Google's privacy under scrutiny for IPO

Reed Stevenson and Lisa Baertlein

SEATTLE/SAN FRANCISCO: Google Inc.'s decision to go public will draw even more attention to what many see as inadequate privacy for the top Web search provider's users, watchdogs say.

As a publicly traded company, six-year-old Google would have to disclose more information about its operations and begin answering to shareholders, which would make it harder to avoid controversies like the one that erupted when it introduced its Web-based e-mail service last month.

And privacy advocates say that market pressure to deliver more revenue generating services could in fact tempt Google to tap into its growing database of user information to deliver more customers to cash-paying advertisers.

"Market pressure would push them to monetize that information," said Kevin Bankston, an attorney and fellow at the Electronic Freedom Foundation. Last month, Google's e-mail service sparked protests from groups like the EFF and International Privacy, which argued that the company would violate privacy laws because its computers in Mountain View California would scan incoming e-mails for key words that trigger advertisements.

G-mail would also permanently save messages even if the user deletes them or terminates the account, another issue that has fanned privacy fears.

Privacy advocates have also noted that Google's toolbar, which runs inside Microsoft Corp.'s where the internet explorer can collect and copy information about the sites that a user visits even without the consent of the site owner.

These issues, which concerns over Google's cookies -- little data files that identify Web browser users -- will be much more difficult to deal with as a public company, industry experts said.

Moreover, in its regulatory filing last week, Google disclosed that an outside accounting firm had found "a need to increase restrictions on employee access to our advertising system and automate more of our financial processes."

Ironically, some privacy protection could come from Google's largest competitor. Among the potential threats to its business, Google said a company like Microsoft could engineer document formats, such as the one used for Word, to "limit the effectiveness" of Google's search technology by "excluding the content of documents in such formats."

'NOT THE USUAL YADA YADA'

Chris Sherman, who edits SearchEngineWatch.com's daily newsletter, said Google would probably change its privacy practices when it goes public.

Still, he said, "fundamentally, Google has been proactive about privacy issues."

To be sure, a consent page actually warns people installing Google's toolbar: "Read this carefully, it's not the usual yada yada."

But Daniel Brandt, president of Google Watch, said that is not enough, since Google has the right to unilaterally change its privacy practices whenever it feels the need to do so.

"If they continue to have snafus like E-mail and ignore public responsibility and get bad press, then the stock won't go up," Brandt said.

G-mail, still in test phase, offers one free gigabyte of storage, far more than rival e-mail services. It works by displaying advertisements based the words in the messages.

Although it has been Google's privacy practices that have been getting attention, Eric Goldman, a professor at Marquette University Law School in Milwaukee, said the company is not alone in collecting consumer information in the name of delivering better service.

Amazon.com Inc., Time Warner's AOL, Yahoo Inc. and E-Bay Inc. also possess and use detailed private information about their customers, Goldman said.

Amazon's personalized recommendations are based on customer buying patterns and Yahoo is working to deliver highly personalized searches based on what it learns from user behavior.

The highly publicized concern about privacy is emerging even though the information U.S. consumers want to withhold is necessary for the very services that they demand, Goldman said.

"We want the info we want when we want it," he said, "but we don't think about what that involves."

Microsoft, whose software has drawn the wrath of privacy advocacy groups for years because of its widespread access to user behavior and information, said it has no plans to offer advertising linked to the content of e-mail that passes through its MSN Hotmail service.

"We do offer some advertising with Hotmail," said Lisa Gurry, lead product manager at MSN. "Given the reaction to contextual ads, it's not something we're interested in pursuing at this point in time."

Yahoo, another company that Google considers a primary competitor, promises in its privacy policy "not to use the content of messages stored in users' Yahoo Mail accounts for marketing purposes."

© Reuters