I remember when Google was new.
It was the geek’s favorite search engine.
While everyone else was getting junk results from companies like Lycos, Excite, InfoSeek and even Yahoo, a small handful of Bay Area geeks who were “in the know” were excitedly passing it around to friends.
No one, including the two operators of the site, had any idea where it would lead.
Could there ever be another Google?
I have three answers: CompuServe…AOL…MySpace.
Each, for a brief shining moment, was “IT” in the online world.
So the idea that Google could some day be eclipsed is not that far-fetched. The only issue is the time arc.
Even Microsoft, with a monopoly over PC operating systems, has seen its marketplace dominance steadily eroded.
In some important ways Google is even more vulnerable than Microsoft because virtually all its revenue comes from advertising.
Life without competition
Right now Google’s competition is pathetic – and that includes Yahoo.
Even though Yahoo’s traffic is comparable, it’s done a very poor job of monetizing it.
And other than getting a spread in Vogue Magazine, Yahoo’s CEO Marissa Mayer (formerly with Google) doesn’t seem to be in too big a hurry to change things.
But someday, someone will figure it out.
The Big Achilles Heel
Google income depends on the health of the overall economy and the optimism of advertisers.
Google’s pretty much experienced the “hockey stick” curve in the number of places where it can place its ads, so growth potential on that front is limited.
Now it’s a matter of what advertisers are willing – and able – to pay for clicks and, make no mistake, that number is “elastic.”
Yes, the cost of clicks has gone up exponentially since Google launched AdWords, but there is nothing that says it can’t go down, especially if we have another major downturn in the economy (something that not only is possible, but is likely in my opinion.)
How far can click prices go on the downside? 20%, 50%, 90%?
The pain of overhead
If you lived through the first Dotcom crash, you’ll recall that when the air finally came out of the banner ad bubble, a 90% decline in online ad prices was not only not far-fetched, it was reality. That, and worse, is exactly what happened from peak to trough.
Few saw it coming, let alone were even able to imagine the possibility. (I did. I ran, not walked away from anything that was banner ad funded in 1998 – and felt like an idiot…until 2001.)
Many “smart” guys with big overheads based on the expectation of perpetually inflated banner prices found themselves busted overnight.
What about Google?
Remember that for all practical purposes, ad revenue is its only source of revenue. Gmail, YouTube and the 1001 other “cool” services it provides are money losers. Ad revenue is the horse that pulls the cart all their other offerings ride in.
So what happens when advertisers wake up en masse one day and say “I’m not paying 40 cents (or $1 or $10) for a click anymore. It’s not worth it.”
All those salaries still have to be paid. All those servers still have to be maintained. The light bill still has to be paid.
It will be interesting.
But who else does search well?
I can hear some people say right now: “But who else does search as well as Google? Surely search is always going to be a big important business.”
Yes it will – and fleet of foot operators are already nibbling on the outer tips of Google’s toes.
Here’s the one I like the best: DuckDuckGo (They should advertise on “Duck Dynasty,” don’t you think?)
Why do I like this company?
First, some reality.
The odds of them stealing the search business from Google are incredibly long. I’m not betting on it.
But they don’t need to be Google to make good money in search.
And most important, from the consumers point of view – the view that counts – DuckDuckGo is a better deal than Google in some very important ways.
Google is not free
How can one free service be a better deal than another free service?
Well, Google is not free.
Google gives you search results and in return it records your personal search activity which it re-sells to advertisers so they can, theoretically at least, target you better.
You may not care.
Some people do.
Do you like the fact that Google search results are frequently gamed by scammy marketers and PR firms?
DuckDuckGo is designed in such a way to make that impossible.
Do you like the fact that Google takes your private searches and then plasters related advertising everywhere you go that they control? (What if you searched on a medical or personal problem? Do you want to be reminded 24/7 of that? Do you want other people using your computer to wonder about the ads on your computer?)
DuckDuckGo does not record your searches.
Do you like the fact that Google distorts your search results based on who they think you are and what you want? (Yes they do. It’s called “personal search” and though you never asked for it or were told about it or how to disable it, all your searches are now re-arranged to conform to your past searches – and anything else that Uncle Google knows about you.)
DuckDuckGo does not dabble in personal search.
Do you like the fact that Google and Microsoft – and seemingly every other US Internet service provider – has entered into a partnership with the NSA to share your search data with agency employees who are so out of control they use the info to stalk ex-girlfiends (Look it up, it’s already happened.)
Since DuckDuckGo doesn’t record personal data, there is nothing for them to hand over to the NSA.
You may not care about about these things personally, but millions of people do and that’s enough to build a business.
Practical lessons to take from the DuckDuckGo story
1. Markets dominated by the Big Boys are not impenetrable
Not only can you compete with the Big Boys, it can be highly profitable to do so. Big companies get fat, lazy and arrogant and, even when very well run, like huge oil tankers are very hard to maneuver.
Don’t be intimidated by them. They all have vulnerabilities.
Google’s survival depends on taking your private data and using it to spam, I mean serve, you with ads. They can’t afford to do things differently and this leaves a gap in the marketplace for someone whose business model doesn’t depend on the Google Way.
2. The road repair method of market research
This is one of the foundations of the System and it’s the simplest, cheapest, most reliable way to come up with new products and services to offer. DuckDuckGo is a classic example of “road repair market research.”
The road repair method of market research says: Get out of your Ivory tower, forget about your world changing ideas, and walk (don’t drive) the roadway (i.e. immerse yourself in the customer experience.)
If you do this, you will invariably find holes and bumps in what’s currently being offered profitably in the marketplace. They’ll jump right out at you. No high IQ or advanced market research tools required.
Holes are things that customers aren’t getting that they’d like to get. Bumps are things that make the customer experience unpleasant.
The hole tells you exactly what you must do to fill it. The bump tells you exactly what must be removed. If you can come up with a business model that works by providing a competitive service that fills some of the meaningful holes and smooths out some of the meaningful bumps, you’ve got a product worthy of bringing to market.
I’m sure there are people who thought Gabriel Weinberg was insane when he started DuckDuckGo.
He’s someone who employs the “road repair” method of market research and goes with the obvious.
3. Have fun – and make money – slaying the Dragon
Having a Cause is a great thing and going after the Big Boys is a great cause.
Truth be told many, if not all, of the Big Institutions we have to deal with daily are in serious need of an ass kicking.
If you agree with my sentiment, what could be a more enjoyable business than mounting your steed, Don Quixote-like, and going after them?
Remember, a very small slice of a very, very big pie can be enough to build a business on.
The delicious method in Weinberg’s madness is starting to become apparent. Here’s a recent analysis from Michael Rosenwald at the Washington Post:
“Weinberg’s non-ambitious goals make him a particularly odd and dangerous competitor online. He can do almost everything that Google or Bing can’t do because it could damage their business models…
If users figure out that they like the DuckDuckGo way better, Weinberg could damage the big boys without even really trying. It’s asymmetrical digital warfare…”
It’s not always a disadvantage to be the Little Guy. In fact, it can be quite a lot of fun – and profitable.
Now that’s a combination that’s hard to beat.
P.S. If you found some of the insight and advice in this article interesting, useful or helpful, you can find more of it here: Real Marketing Books
– Ken McCarthy, DuckDuckGo user
P.S. For over 25 years I’ve been sharing the simple but powerful things that matter in business with my clients.
If you’d like direction for your business that will work today, tomorrow and twenty years from now, visit us at the System Club.