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Disconnect, a startup co-founded by a former Google(s goog) engineer, is fast becoming a darling of privacy advocates — and a potential headache for marketers and search engines. This week, the firm launched a free service that thwarts Google, Bing(s msft) and the rest of them from logging what you search and, says the company, demand is brisk.

Disconnect says that, two days in, it has received 250,000 queries and that it had “the most successful first day ever for a standalone search product.” It’s still early, of course, but the initial reception for Disconnect Search suggests pent-up demand for easy-to-use privacy products — and a possible long-term threat to Google and the online ad economy.

Search without leaving a trace

Disconnect, which started in 2010 as a widget to block Facebook(s fb) tracking, already offers an easy way to see and prevent online ad and research firms from siphoning your data as you browse the web. This week, the company expanded its offerings to include Disconnect Search, which it built with the help of a former NSA engineer.The new product works like this:

A user clicks once to install Disconnect Search (here’s the link), and the tool appears as a small icon on her Chrome or Firefox browser frame:

Once Disconnect Search is installed, the user can specify her preferred search engine, and search like normal in the browser bar (in the case of Chrome) or the little toolbar (for Firebox). Or she can use Disconnect’s own dropdown bar, which looks like this:

Once Disconnect Search is installed, the search experience is the same — the user sees the same set of search results as she normally would (though they come up just a mite slower).

The big difference is that Google or Bing can’t keep records of the searches since the queries are encrypted and routed through Disconnect; the companies peg searches for “toe fungus” or “loathsome disease” to a given user or IP address. (In its video explaining the service, Disconnect offers the example of credit agencies using search terms to find identify people who search for “bankruptcy.”)

The tool is akin to the “Incognito” or private browsing (aka “porn mode“) offered by Chrome and other browsers; however, in the case of Disconnect, the feature remains on all the time, even when a user logs into Google, Yahoo (s YHOO), etc. This ability to mask search queries is significant at a time when big internet companies are adjusting their privacy polices to track users as they move across various services. Google, for example, can now blend your search history, your Gmail and YouTube activities.

Disconnect Search also prevents websites from seeing which key word or search result brought a visitor to their site.

Trouble for advertisers?

Disconnect’s one-click way to private searching may prove a hit with users, but it’s a safe bet the company is not making any friends in the advertising industry. As it turns out, the service also blocks Google AdWords, the company’s longtime cash cow that still accounts for a significant portion of the online ad market. (Update: Cofounder Brian Kennish explains in the comments below that Disconnect Search wasn’t designed to block ads, but is doing for some AdWords due to technical reasons).

The start-up, in other words, is depriving Google of both money and data.

Casey Oppenheim, a former consumer rights attorney and one of the Disconnect co-founders, said he is not worried about Google or other search companies taking action to kick Disconnect off their browsers.

“We eliminate calls between Google search and the browser to prevent search terms and personal info (IP addresses, cookies) from leaking to Google. This does block some, but not all, Adwords. Ad blocking companies (with 50M plus users) have been blocking search ads for a long time and as far as I know search engines haven’t retaliated,” said Oppenheim in response to an email query.

Google did not respond to a request for comment about Disconnect.

It’s unlikely the search giant is having panic attacks over the fact that Disconnect has already scrambled 250,000 searches; after all, Google reportedly gets more than 5 billion searches a day. But if the momentum for private browsing and search tools stays strong, it will increase the pressure on Google and other online ad industry stalwarts to go places where they can get data — for instance on mobile devices, which are more free from ad blocking tools. The industry will also likely press forward with post-cookie technology that can identify users across locations and devices.

This could trigger an ongoing back-and-forth between privacy tool makers like Disconnect on one hand, and ad tech companies on the other, over the ability to access consumer data.

Ultimately, such a fight could be useful by making it obvious once and for all that services like Google and Facebook are not free — and that if we don’t pay for them with money, we will pay for them with our data.

Clarification: This story was updated on Thursday morning to include additional details about AdWords from Disconnect’s Brian Kennish that are set out in his comment below.