Is Google's $7 million privacy fine its "Microsoft moment"?

Google's agreement to pay $7 million to 37 states for Street View privacy violations didn't even amount to a financial slap on the wrist. But there are those who say that the fine, combined with new privacy practices the company will have to initiate, will prove to be Google's "Microsoft moment" -- the equivalent of the federal government's suit against Microsoft for anti-trust violations, which led to the company's fall from top of the tech heap. Are they right or wrong?

Google agreed to pay $7 million to 37 states and the District of Columbia because Street View vehicles collected personal information from people's WiFi networks between 2008 and 2010. Google didn't just collect that information, it also stored it, and gave out false information about how the information was gathered and what was done with it after it was gathered.

The $7 million doesn't even amount to chump change for Google. Neither did the $22.5 million it was fined by the Federal Trade Commission this past summer for working around Safari's privacy protections.

A much bigger issue is the new privacy controls Google will be forced to institute, and even more important than that, the way the fine adds to the public perception of Google as serial privacy-invader. That's where some believe Google's Microsoft moment may come in. Here's what the New York Times has to say about Google being forced to change the way it does business, and people's possible negative perception of the company:

...it is difficult to make changes in an extremely successful technology firm. Silicon Valley executives remember all too well the case of Microsoft, which owned the future in the mid-1990s in the way that Google, Facebook and Amazon seem to now. Then the government sued the company and came close to breaking it up. Microsoft's image, and its momentum, never recovered.

Is the comparison a fair one? To find out, let's take a brief trip in the Wayback Machine to the federal government's actions against Microsoft. They began in 1991, when the Federal Trade Commission began an investigation into whether Microsoft abused its monopoly on operating systems as a way to harm competitors and push into new markets. The investigation lasted until 1993, when FTC commissioners were deadlocked over pursuing it, and the FTC dropped it. However, soon after the Justice Department began an  investigation.

That investigation culminated in an anti-trust trial that began in 1998. Various legal machinations followed, and it wasn't until 2001 that Microsoft agreed to make a variety of changes to the way it did business, and not until 2002 that the agreement was finalized. Even then, some states disagreed with the settlement, appealed it, and the entire case was finally put to rest in 2004.

What happened then is vastly different than Google's Street View settlement. To begin with, Microsoft faced 13 years of investigations and court battles. The fight consumed the time of top executives, from Bill Gates on down, and so they had less time to focus on Microsoft's business and products. The Street View investigation lasted far shorter, and consumed very little time from Google's top executives. It was barely even a minor distraction.

In addition, the suit against Microsoft went after the very core of its business -- Windows, and the way it was used to gain an unfair competitive advantage. Street View, on the other hand, is certainly not at the core of Google's business. And the complaint about Street View had nothing to do with the core of how it works. Instead, it had to do with arrogance and ignorance about privacy. Google has no reason to get personal information from people's networks, and it loses nothing by not gathering that information.

Because the suit against Microsoft took so much of its executives' time, and the agreement forced Microsoft to scale back the way it used Windows as a cudgel against competitors, Microsoft's culture changed in its aftermath. No longer did it rely on slash-and-burn business practices. The company might not have become kindlier and gentler, but it was no longer quite the shark it used to be.

The same thing won't happen to Google. The privacy practices it is being forced to follow are relatively minor, and are more educational than anything else. They don't dramatically change anything about the way Google does business. Google will continue to operate largely the way it always has.

In fact, the fine may well be a good thing. By paying the fine, Google can try to show the world it cares about privacy. By instituting painless privacy practices that don't touch its core business, it can seem to people that Google  takes privacy more seriously, even while it collects vast amounts of data.

So no, paying the $7 million is far from Google's "Microsoft moment." Expect Google to work in much the same way it did before the fine, with a potentially improved public image.

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