Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How DuckDuckGo Gained 30 Percent as Users Fled Google AI
Transcript
- Lucas: There's a number in the news this morning that I think tells a bigger story than it looks like on its face: DuckDuckGo installs are up thirty percent over the last few weeks. Luna: Thirty percent — that's not a blip. That's a signal. Lucas: Right. And the proximate cause is pretty clear. Google's been rolling out its AI Overviews more aggressively — the 'AI Search' feature that summarises answers before you even click a link. A lot of users find it intrusive, sometimes inaccurate, and they're actively looking for alternatives. Luna: I've seen the complaints. People saying they feel 'force-fed' the AI results. DuckDuckGo's CEO even put out a statement about how they don't 'hallucinate' search results because they don't generate them. Lucas: Exactly. And the thirty percent figure is installs — not just web visits. People are downloading the browser, setting it as default. That's a switching cost. It suggests real conviction. Luna: So the obvious question for this show: does a surge like that make DuckDuckGo a more attractive acquisition target? Or does it make them want to stay independent even more? Lucas: That is exactly the question I want to drill into. Because on one hand, a thirty percent install bump in a few weeks — if it sustains — changes the user base trajectory. That could increase the company's valuation in a sale scenario. But on the other hand, DuckDuckGo has always positioned itself as the anti-Google. Selling to Google is off the table. Selling to Microsoft? Their search index is Bing, so there's already a commercial relationship. But a full acquisition by Microsoft would probably anger the user base that just joined for privacy reasons. Luna: Right, so the pool of potential acquirers is small. Who's left? Apple? They have a privacy brand, they already use DuckDuckGo as a private search option in Safari. But Apple doesn't usually do big acquisitions that they then keep as a separate brand. Lucas: Apple's track record is pretty clear: they acquire technology and integrate it. Beats is the exception, and that was mostly about music licensing and brand. DuckDuckGo as a standalone browser — Apple would probably just bolt the search privacy features into Safari. That might not be the outcome the founders want. Luna: So maybe independence is actually the better path. But then you have to think about founder liquidity. DuckDuckGo has been around since 2008. That's eighteen years. The founders and early employees have got to be sitting on significant equity with no liquid market. Lucas: That's the tension, right? The company is profitable — it makes money from advertising, but without the tracking that Google uses. So it's not burning cash. But profitable doesn't mean liquid. Founders can't sell shares on a secondary market easily if the company isn't public and isn't doing tender offers. Luna: DuckDuckGo has done at least one secondary sale that I recall — back in 2020, they allowed employees to cash out some shares. But that was five years ago. Since then, the company has grown, but I don't think there's been another liquidity event. Lucas: Right. And compare that to some of the other privacy-first companies. Proton — the encrypted email and VPN company — they've done secondary sales, and they've talked about a possible IPO down the line. Signal, on the other hand, is a nonprofit. They don't have the same pressure. But for a for-profit like DuckDuckGo, the exit question is real. Luna: And the thirty percent surge could be the catalyst that forces the issue. Either an acquirer gets more interested, or the founders decide the moment is right to go public while the brand momentum is high. Lucas: Let's look at the numbers a bit more. DuckDuckGo's market share in search is still small — around two and a half percent globally, maybe three in the US. But thirty percent more installs in a few weeks could push that share meaningfully higher over time. If they retain even half of those new users, that's a fifteen percent bump in their daily active user base. Luna: And that's happening against a backdrop where Google's own AI rollout is facing regulatory scrutiny. The EU is looking at whether forcing AI Overviews on users violates digital fairness rules. So DuckDuckGo might benefit from both user backlash and regulatory tailwinds. Lucas: That's a good point. Regulatory tailwinds matter in an exit because they reduce the risk that a future policy change will hurt the business. If regulators force Google to give users an opt-out from AI search, the DuckDuckGo surge might slow. But if they don't, the surge could continue. Luna: So from a founder's perspective, the window to exit might be now, while the momentum is clear but the long-term trajectory is still uncertain. The classic 'sell into strength' idea. Lucas: Exactly. And that's where the valuation math gets interesting. DuckDuckGo was valued at around one point two billion dollars in its last known secondary round, back in 2021. Since then, the company has grown revenue — they're estimated to be doing over one hundred million in annual revenue now — and they're profitable. Luna: If you apply a multiple to that, a public market comparable like a search or browser company... what's the closest? Opera Software? They trade at around three times revenue. DuckDuckGo at one hundred million revenue would be three hundred million — that's less than the one point two billion private valuation. Lucas: But Opera isn't a great comp because it's not purely search — it has fintech and other stuff. A better comp might be something like Yandex's search business before it sold, or maybe even a company like Mozilla, which isn't public but has a browser-based model. Mozilla's revenue is mostly from search partnerships, and they're valued at a premium because of the privacy brand. Luna: So DuckDuckGo could command a premium if the acquirer values the privacy halo and the growing user base. Maybe four or five times revenue? That would put the valuation at four to five hundred million — still below the one point two billion from 2021. Lucas: Right, and that's the uncomfortable truth. The private market valuation from four years ago was set in a different interest rate environment, when growth was priced differently. Now, even with a thirty percent install surge, the public or acquisition valuation might be lower. That's a tough pill for founders and early investors. Luna: Unless the acquirer sees strategic value beyond the revenue multiple. For example, if Apple wanted to acquire DuckDuckGo to strengthen its privacy narrative against Google, they might pay a premium. Or if a company like Cloudflare wanted to add a search product to its suite. Lucas: Cloudflare is an interesting thought — they already have a privacy-focused DNS service, and they've talked about search. But they're not a typical acquirer of consumer-facing products. The more likely scenario is that DuckDuckGo continues independently, maybe does another secondary offering to give employees and founders some liquidity, and waits for a better window. Luna: And that's where the thirty percent surge could be useful internally: as a proof point to convince a new set of investors to buy secondary shares at a higher valuation than the 2021 round. If the company can show that the user growth is accelerating because of a structural shift in the search market, they might justify a mark-up. Lucas: That would be the smart play. Use the momentum to create a liquidity event for insiders, without selling the company. We've seen other startups do that — it's like a mini ipo via secondary sales. And it doesn't require the regulatory overhead of a public listing. Luna: So the lesson for founders listening might be: when you get an unexpected demand shock, don't just think about selling the whole company. Think about whether you can use that moment to create partial liquidity for yourself and your team, while keeping the company independent. Lucas: Exactly. And DuckDuckGo is a good case study because they've been disciplined — they didn't take VC money early on, they built a sustainable business. That gives them options. They're not forced to sell because they need a return for investors. Luna: Although they did take some venture funding later, from Union Square Ventures and others. So there are institutional investors who eventually want an exit. But the company has been able to manage that through secondary sales rather than a full exit. Lucas: And that's a model more startups should consider. If your business is profitable and growing, you don't have to sell. You can create liquidity in tranches. It takes more work — you have to find buyers for secondary shares, negotiate pricing — but it preserves your independence and your culture. Luna: Which, for a privacy-focused company like DuckDuckGo, is probably worth more than a quick acquisition that could alienate users. Lucas: It's also worth noting that the thirty percent install spike might not be permanent. Some users might try DuckDuckGo and switch back if they miss Google's results quality. So the company needs to convert those trials into long-term retention, or the window closes. Luna: That's the challenge for any privacy-first alternative: you're trading convenience for privacy. Most users say they care about privacy, but their behavior shows they prioritise convenience. DuckDuckGo's results are good, but they're not as good as Google's for local searches or shopping. Lucas: So the question is: can DuckDuckGo improve its product fast enough to retain these new users? They've been investing in their own search index — they used to rely heavily on Bing, but they've been building their own crawler. That could improve result quality over time. Luna: If they can show improved retention in the next quarter, that would be a strong signal for any potential acquirer or secondary investor. Lucas: Alright, I think we've covered the angles. Let me ask you this — if you were advising the DuckDuckGo founders right now, what would you tell them to do? Luna: I'd say: run a secondary tender offer now, while the install numbers are hot. Let employees and early investors cash out at a valuation that reflects the momentum, but don't sell the company. Then use the next six months to prove retention and improve the product. If the numbers hold, you can revisit a full exit later at a higher price. Lucas: I think that's sound. And I'd add: start talking to a few strategic partners about potential acquisition terms, just to know what the floor is. You don't have to sell, but knowing your BATNA — your best alternative to a negotiated agreement — gives you power in any negotiation. Luna: Plus, if you're talking to potential acquirers, you might get a sense of what they value. That could inform your product roadmap. If Apple tells you they'd pay a premium for a feature you haven't built yet, maybe you build it. Lucas: Exactly. So the takeaway for founders: external shocks — like a mass user revolt against a competitor — can create windows for liquidity. But you have to be prepared. Have your financials ready, know what you want, and be willing to move fast. Luna: And maybe also have a good privacy policy in place. Because the moment you start talking to acquirers, your users will want to know you're not selling out. Lucas: That's a great note to end on. For The Startup Exit Podcast, I'm Lucas. Luna: And I'm Luna. Thanks for listening.