(Bloomberg) -- The data that Google collects while we're online underpins the $1.8 trillion valuation of its parent company, Alphabet Inc. Privacy campaigners have tried to limit its access to everything from search histories to user locations, yet it's still able to monetize the digital profiles of billions of people. Now some U.S. states and consumer groups are trying to use the courts to force change. If the lawsuits succeed, it could help reshape the $300 billion digital-advertising industry and provide a template for restricting the power of giant technology companies.
1. How does Google make money from my data?
When you're using its Chrome browser, search engine or Android operating system, Google tracks your activity to build a picture of your preferences and interests. The information is gold dust for brand marketers, who need it to target their ads at the consumers who are most likely to bite. Google's role as the middleman linking online advertisers to shoppers guarantees it a big cut of global ad budgets. The company also gathers data to protect against fraud and abuse, personalize content and maintain and improve its services. Critics say the troves of information amassed by Google, Meta Platforms Inc.'s Facebook and other giant tech platforms give them an unassailable competitive advantage over any potential challengers.
2. What's in the lawsuits?
Texas, Washington, Indiana and Washington, D.C. hit Google in January with separate suits accusing it of tricking consumers into disclosing location data for ad targeting. Two proposed class-action suits have also been filed on behalf of millions of Google users, claiming the company secretly scoops up data through its Chrome web browser. One says that Google tracks the “most intimate and potentially embarrassing things you browse on the internet,” even in “Incognito” mode -- which is supposed to keep browsing private. The other alleges that Google illegally collects data from Chrome users who have opted out of sharing their Web activity by choosing not to “sync” Google accounts with Chrome. The company denies claims in the suits that it violated California privacy and federal wiretapping laws, saying consumers misrepresented its features and privacy controls.
3. What's at stake?
If the consumer privacy suits over Chrome win class-action status and proceed to trial, Google could face court-imposed limits on its ability to harvest data. It may end up paying tens of billions of dollars in damages in the suit over its “Incognito” mode, according to Bloomberg Intelligence analyst Matthew Schettenhelm. The second suit by users, which claims Google built a $1 trillion business “entirely on monetizing the value of Internet users' data,” is seeking damages of at least $1,000 per user. Rulings or verdicts against Google could spur action from regulators and lawmakers examining the company's data-gathering practices and even lead to a wider industry crackdown. Whether that would inflict serious damage on the tech giants isn't clear. Meta has paid out billions of dollars in penalties for privacy violations over the years, with little impact on its growth. A share price plunge that wiped $230 billion off its market value in February was driven by concerns over slowing user growth rather than the company's history of data harvesting.
4. What's next?
Plaintiffs in the Chrome “sync” feature lawsuit are waiting for a hearing set for May 31 to know if they will be granted class-action status so they can represent millions of other users. Those in the “Incognito” suit will seek class-action status at a hearing in September. Alphabet's Chief Executive Officer, Sundar Pichai, has already been ordered to face questioning under oath in that case.
5. What has Google done about privacy?
Under pressure from privacy-conscious consumers and regulators, the company said in 2020 it would ban advertisers from using third-party cookies to track consumers in Chrome and target them with ads. The decision sparked a backlash from publishers, which rely on ads, and Google delayed the move until late 2023. It's been devising a cookie alternative that will allow digital marketers to reach consumers based on shared profiles rather than personal web browsing. In February, it proposed tools for its Android mobile operating system that would increase user privacy by banning data tracking across multiple applications and limiting how app makers share user information with third parties. Critics say the moves go only some way to address privacy concerns and could cement Google's dominance in digital ads.
6. Is anyone else going after Google?
Efforts to pass legislation in Congress to make it harder for big tech firms to access personal data have reached an impasse. However, pressure is building in Europe, where regulators are scrutinizing the mechanics of Google's online ad business. Germany's Federal Cartel Office is investigating its data processing terms after deciding it enjoys a “strategic advantage” from the information it collects that others cannot challenge. France's data protection authority has fined Google twice over the way it manages tracking devices on its search engine. A U.K. watchdog is overseeing Google's ad-tracking overhaul as part of a pact that ended an antitrust probe there. And Ireland's data protection authority is preparing a ruling that could make it harder for the tech giants to transfer swathes of user data to the U.S.
Meta, Google Face Data Doomsday as Key EU Decision Looms
7. Is there a risk for rivals, like Meta?
In a sign of how crucial the flow of personal data is to the big platforms, Meta told investors in February it would lose $10 billion in ad revenue in 2022 after Apple Inc. decided that apps on its iPhone and other devices must seek permission from users before tracking them. Any new limits on Google's information collecting are likely to have implications for other businesses that monetize personal data. If the courts agree that Google's practices violate state and federal laws, that could encourage regulators to raise the bar on privacy across the board.
The Reference Shelf:
- A Bloomberg QuickTake on why Apple and Google Are Killing the (Ad) Cookie
- Google's 2021 blog post about delaying plans to phase out third-party cookies
- A September letter from Senate Democrats to FTC Chair Lina Khan over data privacy concerns
- Bloomberg article on how a judge was “disturbed” that Google tracks ‘Incognito' users
- Bloomberg Intelligence note on Google's private-browsing suit
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