Online Privacy

Expect Google's bull-in-a-china-shop entry into social, to try and neutralize FaceBook, to bring lots more major unwanted privacy attention to the privacy-challenged social media business model, and to contribute to the eventual bursting of the Internet investment Bubble 2.0.

• The hot air that is inflating the social media Bubble 2.0 is that people somehow want to forfeit their privacy to socialize more efficiently, and that social media business models can indefinitely monetize privacy arbitrage against users' interests without consequence.
  • (See Part I of this series here.)
• Ironically, the investment fate of social media, and Bubble 2.0, will depend less on what social media companies do, and more of what the leviathan Google does in social media.
  • The venture capital community has long been painfully aware of the Google-leviathan's  outsized effect on every other VC investment, because they always ask start-ups "What if Google Does It?"

I.   Privacy Baseline is on the Move: Bipartisan Interest in Privacy Protection Strengthening

Anyone following social media or Google would be remiss to not notice the flurry of recent bipartisan, bicameral, and bi-branch interest in increasing privacy protection of online users in just the last few weeks.

Google's ignominious Federal rap sheet only grows longer.

• Friday the DOJ effectively charged Google with misrepresentation to the public.
  • Google represented that its cloud service for Government was certified under the Federal Information Security Management Act (FISMA) since last July, when in fact it was not FISMA-certified for the product that Google claimed it was.
• This latest Google misrepresentation revelation came in a DOJ filing to the Federal Court which is hearing Google's case against the Department of Interior of the U.S. Government:
  • "On December 16, 2010, counsel for the Government learned that, notwithstanding Google's representations to the public at large, its counsel, the GAO and this court... Google does not have FISMA certification for Google Apps for Government."

I.   What does this mean?

Ironically after Google's Larry Page pledged in the first line of his 2004 IPO letter -- that "Google is not a conventional company. We do not intend to become one." -- Google under his new CEO leadership is in fact rapidly becoming much more of a "conventional" company.

Three Big Early Signs from Mr. Page's CEO-ship:

When the world's most powerful company gets a new CEO for the first time in a decade, everyone naturally has a lot of questions.

• When new Google CEO Larry Page decides to become accessible to people outside the insular Googleplex, here are some key questions to ask Mr. Page about: priorities, management philosophy, privacy, antitrust, intellectual property, and social responsibility.

Priorities:

The proposed FTC-Google privacy settlement of EPIC's privacy complaint has many important, surprising, and far-reaching implications.

• (FYI: FTC Release, FTC Complaint, proposed Consent Order, Rosch concurrence, Google statement.)

I applaud the FTC for taking Google's privacy misrepresentations and deceptions so seriously and look forward to the FTC rigorously enforcing this landmark consent order.

Summary of Takeaways:

Popular bipartisan interest in safeguarding consumers privacy in the U.S. and Europe confronts Google with a core strategic problem because Google's targeted advertising business model is no "privacy by design" and no "privacy by default."

• Google bet wrong and big in assuming that since technology made it so much easier to track and profile users for targeted advertising, users would just accept the new loss of privacy and users and governments would never enforce user demand for choice to protect their privacy.
• Google's all-in company bet on openness, transparency, and sharing, was also a strategic bet against robust privacy, security, and property protections.
• In choosing to brand itself as the penultimate "White Hat" player promoting "openness," Google has effectively designed its business, architecture, and brand to be the main "Black Hat" player on privacy.

Google's No Privacy By Design model is unique.

Google's imaginary spokesmodel Brandi Sparkles explained the logic and thinking behind Google considering branding its new Social media effort and "Facebook Killer" service -- "Circles" -- in the following statement.

"After analyzing everything that everyone has ever said privately or publicly about the word "circles" in digital recorded history, Google's skynet computer decided that Google should name its secret "Facebook-killer" social media service -- drum roll please -- "Circles!!!" (Cue: The digital crowd and the media Googlerati should now roar with approval and delirium at witnessing branding perfection by artificial intelligence. Pretty cool! Pretty cool!)

Google's skynet computer liked the many connotations that spring to mind when one hears the words: "Google Circles."

Brandy Sparkles, Google's roving PR crisis manager parachuted into London last night to snuff out any dissent or questions about Google's purchase of BeatThatQuote.com, a UK price comparison site Google is buying for a reported $37m.

• Google's Brandy Sparkles, known in Google circles as the "Red Adair" of corporate PR crisis management, was called in to snuff out coverage of an impertinent, "little" SEO Book blogpost:  "Google buys BeatThatQuote, A UK comparison site violating Google's rules."
• That post chronicles how Google bought a site that employs lots of the "low quality" "cheating" SEO tactics that Google ruled are unacceptable SEO practices just last month.

After sizing up the SEOBook's charge that Google was being hypocritical in not following its own rules, Brandy Sparkles released the following statement:

"We are the Goog. We make the rules for others on the Internet and we can change them any time we want. That's the way this world works. Life is not fair and Google does not try to be.

Expect privacy concerns to be the eventual catalyst that ultimately bursts the Internet investment Bubble 2.0. It is rare when there is a profound disconnect and suspension of reality between industry behavior/investment expectations and customer wants, needs and expectations, but that is precisely what is at work in Bubble 2.0.

• Almost by definition, investment bubbles are unsustainable; what goes up must come down, it is only a matter of how and when -- not if.
• Simply what fuels Bubble 2.0  is the patently false core assumption that the current unfettered, widespread, and largely clandestine data mining of individuals private information in order to target specific individuals with personalized online advertising:
  • Is aligned with real user interests;
  • Is a forthright business practice consumers are aware of and have meaningfully consented to;
  • Will not be legally constrained in the future; and
  • Will become the accepted norm -- meaning that the populace and governments will adapt to the wishes and desires of the online-ad- industry and not the other way around.
• In a word, is online tracking, profiling and data mining a consumer-driven model? -- or a consumer-dragged model?

This is deja vu for me. I've seen this movie before when I had a front row seat as the original dotcom Bubble 1.0 wiped away $4 trillion in market valuation in a few weeks.

See a preview below of Google's likely official public apology for collecting kids' partial Social Security #s and other private information -- without the permission of their parents.

Per Google's Official Blog:

"We are deeply sorry, very very sorry, and even oh-so-sorry for collecting partial social security numbers, date and place of birth on kindergartners and grade schoolers participating in the Doodle-4-Google contest.