Inside Google

Google this week agreed to a new privacy program as part of a Federal Trade Commission settlement, a move that translates into a major mea culpa for the search giant — and a strong warning to other information-gathering Internet companies. But consumers are unlikely to see widespread Internet-privacy changes as a result, consumer protection groups say.

Under the terms of the settlement, Google faces independent audits every other year for the next 20 years. The audits are designed to ensure the Internet behemoth is following its own privacy guidelines.

Google’s FTC troubles began after it began automatically displaying users’ Gmail contacts on their Buzz pages without their prior approval. That action violated Google’s own privacy policy, which promises to get users’ approval before using their information for anything other than the originally intended purpose.

The settlement also calls for other actions, such as requiring Google to receive users’ approval before sharing their information with third parties, but doesn’t involve a monetary payout.

Settlement Has No Teeth, Critics Say

Consumer Watchdog, for one, believes the settlement falls short of its goal because it lacks bite.

“We appreciate this landmark privacy decision by the FTC, but Google needs to be punished and feel pain on its bottom line,” John Simpson, Consumer Watchdog’s Privacy Project director, said in a statement. “Nothing will completely stop Google from invading users’ privacy until it gets hit where it hurts, its bank accounts.”

Jeff Chester, executive director of the Center for Digital Democracy, characterized the settlement as a significant victory in the battlefield to maintain consumers’ privacy, but also questions its likely effect on the industry.

“The reality is this settlement was more about a symbolic decision, than instilling change,” he says. “This sends a big signal to the industry that privacy and consumer protection online are critical, but in practical terms, it will not have a huge impact on changing the immediate behavior of companies.”

Harder to Make Money on the Internet?

Still, the settlement could end up having a significant potential impact on other Internet companies that rely on the collection and sharing of users’ information for advertising, if Google and others end up ratcheting down this practice.

In an attempt to bolster their advertising dollars, many Internet companies want to offer advertisers the ability to target their ads to consumers who most likely would be interested in their products. But that’s difficult to do if Internet companies are restricted in their ability to share information about their users to third parties.

And the future of data collection or personal information may become more difficult down the line. Congress has been taking up privacy matters with greater frequency. In February, for example, a “Do Not Track Me” bill was introduced in Congress, designed to allow consumers to block unauthorized efforts to track their online information.

“This settlement is part of a much broader privacy war,” Chester says.