This is a great question, and really the answer is what are you wanting to do. Both options are a great way to get your word, thoughts, ideas, and products out to the public. With both options you can do some seo and get great ranking on the search engines. I have one website that pay for hosting and have the domain name I picked. Cpu overclocking software it deals with overclocking your computer. A subject I love to talk about. I am on first page of all major search engines, including Google for my keyword and working on other keywords. I paid 80 bucks start up, and I have made a few dollars with this website.
I also have about 10 other blogs I write on, each on different niches. Atleast 4 of those blogs are first page google as well. I have also made a few bucks on these with different affiliate programs. So my question is which is better, a paid webhost with domain name or using free blog formats.
With both I have made money. With both I am on first page of search engines. I made back my hosting fee with my paid after a few affiliate sales. Once I made my first affiliate sell on my blogs I was already in profit.
My thoughts on both. With paid hosting and websites, I did some seo and made first page of google. I have to be careful with what I post and add to that site, because it only takes a wrong post to drop in rankings. I have done that a few times. However if I ever wanted to get fancy with it I can. I could even add a membership section to it. With paid hosted websites you can pretty much do anything technical to it.
With blogs you cant get as fancy. How ever with blogs, If I get a post that makes it first page of search engines it stays. No matter what I post after it. So really both takes know how and you learn from mistakes. Blogs are free, the first sell you are in profit. Paid services you make money in the long run.
If you are on a tight budget but want to start making money online I would suggest a free service like this one, blogger. If you do a thorough keyword research then you can very well make the first page of search engines.
If you have a bigger plan and want to get more technical then go with a paid service. You can find cheap service like this one for 7.95 a month with unlimited hosting. However if you will still need to do key word research regardless of what your website is about if you want to rank well in search engines.

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