DuckDuckGo (DDG) is privately owned. Indeed as reported by Crunchbase, it received over $170 million in funding from several investors, comprising Union Square Ventures (led by Fred Wilson). DuckDuckGo’s business model proposes itself as an alternative to Google’s business model. Therefore while it might be an option for Google to purchase DDG to reduce the competitive pressure from privacy-based search engines, this is off the table as of now.
Might DuckDuckGo be acquired by Google in the future?
To answer this question, let’s go back for a second to how these two business models work.
Where Google makes money primarily via targeted advertising (the search engine collects many data points across various devices also thanks to Android and its Google Chrome browser, as the users navigate the web).
Google is a platform, and a tech media company running an attention-based businessmodel. 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.The digital advertising industry has become a multi-billion industry dominated by a few key tech players. The industry’s advertising dollars are also fragmented across several small players and publishers across the web. Most of it is consolidated within brands like Google, YouTube, Facebook, Instagram, Amazon, Bing, Twitter, TikTok, which is growing very quickly, and Pinterest. Google generated over $116 billion from advertising revenues in 2018, which represented 85% of its total revenues. Of those revenues, over 70% came from traffic via Google’s main properties (Google search engine, YouTube, Gmail, and others). Google’s main properties are monetized primarily via a cost-per-click mechanism. Network member’s sites are primarily monetized on a cost-per-impression basis. Google also spent over $26 billion in 2018 to sustain its traffic on both its properties and as a revenue-share mechanism with its network members (AdSense and AdMob).
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.
As contextual data (like location or keyword search) is collected to serve ads, it is thrown on the fly.
As you can imagine, this business model might be highly inefficient as it makes it hard for DDG to build so-called “data moats” or data network effects (network effects on the tool as it scales because it gains more and more data from existing users so that it can refine further its results for future users).
This deficiency in DuckDuckGo’s business model is well paid off by the fact that an exponentially growing number of users are willing to take a tool that might not be as advanced as Google, yet it is privacy-based.
Going forward, as digital advertising is evolving in the direction of more privacy-focused tracking, also DuckDuckGo will benefit from it, thus becoming even more valuable.
In that scenario, a potential takeover from Google (Alphabet) might not be as farsighted.
Key Highlights
DuckDuckGo’s Funding and Ownership: DuckDuckGo is privately owned and has received over $170 million in funding from various investors, including Union Square Ventures led by Fred Wilson.
Alternative to Google: DuckDuckGo positions itself as an alternative to Google’s businessmodel, focusing on user privacy and offering a privacy-based search engine.
Google’s Potential Acquisition: While DuckDuckGo’s acquisition by Google could be considered to reduce competitive pressure from privacy-based search engines, such a move is currently not in progress.
Google’s Revenue Model:Google generates most of its revenue through targeted advertising, collecting user data across various devices and platforms, including Android and Google Chrome.
Google’s Dominance in Digital Advertising:Google’s advertising revenues account for a significant portion of its overall revenue, with products like Google Search, YouTube Ads, and Network Member sites contributing the most.
DuckDuckGo’s Revenue Model: DuckDuckGo’s revenue comes from advertising and affiliate marketing. Advertisements are displayed based on search keywords, and the company earns from Amazon and eBay affiliate programs when users make purchases through DuckDuckGo.
Data Collection and Privacy: DuckDuckGo’s privacy-focused model contrasts with Google’s data collection practices, which have raised concerns about user privacy.
Efficiency and Data Network Effects: DuckDuckGo’s business model may lack the efficiency of data collection and network effects that Google enjoys due to its extensive user data.
User Preference for Privacy: Despite potential limitations, DuckDuckGo gains users who prioritize privacy and are willing to use a less advanced tool for the sake of data privacy.
Future Privacy-Focused Advertising: As the digital advertising landscape shifts towards privacy-focused tracking, DuckDuckGo stands to benefit and become more valuable.
Implications for Acquisition: Given DuckDuckGo’s unique selling point of privacy and its potential alignment with evolving privacy trends in advertising, the prospect of a takeover by Google might not be as strategically appealing.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
