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Is $170 million a big enough fine to stop Google privacy violations?

Questions And Answers

Another week has passed, and we have another story focusing on privacy violations at Google. This time it has cost the search giant $170 million, but is that anywhere near enough?

The Federal Trade Commission (FTC) has announced yet another fine for Google, this time the YouTube video platform has been caught breaking privacy rules. An investigation found YouTube had been collecting and processing personal data of children, without seeking permission from the individuals or parents.

“YouTube touted its popularity with children to prospective corporate clients,” said FTC Chairman Joe Simons. “Yet when it came to complying with COPPA [the Children’s Online Privacy Protection Act], the company refused to acknowledge that portions of its platform were clearly directed to kids. There’s no excuse for YouTube’s violations of the law.”

Once again, a prominent member of the Silicon Valley society has been caught flaunting privacy laws. The ‘act now, seek permission later’ attitude of the internet giants is on show and there doesn’t seem to be any evidence of these incredibly powerful and monstrously influential companies respecting laws or the privacy rights of users.

The COPPA rules requires child-directed websites and online services provide notice of their information practices and obtain parental consent prior to collecting personal information from children under 13. In the complaint from the FTC and New York Attorney General, it is stated that while YouTube is a general audience video platform, the fact there are child-specific channels it would have to comply with the COPPA rules.

As YouTube has been marketing itself as a destination for children to seek relevant content through specific channels, the team knew it was engaging specific demographics and did not seek consent. Even its own rating system acknowledged the separation in audiences, while the advertising machine generated relevant content for that audience. It knew what it was doing, but seemingly decided against seeking consent.

At a company which attracts the best talent, we cannot believe this is an innocent oversight. Google pays ridiculous salaries to ensure the smartest people work for the company, and if these incredibly intelligent people were not away of these nuances in the law, there is something seriously flawed at Google. We simply do not believe this is the case.

At some point, authorities are going to have to ask whether these companies will ever respect these rules on their own, or whether they have to be forced. If there is a carrot and stick approach, the stick has to be sharp, and we wonder whether it is anywhere near sharp enough. The question which we would like to pose here is whether $170 million is a large enough deterrent to ensure Google does something to respect the rules.

Privacy violations are nothing new when it comes to the internet. This is partly down to the fragrant attitude of those left in positions of responsibility, but also the inability for rule makers to keep pace with the eye-watering fast progress Silicon Valley is making.

In this example, rules have been introduced to hold Google accountable, however we do not believe the fine is anywhere near large enough to ensure action.

Taking 2018 revenues at Google, the $170 million fine represents 0.124% of the total revenues made across the year. Google made on average, $370 million per day, roughly $15 million per hour. It would take Google just over 11 hours and 20 minutes to pay off this fine.

Of course, what is worth taking into account is that these numbers are 12 months old. Looking at the most recent financial results, revenues increased 19% year-on-year for Q2 2019. Over the 91-day period ending June 30, Google made $38.9 billion, or $427 million a day, $17.8 million an hour. It would now take less than 10 hours to pay off the fine.

Fines are supposed to act as a deterrent, a call to action to avoid receiving another one. We question whether these numbers are relevant to Google and if the US should consider its own version of Europe’s General Data Protection Regulation (GDPR).

This is a course which would strike fear into the hearts of Silicon Valley’s leadership, as well as pretty much every other company which has any form of digital presence. It was hard work to become GDPR compliant, though it was necessary. Those who break the rules are now potentially exposed to a fine of €20 million or 3% of annual revenue. British Airways was recently fined £183 million for GDPR violations, a figure which represented 1.5% of total revenues due to co-operation from BA during the investigation and the fact it owned-up.

More importantly, European companies are now taking privacy, security and data protection very seriously, though the persistent presence of privacy violations in the US suggests a severe overhaul of the rules and punishments are required.

Of course, Google and YouTube have reacted to the news in the way you would imagine. The team has come, cap in hand, to explain the situation.

“We will also stop serving personalized ads on this content entirely, and some features will no longer be available on this type of content, like comments and notifications,” YouTube CEO Susan Wojcicki said in a statement following the fine.

“In order to identify content made for kids, creators will be required to tell us when their content falls in this category, and we’ll also use machine learning to find videos that clearly target young audiences, for example those that have an emphasis on kids characters, themes, toys, or games.”

The appropriate changes have been made to privacy policies and the way in which ads are served to children, though amazingly, the blog post does not feature the words ‘sorry’, ‘apology’, ‘wrong’ or ‘inappropriate’. There is no admission of fault, simply a statement that suggests they will be compliant with the rules.

We wonder how long it will be before Google will be caught breaking privacy rules again. Of course, Google is not alone here, if you cast the net wider to include everyone from Silicon Valley, we suspect there will be another incident, investigation or fine to report on next week.

Privacy rules are not acting as a deterrent nowadays. These companies have simply grown too large for the fines imposed by agencies to have a material impact. We suspect Google made much more than $170 million through the adverts served to children over this period. If the fine does not exceed the benefit, will the guilty party stop? Of course not, Google is designed to make money not serve the world.

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