Yes, that is part of it but more often, going from a FREE blog to a serious website with WordPress.org is a big step. People with custom domains are typically competitive for business, ad revenue and other. More than those with FREE Blogs.
Sure, they think they are competitive but search engines, most often, don't take them seriously. Think about this: Google, which owns Blogspot, typically REFUSES (but are becoming more willing for MONEY) to allow those with THEIR OWN Blogspot properties to use their Paid Advertising with Adwords!!!
.com are nothing more than hobby sites (not that there is anything wrong with that).
For any who dispute this - check your top 20 most competitive keyword searches, go to search engines and find how many FREE Blogs are in top 10-20 results.