Google’s new privacy policy

Google has changed the rules to make it easier to get its hands on our personal data. Should we be concerned? Matthew Partridge reports.

What's the issue?

Search engine giant Google has recently changed its privacy policy. It will now share users' data across various services. This means, for example, that users' old web searches will influence the results they get when they access Google-owned online video website, YouTube. The company points out that it has consolidated more than 60 different privacy policies during the process. However, it will also be much harder for users to opt out of sharing their data. This has caused anger among consumer groups and regulators.

Yet, as Charles Arthur in The Guardian points out, this is merely the latest in a long line of actions that are eroding our privacy. Google is hardly alone in collecting personal data from its users. A large number of apps (software applications) and websites leech email contacts and phone numbers from our mobile devices and computers, often without users being fully aware of what is going on.

Why do companies want our data?

Money. Google, for example, makes its money from advertising. The more relevant the advertisement is to you as a consumer, the more likely you are to click on it and go on to make a purchase, and the more desirable Google becomes as an avenue for companies to use to promote their wares.

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As Sharon Vaknin of CNET points out, this targeted advertising is critical to Google's business model. "There's no such thing as a free lunch, people. Google has to make money from advertisements, so they might as well be accurate." The same goes for other big name sites, such as Facebook. They collect user data with the aim of monetising' it (to use the marketing speak). But it's hard to do that if they aren't allowed to make use of the data. As Tim Bradshaw puts it in the Financial Times, "personal data are the engines of the new internet economy".

Should consumers be worried?

Adam Cohen points out in Time that "people do a lot of things online that they may want to keep secret". Worse still, "these companies could sell the data to people who will do harmful things with it". He even notes that "this kind of data can easily end up in the hands of the government, which can subpoena it from the tech companies and suddenly, we are living in a Big Brother state".

However, The Economist's Babbage blog defends the search engine giant, noting that "[Google] ran an extensive advertising campaign, both online and offline, to alert folk to the tweaks it was planning to make... other web firms would do well to follow its example".

Don't users have to opt in to all this?

It's all very well highlighting changes to a privacy policy. But like the complicated small print in any other form of contract, many users are unlikely to read it in full (if at all). And there's a good reason for this. Lorrie Faith Cranor and Aleecia McDonald of Carnegie Mellon University have calculated that a typical website privacy policy takes ten minutes to read.

Given that the average web user encounters over 1,400 privacy policies, this means that it would take more than 76 working days to read through them all. It's stretching the point, but if everyone in America actually did that, it could cost the economy hundreds of billions of dollars in squandered time.

In short, as Alexis Madrigal argues in The Atlantic, as things stand, it is impossible for users to check every privacy policy. This means that "the way we deal with privacy is fundamentally broken. The collective weight of the web's data collection practices is so great that no one can maintain a responsible relationship with his or her own data."

Is more regulation the answer?

Richard Falkenrath of cybersecurity adviser the Chertoff Group argues in the Financial Times that European Commission proposals for "a new right to be forgotten", which would force internet firms to delete all personal data, are "essential both for Europeans and Americans to protect personal privacy in the age of pervasive social media and cloud computing". Politico reports that Barack Obama's administration is "calling on Congress to pass a consumer privacy bill of rights, while putting the onus on companies like Google and Facebook to forge new data handling rules for the digital age".

However, others argue that a consumer backlash may be the real answer. According to Creative Boom magazine, "the free social media party is over. It's coming to an end as we realise that we don't want our data shared, and we certainly don't want to be targeted' by advertisers." Stephan Foley in The Independent notes that Facebook's attempts "not to offend privacy advocates" mean that its new advertising plan is "underwhelming".

It's not just online firms

The collection and use of customer data isn't, of course, restricted to online firms. Charles Duhigg in The New York Times highlights a striking example from US supermarket Target. Eager to secure the custom of new parents, Target built a statistical model to trawl its customer database for behaviours that suggested a woman was in her second trimester of pregnancy.

In one case, it worked too well, sending baby-product-related advertising to a teenager before her father had learned of her pregnancy. For all the talk of regulation, says The New York Times, politicians covet our data too. All the major candidates, including President Obama's re-election team, get data from credit agencies to target advertising at the household level.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri