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The tale of Google and the disappearing garden gnome

 

Garden-gnomes

By Simon Davies

Data protection and competition authorities throughout the world are lining up to prosecute Google over a variety of transgressions. This week regulators from a further six European countries gave up trying to talk the company into respecting data protection laws and decided to take coordinated enforcement action.

One has to feel some pity for these regulators. No matter what they do, the advertising giant just rolls on, seemingly oblivious to condemnation.

The US Federal Trade Commission has twice fined Google, while European authorities have already found the company in violation of data protection rules. And last month the company reached a $7 million settlement with the attorneys-general of 38 US states over the covert collection of personal information through Street View WiFi interception. The list goes on.

One has to feel some pity for these regulators. No matter what they do, the advertising giant just rolls on – seemingly oblivious to condemnation. The extent to which they can penalise is often set to 1940s levels and so doesn’t even make a dent in Google’s finances.

Regulators believe slapping Google with a fine will make the company think twice about its actions. Well maybe the company would give a second thought if it even noticed the fines, but like the Borg it doesn’t detect anything miniscule. Google appears to have an accounting arrangement that invisibly shifts the penalties into the following year’s legal education consulting budget. The outlay is classified as a miscellaneous marginal contingency leveraged against provisional interest set against the company’s projected profit increase. Easy peasy! Think of it like a middle-income family chucking a couple of dollars in the swear box every week but not paying the charity until next year’s pay increase.

Google appears to have an accounting arrangement that invisibly shifts the penalties into the following year’s legal education consulting budget.

Regulators also labour under the misapprehension that the company feels some shame about being found guilty of law-breaking. This would be the case if Google actually believed that privacy law has any overall validity, which it blatantly does not. The company thinks European privacy law sucks, and has said so multiple times.

So how much should an authority fine Google next time the company is found in violation of law? Before Kazakhstan and Upper Congo have to anguish over this conundrum Privacy Surgeon felt everyone would benefit from a handy guide to help agencies reach the right decision.

To begin, some raw figures.

Google is big. Its 2012 revenue of $50 billion works out at $136,890,000 per day or $5,703,000 per hour. That’s $95,000 per minute or $1,580 per second. That’s what the entire Egyptian and Singapore nations earn. Or, put another way, Google’s revenue is greater than that of more than half of European member countries.

Google is big. Its 2012 revenue of $50 billion works out at $136,890,000 per day or $5,703,000 per hour. That’s $95,000 per minute or $1,580 per second. That’s what the entire Egyptian and Singapore nations earn.

These are impressive statistics, and Google’s profit doesn’t disappoint either.

The company’s 2012 profit of $10.74 billion works out at $29,404,000 per day or $1,225,000 per hour. That’s $20,000 per minute or $340 per second – more than double the national revenue of Ethiopia. And we shouldn’t overlook the hundred billion dollars of assets.

Let’s contrast these figures with the penalties being levied against the company. Last year the US Federal Trade Commission (FTC) fined Google a record jaw-dropping $22.5m for breaching the privacy of millions of users by allowing tracking cookies to be placed on their machines without consent. This equates to the following:

– 3.95 hours revenue
– 18.4 hours profit
– 0.024 percent of assets

To put this into a more real-life perspective.

54,000 Google staff consume an average of two cups of coffee per working day @ $1 per cup cost to the company. Thus the fine is 83 percent of the company’s annual staff coffee outlay (total cost approximately $27 million). On a more gastronomical note it would be about twenty percent of the annual staff food bill.

The French privacy regulator CNIL however decided that a fine of 100,000 Euros ($128,000) struck the right chord.

The impact on Google is as follows:

 

– I minute 21 seconds of revenue
– 6 minutes 17 seconds of profit
– 0.00014 percent of assets

Placed again into perspective, if the company convinced its staff to each drink three cups of coffee less per year the fine would be more than covered. Or the company could start a “give up coffee for a day” campaign with almost the same effect.

if the company convinced its staff to each drink three cups of coffee less per year the fine would be more than covered. Or the company could start a “give up coffee for a day” campaign with almost the same effect.

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Penalties could however be creatively based on user monetisation. As an advertising company Google’s product is its users, and they each have a defined monetary unit value.

It’s difficult to calculate exactly how many people use Google, but it’s probably safe to round it to a billion. That means Google derives $50 revenue per year, per user and makes $10 profit from every user.

If the FTC fine was conceived as a penalty against revenue per user then the company would have to consider writing off a year’s revenue from, say, America’s 38th largest city, Mesa Arizona. This move would of course devastate the economy of Mesa, which relies on targeted advertising to direct visitors to its primary cultural attraction – the Mesa Grande Ruins – thus ensuring that tourists don’t get this landmark confused with other Hohokam structures of the classical period in the region.

In a similar vein, if the CNIL fine was conceived as a penalty against revenue per user then the company would have to write off a year’s revenue from around eight New York City residential blocks. Or Google could forgo a couple of month’s revenue from the picturesque town of Malmo Sweden, the world’s 844th largest city.

The scale of these figures can be daunting for regulators. I mean, it’s hard for most people to imagine anything bigger than a million. Everything greater than that just becomes a stratospheric blur.

So imagine Google’s hundred billion dollars of assets is the equivalent of a million dollar home. It’s a very nice home, with four bedrooms, two newly refurbished bathrooms and a lovely stretch of landscaped garden watched over by a cute concrete gnome with a hand-painted smiling face next to the driveway.

Well, look again at the garden gnome. That’s what the FTC just confiscated with its last fine (equivalent to $230). And CNIL’s fine was like removing a scoop of gravel from the driveway (equivalent to $1.28).

The question that governments may want to ponder is whether plundering Google’s garden ornaments is sufficient to force the company into legal compliance. Perhaps the time has come to review the powers of regulators.