duckduckgo-business-model

How Does DuckDuckGo Make Money? DuckDuckGo Business Model Analysis

DuckDuckGo makes money in two simple waysAdvertising 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.

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 already had a massive market share of the search engine market.

Yet, Gabriel looked 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, the classic experience through search engines was that once a search term had been inputted into the search box, you would get many 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 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,

DuckDuckGo-Launch

Feedback arrived quite soon,

DuckDuckGo Launch

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, 

duckduckgo-traffic-growth

With the rise in privacy concerns online, DuckDuckGo has gained substantial traction, reaching over 111 million queries daily by October 2022.

While still small compared to Google (which runs at billion searches daily), DuckDuckGo has demonstrated that you can launch a business in a resegmented market

market-typesA resegmented market is a market dominated by a few key players. 

How do you, for instance, enter such a market?

A key strategy – which was used by DuckDuckGo – to enter the market was to look for “value gaps” or products/services that fulfill a need that the dominant player can’t (for various reasons):

market-entry-strategies
An entry strategy is how an organization can access a market based on its structure. The entry strategy will highly depend on the definition of potential customers in that market and whether those are ready to get value from your potential offering. It all starts by developing your smallest viable market.

In DuckDuckGo’s case, the company developed its business model, which focused on privacy.

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.

Market Blindness

In a classic Innovator’s Dilemma scenario, the dominant player lives in such a large industry. 

When a new player comes about, it’s usually targeting a segment of that industry that is not interesting to the dominant player. 

For instance, in the case of DuckDuckGo, focusing on privacy; is only a small segment compared to the overall search industry. 

Indeed, Google might have ignored it altogether initially. 

This is a classic example of the dominant player that, due to its success, can’t see the opportunity (what I like to call market blindness). 

This connects to the next point. 

Success Paradox

The dominant player, which enjoys incredible revenue growth, and profit margins, will focus most of its business on maintaining that market position. 

Yet, there is a certain point at which the market steers away from a trend and moves toward another trend. 

For instance, a decade before, privacy was not a relevant issue. 

Yet, as more scandals affected tech giants and how they handle data, privacy suddenly became a much larger market. 

Thus, making the dominant player unprepared for when this market exploded. 

This is why the dominant player can’t see it coming (what I like to call a success paradox).

Saturn’s Syndrome

In Greek mythology, as the story goes. Saturn (or, as the Greeks called him, “Cronus”) was the king of the Titans. 

In fact, before gods would take over Greek mythology, there was the kingdom of Titans. 

As the story goes, Saturn had learned that one day, one of his sons will dethrone him. 

To prevent that, Saturn, as he was about to become a father, he swallowed his sons. 

He believed he would have kept his reign forever in this way. Yet, in some ways, the sixth son survived; thanks to the mother hiding him from Saturn, he grew up with the idea of vindicating his brothers. 

As that son grew, he developed relationships with other divinities until he was big enough to challenge his father, Saturn. 

Finally,  the sixth son, who could not be swallowed, overthrew Saturn and became the new king. 

Yet, this son, called Zeus, ended the Kingdom of Titans, and he created a new kingdom, the Kingdom of Gods. 

That is how the Titans era ended, and the Gods’ era started. 

Going back to the business world. It doesn’t matter how much firepower the dominant player has. 

It can try to swallow as many new entrants as possible, yet the new entrant will build a new kingdom from scratch in an era where technology accelerates, and new industries are created each decade. 

And dethrone the former dominant player. 

In short, the new entrant will build a new industry from scratch, taking advantage of bottom-up forces (consumer adoption). 

That industry will initially look uninteresting to the dominant player and, in some cases, not relevant. 

Yet, as the new industry develops non-linearly, it comes the time where the new industry grows at such proportion to potentially swallow the former dominant industry. 

So, in a reverse process, Saturn, once swallowing his sons, then gets swallowed. 

In other words, the new player had to build its strength on a new industry, which it had created from scratch, and it’s a new playfield.

The former dominant player doesn’t know how to navigate. This creates a huge competitive advantage for the new entrant, now a dominant player in a new industry. 

And it creates the premises to take over the old industry! 

Value Gaps

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 Google’s competitive advantage is in the data it has and how it repackages it. 

Therefore DuckDuckGo’s business model starts from a weakness in Google’s value proposition.

Differentiate the value proposition

value-proposition
A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.

When you surf the web through Google, the search engine tracks you so that you can get targeted ads from the businesses part of the AdWords network.

At the same time, this is interesting for businesses, which can quickly make money from advertising.

That is a flaw in this model: users’ privacy.

In fact, concerns about 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.

RelatedDuckDuckGo: 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, the search engine may return an ad within the results.

For instance, if I’m searching for “car insurance, ” the search engine will return an advertisement related to that.

As simple as that. The search engine will not track or 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 to generate revenue streams together with untargeted advertising.

Is the DDG model sustainable?

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

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, which comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

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 users’ privacy concerns 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 built a business model based on differentiating its value proposition from Google.

Google’s value mainly comes from its ability to track its users to offer targeted ads.

While this strength 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 DuckDuckGo ever 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 critical for DuckDuckGo users, why not experiment with a subscription-based search?

Who says that search has to be free at all?

Related Business Models

Google Business Model

google-business-model
Google is a platform, and a tech media company running an attention-based business model. As of 2021, Alphabet’s Google generated over $257 billion in revenue. Over $209 billion (over 81% of the total revenues) came from Google Advertising products (Google Search, YouTube Ads, and Network Members sites). They were followed by over $28 billion in other revenues (comprising Google Play, Pixel phones, and YouTube Premium), and by Google Cloud, which generated over $19 billion in 2021.

Attention-Merchants Business Model

attention-business-models-compared
The organization doesn’t monetize the user directly in an asymmetric business model. Still, it leverages the data users provide and technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data and its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Asymmetric Business Model

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly. Still, it leverages the data users provide and technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data and its algorithms sold to advertisers for visibility.

Facebook Business Model

facebook-business-model
Facebook, the main product of Meta, is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion was from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm). 

TikTok Business Model

tiktok-business-model
TikTok is a Chinese creative social media platform driven by short-form video content enabling users to interact and generate content at scale. TikTok primarily makes money through advertising, and it generated $4.6 billion in advertising revenues in 2021, thus making it among the most popular attention-based business models or attention merchants.

Instagram Business Model

instagram-business-model
Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc.’s overall business model. Acquired by Facebook for a billion dollars in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger left the company, as Facebook pushed toward tighter integration of the two platforms.

YouTube Business Model

how-does-youtube-make-money
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it generated more than $28B in revenue by 2021. YouTube also makes money with its paid memberships and premium content.

Twitter Business Model

how-does-twitter-make-money
Twitter makes money in two ways: advertising and data licensing. In 2021, Twitter generated $4.5 billion from advertising and $570 million from data licensing. While Twitter generated $5 billion in total revenues, it lost 221 million.

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1 thought on “How Does DuckDuckGo Make Money? DuckDuckGo Business Model Analysis”

  1. 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

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