By Doug Miller
Google’s Business Model
Before looking as these circumstances it is worth reviewing what business Google is in. Google is an advertising company and generates 95% of its revenue selling ads to businesses. Google has been extremely successful with its online contextual advertising business. By combining personal information it has gathered with web session information and browsing habits, it is able to display paid ads that relate to the user’s interests. The more relevant the ads are, the more likely the user will click on an ad at which time Google earns revenue. While Google appears to be involved in many different service offerings, such as Gmail, YouTube, and search, all of these are vehicles for gathering user information which can be used to further enhance the ad business.
One Size Fits All Technology
Google benefits greatly by using this “one size fits all” model. Instead of engineering different products for different markets, the same technology, which originated as a consumer ad-oriented service, is used across every market. With Google’s increasing reach, the per-user cost of delivering its services is lower than what it is for competitors who have different products for different markets. Plus Google can use user data to generate ad revenue which further offsets its costs and helps to feed the extremely profitable ad business. However, repackaging a consumer product such as Gmail for mission-critical public sector use has not always been successful, as demonstrated by the rejection of Google Apps by the Los Angeles Police Department.
One Size Fits All Policies
Without personal data online ads are just ads – not tuned to your tastes and therefore less valuable. So anytime Google is restricted in its ability to gather and use user data or is forced to allow users to opt out, it has less chance of showing a relevant ad and less chance for a revenue event with advertisers – who only pay if the user clicks on the ad.
Ball’s in Google’s Court
While the CNIL has stated it will announce its “repressive action” before summer time, the ball is actually in Google’s court to decide whether it should start making steps to comply with Europe’s recommendations or continue to ignore the data protection authorities and hope for minimal action. After all, the CNIL and the other data protection authorities have limited ability to enforce the law or levy fines. With a possible fine of only 300,000 to 600,000 Euros in each European country, Google may figure that it is better to just consider the fine as a cost of business, pay the fine and carry on as it does now. The lucrative data-driven ad business is much too valuable when compared to a small fine and caving in to the Europeans would set a dangerous precedent for potential actions in other countries. If the Europeans are successful in changing Google’s data collection practices, then even the US might wake up and realize this model is not in the best interests of consumers and businesses. With Google and others now lobbying to soften Europe’s proposed new data protection law, it may find this stonewalling strategy will buy it some time and ultimately pay off. On the other hand, Google may be playing with fire and the end result could be a billion dollar fine.