most likely want to focus on getting traffic from search engines, and SEO is the study of how to do that.
- The Ability to Create Content Prolifically: Most bloggers need to create a high volume of content before they get much traction. Be prepared to write 100+ blog posts before you really start getting traffic (and earning income).
On the other hand, dropshippers typically require the following to succeed:
- The Ability to Validate and Source a Product: You want to sell a product with proven demand, and you need to find a manufacturer for this product that also does order fulfillment.
- Knowledge of Paid Advertising: You need to get visitors to your site somehow, and dropshippers typically use paid advertising to acquire visitors and customers. So you’ll need to learn how to run successful paid advertising campaigns, whether that’s on Facebook or elsewhere.
- Capital: Because dropshippers typically use paid advertising to obtain traffic, you’ll need some money to pay for that advertising.
Blogging Vs. Dropshipping Required Skillset Winner: Tie. It just depends on what your skills are.
If you don’t know what a moat is in the context of business, don’t worry.
The idea is simple.
What is a moat?
The concept of a moat made popular by legendary investor, Warren Buffet, refers to a companies’ competitive advantage.
Just like how a medieval castle used a moat to protect itself from invaders, a business’s moat protects itself from competitors.
Without a good moat, a business will lose its profits over time to competitors.
For instance, one element of Google’s moat is the proprietary technology behind its search engine.
A new company would have a hard time competing with Google in search because Google’s proprietary technology makes its search engine so effective.
Looking at a different example, Coca-Cola’s brand is part of its moat.
Say you create a better-tasting soft drink that has the capacity to be more popular than Coke.
Even so, competing with Coke would be challenging because of its strong brand that almost everyone in the world knows.
In short, Google and Coca-Cola have great moats that protect their profits from competitors.
And, as you can see from these examples, companies typically build effective moats with a strong brand, proprietary technology, and/or intellectual property or copyrights.
Moats are important in any business model including blogging and dropshipping.
You want to build a business with a strong moat that generates profit for as long as possible.
And building a moat is easier to do with some business models than it is with others.
How do I know this?
A simple way to test how easy it is to build a moat with a given business model is to think through how easily a competitor could build the same business.
The more easily a competitor could build a similar business, the less likely it is that you have a good moat.
For instance, say you build a successful blog with 100 well-researched articles that are on the first page of Google for all of their respective keywords.
Theoretically, a competitor would need to write 100 higher-quality articles and outrank you for all of those keywords (which could take years).
If you know much about SEO, you know how challenging this can be.
On the other hand, imagine you have a dropshipping business selling widgets.
Because of your success, someone else sets up a similar web store, finds your manufacturer for widgets, and starts selling your exact same product on their web store at a slightly lower price.
As you can probably tell from this example, setting up a competing dropshipping company is usually easier than competing with another blog.
Thus, building a moat is typically easier with a blog than with a dropshipping business.
Blogging Vs. Dropshipping Moat Winner: Blog
The profit margin of a business refers to the percentage of income the company keeps as profit.
It’s usually easiest to think of business terms like this one in the context of an example.
Thinking Through Profit Margin With an Example
Let’s discuss profit margin with a simple example like a lemonade stand.
Say this lemonade stand sells 10 cups of lemonade a day for $1.00 per cup.
Its daily revenue (gross sales) would be $10.
And say that it costs 20 cents to make each cup of lemonade.
That means the lemonade stand owner keeps 80 cents of profit per dollar cup of lemonade.
So the lemonade stand’s profit margin is 80%!
For those who don’t know, 80% is an absolutely spectacular profit margin.
But as businesses grow, their profit margins (often just called margins) tend to shrink.
Regardless, you want to build a high-margin business because high margins mean you take home more money as profit.
(I discuss margins more in my post about game theory in business.)
Unfortunately, dropshipping is a low margin business.
Even Shopify, one of the most popular dropshipping platforms, acknowledges that dropshipping is a low margin business.
According to billda.com, dropshipping margins are around 15%-20%.
That means if your dropshipping business generates $100,000 in sales, your business’s profit is likely going to be around $15,000 to $20,000.
Why do dropshipping businesses have low margins?
Typically, dropshippers have high website traffic acquisition costs because they rely on paid advertising to get traffic.
Also, dropshippers need to pay the wholesale cost of whatever product they’re selling.
How can blogging margins be so high?
Most bloggers rely on organic traffic sources for their blog.
As a result, they often don’t have any traffic acquisition costs.
Plus, monetizing with ads doesn’t have any costs associated with it.
So if your blog generates $100,000 in income, you could very well take home $70,000 – $90,000 or more in profit!
In short, blogging is almost always a higher margin business than dropshipping.
Blogging Vs. Dropshipping Margin Winner: Blog
Building a successful business, whether that’s through blogging or dropshipping, is almost certainly going to take a lot of time and effort.
So naturally, you want to put that time and effort into building the highest value business you can.
Usually, higher-value businesses have great margins and strong moats.
For evidence of this, check out the online businesses for sale on Flippa.
Flippa is a website where you can buy and sell all sorts of online businesses, from apps and domains to blogs and e-commerce dropshipping websites.
In fact, on Flippa you can filter online businesses for sale by whether they are dropshipping businesses or content-driven businesses like blogs.
One thing I’ve noticed as I’ve looked at business listings on Flippa is that:
Why are blogs often higher-value businesses than dropshipping websites?
Because, as I’ve mentioned, they tend to have better margins as a result of lower operating costs and stronger moats.
Even if you have no plans to ever sell your blog or dropshipping business, it’s nice to have that option.
And if you ever do sell, know that you will likely get a better price for your blog than for your dropshipping company.
Blogging Vs. Dropshipping Business Value Winner: Blog
As you can probably tell, I think blogging is a better business model than dropshipping.
But it’s not just me.
That said, you can still succeed if you want to build a dropshipping business.
And ultimately, I believe you stack the odds of business success in your favor most effectively by pursuing whichever business model you are most excited about and willing to put in the work for.
If that’s dropshipping, then go for it!
Let me know in the comments which business model you think is better for you and why.