DuckDuckGo makes money in two simple ways: Advertising and Affiliate Marketing. Advertising is shown based on the keywords typed into the search box. Affiliate revenues come from Amazon and eBay affiliate programs. When users buy after getting on those sites through DuckDuckGo the company collects a small commission.
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Who says you can’t start a search engine in 2008?
It was 2008, Gabriel Weinberg had successfully sold a tech company, and now he had the time and the cash to experiment with new projects. He started to experiment with many side projects at once.
Among them, there was a search engine. We’re in a time when Google had already a massive market share of the search engine market. Yet, Gabriel was looking into ways to make the search experience less invasive.
In reality, he had two things in mind: on the one hand, he wanted the search engine to offer instant answers to users. Indeed, at the time the classic experience through search engines was that once a search term had been inputted into the search box, you would get a plethora of links to navigate.
Gabriel, instead, wanted to start creating a sort of answer engine.
On the other hand, he also thought that on Google there was too much-paid advertising and spam, So he wanted to fix that. However, who would have invested in a project, in a market, dominated by Google?
Gabriel reasoned that if he managed to make the project gain traction, by using his time and financial resources, he could then get proper funding, once the project had shown it could take off.
Gabriel Weinberg solo launched on September 25th, 2008.
In the international newspapers, there wasn’t a trace of DuckDuckGo’s launch.
That didn’t happen because it was not what Gabriel Weinberg was looking for.
He just wanted to know whether he was on the right track to building the kind of search engine he had in mind.
That is how that day he launched DuckDuckGo on a forum called Hacker News,
Feedback arrived quite soon,
Source: News.Ycombinator
From the “horrible name” to people blown away by how effective DuckDuckGo was for a solo development and launch; after all Gabriel Weinberg understood he was into something.
This was the start of DuckDuckGo.
Today,
With the rise in concerns about privacy online, DuckDuckGo has gained substantial traction, reaching over 98 million queries, daily by May 2022. While still small compared to Google (which runs at billion searches each day) DuckDuckGo has demonstrated that you can launch a business in what’s called a resegmented market.
In short, that is a market dominated by a few key players.
How do you, for instance, enter such a market? A key strategy is to look for “value gaps” or products/services that fulfill a need that the dominant player can’t (for various reasons):
In DuckDuckGo’s case, the company developed its business model, focused on privacy. In fact, where Google harvests data at scale, DuckDuckGo, throws the data away!
This is a key difference.
But, why would the dominant player doesn’t take notice of the new entrant? In reality, the incumbent does take notice, but there are various reasons why it doesn’t act:
- Do not see the opportunity (what I like to call market blindness).
- It can’t see it coming (what I like to call a success paradox).
- It doesn’t align with its core business model (what I like to call the Zeus’ syndrome or that for as much financial firepower the incumbent has, innovation, as it is a bottom-up force is in many cases, unpredictable).
- Your value proposition targets the core weakness of the dominant player. Take the case of DDG vs. Google. Would Google survive if it were to throw the data away? Most business people argue that the competitive advantage of Google is in the data it has and the way it repackages it.
Therefore DuckDuckGo business model starts from a weakness in Google’s value proposition.
Differentiate the value proposition
When you surf the web through Google, the search engine is tracking you so that you can get targeted ads by the businesses part of the AdWords network. While this is interesting for businesses, which can quickly make money from advertising.
That is a flaw in this model: users’ privacy. In fact, as concerns how data online gets used by private companies or governments open up new concerns from users. A concern is a threat to an established organization, but an opportunity for a rising one. Those fears can become a value proposition.
That is precisely what DuckDuckGo has done. Privacy has been the beginning and one of the reasons why the search engine got built.
Related: DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game
Advertising without tracking
According to DuckDuckGo’s founder, Gabriel Weinberg, that is a myth that you have to track users to advertise.
Once a person enters a keyword into the search box, and if that keyword could be connected to a product or service, then the search engine may return an ad within the results.
For instance, if I’m searching for “car insurance” then the search engine will return an advertisement related to that. As simple as that. The search engine will not track either use your data as it will through it right after the search gets completed.
In short, where Google’s value proposition fails, DuckDuckGo builds up a business.
DuckDuckGo’s business model has one key stakeholder: users. And it has one fundamental value proposition: privacy!
A new revenue generation pattern for search: Affiliate Marketing
There is nothing innovative about affiliate marketing. What is innovative is the use of that for a search engine. As we saw DuckDuckGo uses affiliations as a way to generate revenue streams together with untargeted advertising.
Is the DDG model sustainable?
Back in 2015, DuckDuckGo was already profitable, and its revenues exceeded $1 million.
By 2021, DuckDuckGo is still profitable, and probably running a $100 million per year business.
It’s still a tiny company compared to Google, if we look at the overall business model:
Indeed, in comparison, Google’s search advertising machine generated over $149 billion in 2021.
Of course, the fact that the company is profitable and able to grow its user base consistently is a good sign.
However, will it be able to grow enough to be sustainable in the long run? That will depend on whether or not users’ concerns related to privacy will grow and DuckDuckGo’s ability to create new revenue generation patterns, besides advertising and affiliate marketing.
For instance, if privacy is a substantial concern, a subscription-based web search might be one option.
Experimentation here is the key to finding its business model-market fit!
Key takeaway
DuckDuckGo has managed to build a business model based on differentiating its value proposition compared to Google. Google’s value mainly comes from its ability to track its users to offer targeted ads.
While this is a strength that makes it attractive for businesses to pay for Google ads, and publishers to know what content users want, that might also be a weakness. As privacy concerns grow, more users are willing to give up Google to find an alternative to that.
Based on that. DuckDuckGo has built a value proposition based on privacy.
Where Google tracks its users, DuckDuckGo doesn’t.
So how does it make money? Mainly through untracked advertising and affiliate marketing. Is this business model sustainable?
As of 2021, DuckDuckGo is profitable and it generated $100 million in revenues which is still a tiny fraction of Google’s advertising revenues, of $149 billion in the same year.
Thus, the question that comes to mind is “will ever DuckDuckGo become a dominant player?”
That is hard to answer, and it will depend on DuckDuckGo’s ability to experiment with other sources of revenue generation.
For instance, if privacy is something so critical for DuckDuckGo users, why not experiment with a subscription-based search? Who says that search has to be free at all?
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that’s a good point. I agree that when companies become too big, they also become intrinsically prone to do more harm than good. At the same time, this isn’t always the case. We definitely need alternatives to the major tech players