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Analysts are split on how Google’s new privacy rules, which went into effect on Thursday, will affect users — and ultimately the company itself.
The rewritten and unified privacy policy, now the law of the Internet company’s land, lets Google combine data from most Google services.

Google has been notifying users about the impending change since late January via email announcements and notices on its search pages.

Google contends that the new rules don’t veer from previous privacy policies. The company says the changes make it easier for users to see what information the company has collected about them while they use Google’s free search engine, Gmail service, maps, browser and Android-based smartphones.

The company also notes that users still have control over how they use Google’s online services and that private user information remains private.

Critics, however, say the new privacy policy gives Google free rein to parse together a user’s personal information to find out what she is interested in, who she talks to, where she goes and, basically, who she is.

“You don’t have to be a weatherman to predict that this move by Google is going to cause a firestorm of controversy,” said Dan Olds, an analyst with The Gabriel Consulting Group.

“Just so far today, the first day of the new policy, we already have 36 U.S. state Attorney Generals weighing in with a strongly worded letter, and a pan-European privacy commission starting up an investigation. As details start to emerge, I think that the fire is just going to burn brighter,” Olds added.

On Thursday, EU Justice Commissioner Viviane Reding announced that privacy agencies in European countries have concluded that Google’s new privacy policy violates European laws.

France’s data protection watchdog, the Commission nationale de l’informatique et des libertes (CNIL), announced this week that it had asked Google to postpone the new policy.

The CNIL also said it is willing to take the lead in an investigation into the legality of Google’s new privacy policy. The agency said its preliminary research found that Google’s new policy fails to meet the requirements of the European Data Protection Directive.

Google’s new privacy rules consolidate the the bulk of policies it had into one policy, the company said. It combined more than 60 of 70-plus policies into a new main policy.

Google also said it has cut down on the Google Terms of Service and made them easier to read.

Google has been compiling information from users of its different services, like Gmail and Calendar, for some time. The new policy is different in that it includes user information across all products and services.

Critics were quick to complain that Google wasn’t giving users an opt-out option for this consolidation of data. Instead, the company said if users didn’t like their data being combined across services, they could simply stop using those services.

Facebook is gearing up for an initial public offering (IPO) in the second quarter of 2012 that could value the company at $100bn, according to reports.
Rumours that Facebook will file for an IPO have been circulating for some time, but the world’s largest social network has never publically confirmed the move.

Facebook told V3 on Tuesday that it could not confirm the most recent rumours. The first reports originated in The Wall Street Journal and cited “people familiar with the matter”.

Goldman Sachs and Digital Sky Technologies publically invested $500m in Facebook in January, which valued the social network at $50bn.

Quocirca analyst Clive Longbottom suggested that Facebook will have no problems raising $100bn in an IPO. The sum is equivalent to the revenue generated last year by IBM, the world’s biggest software company.

Longbottom pointed out that Facebook will need to sell only a small percentage of stock to achieve the reported valuation.

“All things considered, I expect the IPO will be successful. Social networking is seen as a safe bet for investors, just as telecoms companies used to be,” he said.

“The IPO will bring a lot of money into Facebook which the business will then have to decide what to do with.”

However, Longbottom warned that the money could do the company more harm than good.

“Facebook may decide to use the money to develop its market share in particular regions of the world, but then it already has 10 per cent of the global population using its service,” he said.

“Or it may try and develop a monitised business, which it has been trying to do for a while but has been unsuccessful. It may also try and expand into a software-as-a-service type of company like Google has done with products like Docs, although this may take it off path and remove some of its focus.”

Longbottom suggested that, as Facebook currently turns over $3bn to $4bn a year, but has now been valued so much higher, there may be more pressure on the business to take the IPO route.

“A company cannot just grow from a $3bn company to a $100bn company by pushing more and more advertising, or by getting its users to target advertisements more,” he said.

“Either at some stage Facebook has to change its model or people will see the emperor’s new clothes and move on to the next internet bubble.”

However, while arguing that Facebook’s IPO may create problems for the business, Longbottom said that the social network would be “crazy” to hold off for too much longer.

“It’s better that Facebook makes the offer while it’s still growing than when the model begins to creak. It needs the cash to acquire, to build and to dominate,” he said.

Longbottom cited the failure of Groupon’s recent IPO, which he said was because the firm had waited too long.

“Facebook has managed to build a model that is far more sticky and long lasting than one could have imagined, so the IPO may just work for them,” he said.

The analyst concluded that spring next year would be a good time for an IPO as the market should be seeing some economic recovery by then, particularly in the US.