Google sees profit in tracking users

January 25, 2012

Google doesn’t make much money from its Android phones, but chief executive Larry Page recently vowed in an earnings call that that was about to change.

A push by the company to create clearer online profiles of Web surfers may turn the promise into reality, analysts say.

Google this week announced a shift in its privacy policies that will allow it to follow the activities of users as they move across the firm’s Web sites, including its highly popular YouTube, Gmail and main search engine. The company emphasized in interviews that the change would apply only to users who are signed on to their Google accounts.

The initiative could be of particular significance for consumers of Android devices, who are almost always signed on to their phones and tablets, experts said. Without signing up for an account, an Android smartphone owner would be limited in what he or she could do on the device, they said.

“I guess it’s theoretically possible to use an Android device without being logged on, but that wouldn’t be much of a smartphone,” said Kurt Opsahl, a senior staff attorney at the Electronic Frontier Foundation, a group that advocates for free speech and privacy online.

The company said users who activate Android phones without signing into a Google account can make phone calls, browse the Web and use pre-installed applications. But they couldn’t use their Gmail, chat functions or download Angry Birds, Pandora or other applications from the Android Marketplace.

But Opsahl said that because Google account holders cannot opt out of the new policy, he fears that the company’s efforts to compile information about users won’t accommodate those who want to separate their personal and professional digital lives. The policy change also alarmed some lawmakers and consumer advocates.

For owners of Android devices, which include about half of the smartphone market, Google’s privacy policy shift will enable the company to track what many users do on the phone and combine that data with what the company knows about them from Google’s Web sites.

The privacy policy change could enable the company to sell better-targeted ads. It could also help the firm offer better search results or provide customized services for consumers. On Tuesday, Google gave the example that it could know whether a user was searching for a cat or a car when he or she typed “jaguar” in its search engine.

Google disputed that its new policy would have any special bearing on Android phones. It also said that Google account holders can turn off their search histories, which would limit what the firm tracks, or use its services without signing on to their accounts.

“Android has always relied on Google’s main privacy policy, and it is not true that the privacy changes give Android any additional access to information,” said Rachel Whetstone, vice president of corporate communications for Google.

Experts do not dispute the assertion. They simply note that Google will be able to do far more with the information collected. And because people more frequently sign into their accounts on mobile devices than on desktop computers, the company can constantly cull information from smartphone users, the analysts said.

“Google will make its money from Android as an advertising platform, and its greatest assets are the Google services in quite a number of smartphones,” said Roberta Cozza, an analyst at Gartner research, who estimates that 577 million devices using the Android software platform will be sold in 2015. She said Android devices will be particularly attractive for consumers in developing nations because they are often cheaper than the iPhone.

Smartphones built on Google’s Android software platform are virtually tied with Apple’s iPhone as the fastest-growing smartphone software in the world. Apple also has the ability to cull information from users of its devices, but it is far less reliant on making money from selling targeted ads.

Consumers are typically asked to create a Google account when buying an Android phone. Google declined to break down how many phones are used without Google accounts.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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