Privacy is in, especially since Edward Snowden made Internet searchers aware of how their personal data was being collected by the National Security Agency.
Leading anonymous search engines, like DuckDuckGo and Ixquick, watched their traffic explode after Snowden's revelations became public. Currently, DuckDuckGo has 4.7 million users a day – and its traffic skyrocketed 50% on June 6, 2013, when news of the government's "PRISM Program" went public. Ixquick, also known as startpage.com, has doubled its traffic since then, growing from 2.5 million visitors a day to around 5 million.
These numbers pale in comparison to Google (NASDAQ:GOOGL), which serves up more than 3 billion queries a day – and has about 70% of the search engine market. Microsoft's (NASDAQ:MSFT) Bing (18.2%) and Yahoo (NASDAQ: YHOO) (10.8%) are battling it out for a distant second and third.
The big contradiction
However, here's what could eventually cost Google market share: The contradiction between what searchers say they want and how they actually behave. According to a 2012 study, The Pew Internet and American Life Project, almost the same percentage, around 73% of Americans, indicated they were "not OK" with the invasion of privacy that is tied to gathering and storing data during personalized searches.
If enough web users ever start acting on this value, it could change search dynamics and take away market share and revenues from Google, Yahoo, and Bing -- which have built their business models around collecting loads of data on searchers as a means to generate billions in ad revenue by selling personalized ads.
Google brought in over $50 billion in ad revenues in 2013, while Yahoo ($4.2 billion) and Bing ($3.2 billion) lagged way behind the undisputed search king.
Of course, gaining ground on Google will be no easy task. But one company set its sights on shifting the playing field by offering a privacy-based alternative to Google. Named (almost) for a game many of us played as kids, DuckDuckGo, founded by Gabriel Weinberg, currently has the number 12 ranked search engine, according to eBizMBArank.com. Prior to DDG, Weinberg created The Names Databases, which he sold to United Online for $10 million in 2006.
Weinberg didn't set out to build a private search engine. His initial goal was to provide better search results than Google. Weinberg felt the Google algorithm was easily manipulated, which led to results with too many junk sites. However, Weinberg's decision to keep user data anonymous was partly motivated by an AOL search data breach in 2005. The incident showed him the potential for the government (or others) to get their hands on personal and sensitive search data.
In a 2013 article inThe Guardian, Weinberg had this to say about Google's data collecting procedures: "It's a myth that Google needs to store all this data about you. Almost all the money they make on search is based on what you type into the search box. Nothing more. They need to track you for their other services – Gmail, YouTube – because those are hard to monetize, and that's why you get ads following you around the Internet all the time."
DuckDuckGo's best marketing strategy
For the most part DuckDuckGo's best marketing strategy has been Snowden's revelations, Google's bad moves, and a billboard in San Francisco. In January 2012, when Google decided to aggregate user data across all its services, DuckDuckGo's traffic shot up 300% in three months ... and once users come over, Weinberg says they usually stay.
The growth in traffic indicates he's right, but to take a great idea to the next level and make money is a much harder task. Currently, the newcomer generates revenue by ads and affiliate programs tied to search terms -- not by tracking users' other information. DDG is a private company, but reportedly generated around $150,000 in 2011 when traffic averaged about 300,000 per day. Now that average daily traffic has increased over 1,600% that number should be at least over $1 million annually.
A Fool's conclusion
Some scoff at DDG's relatively minor gains in the grand scheme of search engine use. Google still has over 600 times more searches a day. Extrapolate that out over a month or a year and you see how huge the gap is. And even though surveys say searchers care about privacy, the actual search statistics show otherwise ... for now. But less than 20 years ago, Google was a young start-up itself.
Will Google lose its market leading position over the next five to 10 years? Probably not. However, it also seems unlikely that Bing or Yahoo can beat Google at its own game -- massive data collection and personalized ads. But, the feasibility of a privacy-oriented search engine, like DDG, carving out a profitable niche within the search engine world and going public is something investors should keep an eye on.
Chris Brantley has no position in any stocks mentioned. The Motley Fool recommends Google and Yahoo!. The Motley Fool owns shares of Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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