Affiliate Marketing vs Dropshipping In 2021: Which Makes More Money?

Affiliate marketing vs dropshipping feels like a heavyweight battle for the ages.

That’s because of all the different ecommerce business models online, these are the two most popular ways to get started since they’re both relatively cheap and easy to get started. But, you only have so much time, energy, and resources to dedicate to a business.

So if you had to choose one over the other, which one would make you more money?

In this guide, we’re going to go deep to answer these questions. This includes going over exactly how to make money with affiliate marketing, how to make money with dropshipping, and then comparing the two at a micro level to really understand which is best for you.

Let’s get started…

Affiliate Marketing vs Dropshipping: What Are They?

When you’re just starting out, it makes sense to go after a more capital efficient business. This means a business that doesn’t require a lot of money or at least one that doesn’t require a lot of money upfront to actually start and grow.

Both affiliate marketing and dropshipping fit the bill. But what are they anyway?

What is affiliate marketing?

Affiliate marketing is when you sell someone else’s product for a commission. For example, you can sell a Nike shoe from Amazon to a friend with your unique affiliate link and earn a small percentage of the sale once the purchase is made. In this business model, you don’t need to own the product at all, so all you have to worry about is the traffic.

Now, you can make affiliate sales in any way you want. However, when most people talk about affiliate marketing, they generally mean building a blog that reviews different products and uses SEO to make sales. For example, starting a crossfit review blog that reviews the top supplements, tries to rank their articles with keywords like “best protein powder for Crossfit” on page 1 of Google, and then get sales from that traffic.

So for our purposes, we’re going to stick to that definition.

What is dropshipping?

Dropshipping is when you sell a product a manufacturer already has made and the manufacturer ships it for you. For example, you can find a yoga mat on Aliexpress, set up a Shopify store, sell the yoga mat, and then have the manufacturer make it and ship it for you directly to the customer. Dropshipping products can be made in the U.S or elsewhere.

With that said, when most people talk about dropshipping, they’re talking about Chinese made products from Chinese manufacturers. This is why the most popular form of dropshipping is to use Aliexpress or by talking directly with Chinese manufacturers. If you decide to use U.S based manufacturers, the deal is still the same. Unlike affiliate marketing though, you’re not selling a brand name and earning a commission. You’re selling a generic product with a no-name “brand” and have to build your own ecommerce store to sell it.

Affiliate Marketing vs Dropshipping: Which Is Easier?

While both affiliate marketing and dropshipping are beginner-friendly, they both are completely different business models, which means they have very different skills sets needed to grow.

The skill sets behind affiliate marketing

Again, affiliate marketing is when you sell someone else’s product for a commission. Typically, you’re using Amazon Associates program to do this. So all you have to do is to get good at search engine optimization (aka SEO) and learn how to run a blog so you can make sales directly off of your blog posts, which is essentially the same as building a small media company.

Here are some of the skills involved in doing the above…

Niche selection
Keyword research
Content creation
Backlink outreach
Blog management
Hiring freelancers*

The last step is optional since you can build an entire affiliate blog by writing all of the content yourself. But if you ever decide to scale past yourself, it’s an essential skill set.

The skills sets behind dropshipping

With dropshipping, you are usually reliant on Shopify and Aliexpress or whatever dropshipping manufacturer you’re working with. This means you also only have to worry about getting good at getting traffic and converting that traffic. This is usually done with paid advertising and landing pages.

Here are some skills involved with the above…

Niche selection
Product selection
Copywriting
Ad management
Email marketing
Conversion rate optimization

With dropshipping, you can do all of the above yourself. But you can always outsource some of these skills if and when you’re big enough and have enough profit to do so.

So which one is easier?

Of the two, dropshipping definitely requires more concrete marketing skills. There are consultants who spend decades specializing in each one of the main skills like copywriting, ad management, email marketing, and conversion rate optimization.

Of course, I’m not saying it can’t be done. Neither do you have to be world class in all of them. However, these are definitely harder skills to learn and you have to be “good enough” in all of them so you can make a sale, especially with dropshipping products.

In my opinion, affiliate marketing is much easier.

You don’t have to worry about anything on the conversion side because Amazon handles that all for you. They’re conversion rates are sky high since they spend millions in optimizing every single detail. That already eliminates most of the “hard” skills required to sell a product.

The rest is typically straightforward. Almost anyone can write good review articles. It’s also much easier to outsource the content writing than it is to outsource the services needed to market a dropshipping store. You also don’t have to be nearly as good at analytics to understand when you’re making a profit and if you’re not, how to fix things until you do.

Affiliate Marketing vs Dropshipping: Which Is More Profitable?

Ultimately, what matters in a business model is the potential profit. It makes a huge difference if one model is twice as profitable as the other even if it takes a little more work to make it happen. Now, what I’m about to say next might be a little controversial, but it’s based on pure math.

From my experience, affiliate marketing is much more profitable.

In both affiliate marketing and dropshipping, you are dealing with pretty low margins. This is true even if you do high ticket affiliate marketing or high ticket dropshipping, but at least it’s still better to make 5% from a $100 product than 5% from a $20 product. So the real difference between the two is the cost to acquire a customer. 

With dropshipping, most of your traffic is coming from paid advertising. This means dealing with rising CPMs from increased competition, increasing budgets, and even having to deal with holiday rushes that can completely change your profit structure. And if you want to really optimize your ads, you’re also spending money on the ad creative. 

Hence why paid advertising is a variable cost. It increases as you grow.

Worst yet, the moment you turn off ads is the moment you stop making money.

With affiliate marketing, the cost to produce an article stays the same whether you’re starting from 0 or you have 100,000 visitors per month. Of course, this is assuming you’re sticking to the same length and writing expertise at both stages, which many affiliate marketers do. 

And unlike paid ads, each article you publish drives you traffic and sales for years for free.

In addition, once your blog is big enough, the best affiliate marketers end up diversifying their revenue sources. For example, Gear Patrol is one of the top product review sites for men. Not only do they make money reviewing products, but they also make money with sponsors, their agency services, their affiliate shop, and their live event, among other things.

You can do that with affiliate marketing because affiliate marketing can lead to audience building. But even if you decide not to build an audience and just want to keep things simple, you’ll still make more money at scale with affiliate marketing than with dropshipping.

Affiliate Marketing vs Dropshipping: The Final Verdict

Dropshippers are going to hate me, but the choice is pretty easy.

I would pick affiliate marketing over dropshipping any day of the week.

Ultimately, you’re not building a real, defensible asset with dropshipping. You have no audience, no brand, and you have no real profit to make it all worth it. There are close to no examples of a dropshipping business that’s really “hitting it big”, despite what many guru’s like to advertise.

On the hand, affiliate marketing can lead to huge results.

Just look at sites like Wirecutter, Gear Patrol, and Buzzfeed. All of these businesses have strong assets, they have large audiences, they are strong brands, and have extremely diversified revenue sources. 

Heck, even the affiliate sites that just stay strictly with promoting Amazon products can be sold for really great multiples and are more in-demand than dropshipping stores. But if you can launch your own shoe business, sell your own soap brand, or whatever is relevant to your site, even better!

What About Combining Dropshipping And Affiliate Marketing?

If you’ve noticed, many of the problems of dropshipping are solved by affiliate marketing. Theoretically speaking, this means that if you were to combine affiliate marketing with dropshipping, that would be a good thing, right?

I would say yes and no.

Yes, it would be great to start an affiliate site and grow it to 100,000 visitors per month. From there, you build an email list and now you can start a dropshipping store under the same brand and sell products similar to the ones you review. Almost like Gear Patrol’s affiliate shop, but with dropshipping products. This allows you to build the audience of an affiliate site with the margin of a dropshipping site.

However, dropshipping still has major drawbacks.

Some of these include selling products that aren’t under your brand, shipping times still take 2-3 weeks on average, and the products typically aren’t great. In other words, if you want to sell physical products once you’ve built a large enough affiliate site, you might as well just private label your brand and put it up under the same name.

That way, you can fix all the issues of dropshipping and make even more profit.

How About Amazon FBA vs Dropshipping vs Affiliate Marketing?

Amazon FBA is a completely different beast than either dropshipping or affiliate marketing.

With Amazon FBA, the whole idea is to create your own brand of physical products and then doing everything possible to make sales on Amazon through Amazon SEO and Amazon PPC. Once you make the sale, Amazon handles all of the shipping for you.

I choose Amazon FBA over dropshipping because you get to own a real brand and you get to use both organic and paid traffic to make sales. Plus, you still get the added inventory and shipping benefit from dropshipping, but with differentiated products that have even better margins. So it completely beats dropshipping at almost every single level.

Amazon FBA vs affiliate marketing is a much harder comparison. They are both great models and both can work really well. It’s mostly going to come down to what you’re good at and what you really want to do. You either like the game of listing optimization, reviews, Amazon SEO, and packaging for a new brand or you prefer content, Google SEO, and reviewing existing products.

With that said, building an affiliate site that leads to your own Amazon FBA store is one of the best money making combinations you can ever do.