FTC's Fine Won't Hurt Google as Much as Scolding

Although analysts say Google's $22.5 million fine from the FTC is a simple slap on the wrist, they argue that the publicity about it may still push the company to change its ways.

Ending an FTC investigation into allegations that Google used cookies and bypassed privacy settings to track people who use Apple's Safari browser, the company will pay what the commission says is a historic fine.

The settlement also mandates that Google disable all of the cookies it placed on affected users' computers.

"FTC spokespeople seem to be emphasizing that the $22.5 million is the largest fine ever and that it will send a clear 'don't mess with the FTC' message," said Dan Olds, an analyst with The Gabriel Consulting Group. "However, Google had more than $12 billion in pre-tax earnings in 2011, which is more than $33 million a day. That means the FTC's record-setting Google fine is the equivalent of a little over 16 hours of Google profits.

"When you look at the big picture, this FTC fine is more like a rounding error than a serious punishment," he added.

According to Olds, the fine is more akin to a traffic ticket than an arrest, not something that should leave a lasting mark.

But while the fine isn't too damaging, what may mean more to the company is the bad publicity associated with it.

"I think the bad press is enough to make companies like Google change their ways, because usually the press precedes any investigation by government agencies, which is sad, to say the least," said Jim McGregor, principal analyst with TIRIAS Research. "When issues like this are identified, the changes are usually made long before any sanctions are handed down."

Olds doubts the episode will change anything for customers or between Google and its competition, but the bad press could be a catalyst.

"It's more painful than the fine that the FTC imposed," he added. "It's this negative publicity that might keep Google from so obviously flouting an FTC order again. And if there is any future flouting, it will be much more subtle and hard to detect."

Brad Shimmin, an analyst with CurrentAnalysis, also pointed out that the FTC fine may be a cautionary tale for other companies.

"I think this is a reminder for Google, and more importantly the rest of the industry, that the FTC is willing and able to take action when corporations fail to adhere to their orders of compliance," he added. "Consumers are willing to overlook indiscretions and errors when those are met with some form of corrective action. But too many of those and too few reparations can undermine confidence over the long haul."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is sgaudin@computerworld.com.

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