Affiliate Marketing vs Dropshipping: Which Brings More Money?

Discover the key differences between affiliate marketing vs dropshipping in 2025. Compare startup costs, profit margins, and success strategies to choose the best online business model for you.

Did you know that 81% of brands use affiliate programs, while the global dropshipping market was valued at US$419.8 Billion in 2024?

These staggering numbers reveal just how massive both business models have become!

If you’re dreaming of starting an online business, you’ve probably stumbled across these two popular models.

But here’s the million-dollar question: which one will actually put more money in your pocket?

The choice between affiliate marketing and dropshipping isn’t just about quick cash – it’s about finding the business model that aligns with your goals, budget, and lifestyle.

But which path is right for YOU?

I’m here to break down everything you need to know.

What is Affiliate Marketing?

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As an affiliate marketer, you promote someone else’s product or service, and when people buy through your unique affiliate link, you earn a commission.

Think of it like this: imagine your friend asks you to recommend a good restaurant, and that restaurant pays you $10 every time someone goes there because of your recommendation. That’s affiliate marketing in a nutshell.

The process is actually pretty straightforward: First, you join an affiliate program – most companies offer these programs directly; others use platforms where companies list their products for affiliates to promote.

Amazon Associates is probably the most famous one, but there’s also ClickBank, Fiverr, ShareASale, and tons of others.

The commission rates vary wildly depending on the industry. Physical products on Amazon might only pay 1-10%, while digital products or software can pay anywhere from 20-50% or even more.

The beauty of affiliate marketing is that you can start with very little money. You only need a website or social media account to promote those products.

Though I’ll be honest – the “no startup costs” thing is a bit misleading because you’ll likely need to invest in learning, tools, and content creation to really succeed.

What is Dropshipping?

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Dropshipping is actually pretty simple when you break it down. You set up an online store and list products for sale, but just like affiliate marketing, you don’t hold an inventory.

When a customer orders something from your store, you forward that order to a supplier who ships the product directly to your customer.

The whole process starts with finding suppliers and the right products to sell.

Most people start with platforms like AliExpress, Alibaba, or SaleHoo to find products.

Here’s how the actual order process works, step by step:

A customer visits your online store, places an order, and pays you let’s say $29.99 for a phone case. You then go to your supplier’s website, place the same order using your customer’s shipping information, and pay the wholesale price – maybe $8.99.

Your profit is the difference between the price you charge the customer and the price you pay to the supplier.

A big advantage of dropshipping is that you don’t have an inventory and you don’t need to ship the products yourself.

Your supplier takes care of everything.

Affiliate Marketing vs. Dropshipping: Pros and Cons

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Are you wondering which of these two model is better?

Here are the pros and cons of both methods.

Affiliate Marketing Pros and Cons

Pros

The biggest advantage of affiliate marketing is that it’s incredibly low maintenance once you get started.

You can have old blog posts from 2-3 years that still generate commissions every month without touching them.

You also don’t have to deal with any customer service issues.

Your main job is just to promote the products or services.

The startup costs are ridiculously low too and it doesn’t require any upfront investment.

You can easily start with little budget to create an effective marketing campaign.

The main aspect of affiliate marketing is passive income. This means that you can earn money even if you are not working directly.

Your affiliate links are working for you!

If you want to start with affiliate marketing, choose and sign up for 2-3 programs, select products that align with your expertise, and create an effective marketing strategy to promote them.

Cons

Here’s where affiliate marketing gets frustrating.

First of all, you have zero control over the products or the customer experience. A company could change the entire pricing structure overnight, making your content useless or outdated.

Link removal or commission cuts are common issues and causing a loss in your passive income.

Sometimes the service you are promoting requires a final involvement from the company to finalize the sale. In this case you might be able to drive many qualified leads, but your earnings rely on the ability of the company to close the deal with those leads.

The commission rates can be pretty disappointing too, especially with physical products.

Amazon’s rates have dropped over the years. They used to pay 8% on electronics, now it’s just 2.5%.

When you’re promoting a $50 gadget and only making $1.25 per sale, you need A LOT of traffic to make decent money.

You also need to consider the delays in payments. Lots of companies have net 30 terms, which means they will pay you after 30 days, so you might need to rely on other sources of income until you get paid.

Finally, affiliate programs have specific rules that you must follow.

Some programs for example only allow Google traffic. Others require you to use only their assets when promoting their products.

Dropshipping Pros and Cons

Pros

The control aspect is where dropshipping really shines. You set your own prices, choose your products, and build your own brand.

Dropshipping allows you to scale much faster if you find winning products. In fact, with the right strategy you can easily go from $100/day to $2000/day in sales within few days if one of your ads goes viral.

This kind of explosive growth is much harder to achieve with affiliate marketing.

Once again, a big advantage of dropshipping is not having to manage an inventory.

Your supplier takes care of that, along with shipping, so you can just focus on your website, add as many product you want and promote them.

The customer data is yours too, which is huge for long-term business building. Every sale gives you an email address and customer information that you can use for retargeting and building a proper customer base.

Cons

The customer service side of dropshipping can be an absolute pain.

Handling customers issues about delayed packages and wrong orders can be very difficult because you don’t have control over the product quality, fulfillment, or shipping process.

All these instances can ultimately impact customer satisfaction and affect your profits.

Profit margins can also be low because your supplier takes a substantial portion of each sale and because competition can be high, especially for winning products.

Which Business Model is Cheaper to Start?

With affiliate marketing, your costs will usually involve building a website or a blog.

If you’re working with limited funds, affiliate marketing is definitely the safer option to start with.

Once you pay for hosting, you’re pretty much set. You might invest in keyword research tools or email marketing software later, but those aren’t necessary from day one.

Dropshipping, on the other hand, will hit your wallet much harder.

Setting up your online store already involves more costs than you would have with affiliate marketing:

• Ecommerce platform subscription (Shopify, WooCommerce)
• Premium theme
• Essential apps (Oberlo, email marketing)
• Facebook ads testing
• Logo design

You can easily spend between $500 and $1000 just to get started.

Additionally, there’s hidden costs that people do not often consider: Payment processing fees, transaction fees, app subscriptions, shipping costs.

Add them all up and you’ll see your profits shrink.

Which Business Model Should You Choose in 2025?

If you decide to start an online business, the initial investment required is the first thing you should consider.

But there’s more to that and the financial aspect is not the only one to take into account.

In the end, the decision to go for affiliate marketing vs dropshipping comes down to your personal goals, resources, strategy, and expertise.

Go with affiliate marketing if:

• You have less than $500 to start with
• You’re good at creating content or willing to learn
• You enjoy writing blog posts, making YouTube videos, or posting on social media
• You want something that can actually generate passive income

Choose dropshipping if:

• You have at least $1000 to invest and can handle losing some of it while learning
• You are comfortable with customer service
• You are willing to search for the best or most trending products of the moment
• You want to build a real business you could eventually sell

Both markets have become more and more competitive nowadays.

iOS 14.5 made Facebook ads trickier for dropshippers, while Google’s algorithm updates keep shaking up affiliate rankings.

If you’re completely new to online business, my honest advice is to start with affiliate marketing.

Learn digital marketing fundamentals, build an audience, then maybe consider adding dropshipping later.

There are several successful entrepreneurs who started with affiliate marketing and eventually launched their own products.

Don’t overthink it though – the best business model is the one you actually start and stick with consistently.

Want to know how you can turn blogging passion into a profitable online business?

Check out my guide on how to start an affiliate marketing blog.

Conclusion

Choosing between affiliate marketing and dropshipping isn’t about finding the “better” business model – it’s about discovering which one fits YOUR unique situation, goals, and resources.

Both paths can lead to financial freedom, but they require different approaches and mindsets.

Whether you’re drawn to the content-focused world of affiliate marketing or the product-centric nature of dropshipping, success comes down to consistent execution and continuous learning.

Ready to make your decision?

Start by honestly evaluating your current situation. Then take action – because the best business model is the one you actually start and stick with!