Google’s business model and privacy

Background

Google is an American multinational technology company. It specialises in Internet-related services and products, such as online advertising, search, cloud computing, software, and hardware. In August 2015, Google reorganised its various interests as a conglomerate called Alphabet Inc.  

Many of Google’s services are free for the average consumer. Google operates a business model that is driven by advertising sales. Recent studies show that over 86% of Google’s revenues come from its advertising networks. This network, called AdWords, sells digital ads that target interests that consumers reveal through search requests and their use of Google’s apps and services. Simply put, Google’s business model is based on consumer data; this is the payment offered to able to use the company’s services.  

Web-based companies like Google have recently faced scrutiny over their privacy policies. Consumers and privacy watchdogs have questioned Google’s data collection practices. Demands include greater autonomy to control tracking and a change in Google’s data-driven, advertising business model. 

Analysis

At Google’s annual developer conference, CEO Sundar Pichai placed particular emphasis on staying ahead of “constantly evolving user expectations” on privacy. Google introduced several measures that give consumers greater control over how their location is tracked and how personal information is saved.

Google will bring “incognito mode” to its Google Maps and search functions. The mode will not allow Google to record searches or track user location, similar to how the feature works on its Chrome browser. 

On its latest mobile phone operating system, Android Q, Google will alert its users when apps are accessing the phone’s location data. It will also let consumers restrict how apps access location services. Users can choose from a variety of settings, such as only permitting apps currently open to gather location data. Some apps currently collect location data continuously, even if they aren’t being used. However, in 2018, an Associated Press investigation found that Google continued to collect and store phone location data even when users had turned off Android’s location history settings. 

Some experts have praised Google’s location setting reforms as “impressive.” They believe that Google’s updates are more tangible and less aspirational than other industry players by presenting solutions that have clear benefits for consumers while providing enforceable release dates. 

Chrome is the world’s most popular browser, with over 77% share of the market. Google revealed plans to allow its users to control “tracking cookies” on Chrome. Tracking cookies are bits of software that tail people around the internet. Chrome will now enable its users to clear tracking cookies without having to delete ones that keep users logged into websites or maintain personalised settings. Current Chrome settings only permit users to delete all cookies, irrespective of their function.

The company also unveiled a number of artificial intelligence capabilities, which include facial recognition and voice searches. Google demonstrated how these service requests are processed on the device rather than by sending information to the company’s servers. For example, Google Assistant’s software architecture will allow it to act on specific commands directly on the device, without communicating with the company’s cloud servers. Analysts say that although the move means Google is likely to collect less information about its customers, it will not hurt their business model as it will not take away from their understanding of consumer demands. 

CEO Sundar Pichai also published an op-ed in the New York Times which argued that “privacy cannot be a luxury good” available only to “people who can afford to buy premium products and services.” The statement comes as Apple’s CEO Tim Cook previously took aim at Google’s business model. Mr Cook said that modernity had created a “data-industrial complex” where companies use private information for profit. Mr Pichai’s op-ed is seen as a defence of Google’s data-based business model, maintaining that responsible data collection allows the company to protect privacy. Mr Pichai minimises the role of ad sales, assuring users that such collection does not include data from services such as Docs or Gmail. 

Counterpoint

Critics have pointed out that Google’s updates sidestep demands for changes to its data-based business model. The president of Ghostery, a service that provides ad-blocking and anti-tracking software, says the measures “are not bad, but they almost seem like they’re designed to give the company a better messaging push instead of making wholesale improvements to user privacy.”

Assessment

Our assessment is that as long as Google’s business model is based around data-collection, there will always be questions of privacy abuse surrounding its services. However, we believe that much of the issues surrounding privacy has to do with public perception. Apple has taken the position that only premium hardware can provide such protections, while Facebook has sought to portray itself as fighting for privacy rights without introducing substantive changes. Google has adopted a middle path; the company believes privacy is for everyone and seeks to enforce this position without changing its current business model. We feel that the changes Google have made are a step in the right direction, although as Mr Pichai observed, consumer privacy standards are continually changing. We estimate that web-based companies are likely to continue to compete in promoting their privacy options as comprehensive solutions, without significantly altering their business model. 

Image Courtesy - Scott Roy Atwood [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]