DuckDuckGo, PRISM, and the new business of privacy

One the most valuable things in the world right now is your data.

For Facebook and Google, your data is a window into your soul, your interests, and your buying habits. It’s how they can convince advertisers that giving them money makes sense. It’s how they’ve gotten rich.

But the rise of data companies has also given birth to more than a few companies dedicated to protecting your data — or at least not actively harvesting it.

Above: DuckDuckGo growth from 2010 to July 2013.

One of the more prominent ones right now is DuckDuckGo, a tiny search engine that’s shown that, if you put privacy at the center of your product, people will pay attention. In the wake of the PRISM scandal, DuckDuckGo saw its traffic climb 26 percent over the course of a few days.

DuckDuckGo founder Gabe Weinberg takes a very obvious stance here. “In search, you can make lots of money without tracking people,” he said.

Like Google, DuckDuckDo bases its business of the simple logic of contextual advertising and sponsored links: When you search for something using the site, DuckDuckGo serves you ads based off of your queries — all without attempting to track, identify, or create a profile on you.

Weinberg calls the idea “privacy by design,” and it’s become an increasingly attractive notion not only for tech companies, like DuckDuckGo and Snapchat, but also for investors who see a major moneymaking opportunity in apps and companies dedicated to giving users power over how businesses use their data — or whether they collect it in the first place.

The new business of privacy

Jeff Fagnan, a partner at Atlas Ventures, puts it simply: Privacy can be a business.

“Theres a big segment of the population that would be willing to pay to be protected in that consumer experience around privacy,” Fagnan said.

This is a reality Fangan is betting on. Back in 2011, he and Atlas Ventures led a $5 million investment round in Abine, a Boston-based privacy company that’s created a variety of tools for blocking web tracking and removing personal data from data collection sites. The company’s most recent release is MaskMe, a comprehensive suite of privacy tools that even gives users the ability to use dummy credit card numbers. (For a fee, of course: MaskMe’s premium subscription runs for $5 a month.)

Other investors are following suit. Last month New York City-based FirstMark Capital led a $3.5 million funding round in Disconnect, the company behind the eponymous anti-web tracking browser extension for Chrome, Safari, and Firefox. In a similar vein, Security company AVG acquired small web privacy firm PrivacyChoice for an undisclosed amount in May.

Even Megaupload bad boy Kim Dotcom is trying to get in on the action: Last week, Dotcom announced his plans to start a venture capital firm focused solely on privacy startups.

Above: Google is just as afraid of Prism as you are.

The takeaway here is clear: Just like companies have built businesses off paper shredders, window blinds, and antivirus software, companies like Abine, DuckDuckGo, and Disconnect can build strong businesses that protect the data of web users. As privacy becomes increasingly important to people, many more technology companies will rise to meet their needs, Fangan argues. And that creates viable opportunities for investors.

The idea is, of course, a crazy one in Silicon Valley, which is full of companies that are fueled by the desire to collect and advertise off of as much data as possible. For Google, Facebook, and just about every other tech company, data is money, and the more of it they collect, the stronger they become. If “move fast and break things” is Facebook’s motto, “move fast and collect everything” is the motto of everyone else (including the NSA).

But as the backlash over PRISM has shown, this approach isn’t without its faults. Sarah Downey, a privacy analyst and attorney at Abine, says that tech companies set themselves up for disaster when they collect and store so much data — and not just because it makes life easy for the NSA when it comes knocking.

“The only guarantee you have when you collect data is that it’s never going to be safe,” she said.

That idea is a dangerous one for the likes of Google, which is only successful insofar as much as it can keep users on its services. If privacy breaches or even fears of government snooping become significant enough that they cool users’ relationship with Google, this is bad news for Google’s bottom line. Data is its lifeblood.

The tentative rise of privacy by design

All of this sounds great in theory, but the trouble with online privacy is the disconnect between how people feel about and what they actually do about it.

As SearchEngineLand’s Danny Sullivan pointed out last month, even DuckDuckGo’s impressive growth is emblematic of a larger, less wholesome reality: People say they care about privacy online, but that isn’t stopping them from using Google’s services.

“If you ask people about search privacy, they’ll respond that it’s a major issue. Big majorities say they don’t want to be tracked nor receive personalized results. But if you look at what people actually do, virtually none of them make efforts to have more private search,” Sullivan wrote.

More, Sullivan argues that even if PRISM fears drive more and more people to DuckDuckGo, Google’s lead is so extreme that DuckDuckGo has an almost nonexistent chance to catch up.

DuckDuckGo’s response to Sullivan’s claims comes in two parts. One, while Sullivan is right that people aren’t switching away from Google in any significant capacity, much of the reason for that is because they haven’t been aware of viable alternatives like DuckDuckGo. “Despite all the press, still hardly anyone knows about private alternatives to Google. That’s finally changing,” Weinberg said.

As for DuckDuckGo’s capability to only capture 10 percent of the search market, Weinberg says: Ten percent is pretty awesome.

“If we get just a few percent in the world, that’s a large percent in a big market. That makes it a good business,” Weinberg said.

“Can you beat Google without tracking people? Maybe not. But we’re still building a business,” he added.