Google has built one of the most profitable business models ever seen in the tech industry. How? By providing free and useful services like Search, Maps and Gmail to billions of people, while gathering their personal data to target ads. Google users get helpful tools but pay with their private information. Advertisers get access to those users‘ attention. This bargain has led to the notion that "you are not the customer, you are the product." While Google‘s model has faced growing backlash over privacy concerns, the company continues expanding its scope to gather more user data and drive revenue growth.
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Trading Data for Convenience
Google‘s search engine started as a college project in the 1990s, but its PageRank algorithm soon delivered better results than competitors. Google succeeded by understanding that people wanted convenience and relevance. Initially, users got precise search results while advertisers bought keyword ads.
- Google search now handles 5.6 billion requests per day and has 90% global market share [1].
- Google parent company Alphabet reported $257 billion in total 2020 revenue, with $147 billion from advertising [2].
As Google launched free tools like Gmail, Maps, Chrome and YouTube, it became experts at monetizing the personal data and attention its services attracted.
- By scanning Gmail content to target ads, Google gained insights into the lives of 1.5 billion active email users [3].
- Google‘s Android OS with Google apps pre-installed now powers over 80% of smartphones globally [4], providing a wealth of location and usage data.
- Google AdSense lets over 2 million websites make money by placing targeted Google ads based on their content and visitors [5].
Google‘s ubiquitous services provide convenience to users but enable ever more intrusive data gathering for advertisers.
Google‘s ad revenue and market share growth over time. Source: [11]
The Costs of "Free" Services
The bargain of trading personal data for free services has provoked intensifying scrutiny of tech companies. In various surveys:
- 72% of respondents said internet companies should be regulated as to how they use customer data [6].
- 41% said it is not possible to go through daily life without being tracked online [7].
- 91% said people have lost control over how personal information is collected and used [8].
Critics increasingly deride elements of Google‘s model as "surveillance capitalism" – covert extraction of private human experiences as raw material for advertisers. But as tech analyst Leo Schwartz said:
"Users have generally accepted this data/convenience tradeoff. The average person values access to helpful, free services more than the privacy risks."
Controversies over Google‘s data practices have erupted periodically:
- In 2016, Google faced backlash when it combined data from DoubleClick ads with personally identifiable user information [9].
- In 2020, the U.S. Justice Department filed an antitrust lawsuit alleging Google used anticompetitive tactics to protect its monopoly power in search and search advertising [10].
While not illegal, comprehensively combining its vast troves of user data raises ethical questions for Google and regulators.
Adapting the Data Model
In response to criticism, Google has made adjustments like:
- Phasing out third-party tracking cookies in Chrome by 2024, though Google‘s own first-party cookies remain [12].
- Implementing "differential privacy," which obscures individuals‘ identities in collected aggregate data [13].
They aim to preserve the core advertising model while reducing transparency around exploitation of user data.
Competitors like Facebook and Amazon operate similar models of providing free services, gathering extensive personal data and selling highly targeted ads.
- Facebook makes $28 billion in annual ad revenue from its 2.8 billion users [14].
- Amazon‘s $22 billion yearly ad business leverages robust shopper data [15].
But at over 90% market share in search ads and 80% in mobile operating systems, Google sits at the apex of user data collection.
The Future of Your Data
Going forward, expect Google to continue expanding its services to gather ever more aggregate user data, even as it masks individual identities and tweaks practices to avoid stifling regulation. Areas like connected devices, digital payments, augmented reality and healthcare offer new data sources to augment Google‘s profile of each user‘s habits, interests and relationships. While users enjoy the utility of Google‘s tools, the company enjoys the utility of access to users‘ lives. Hoarding more behavioral data than any entity in history provides root-level insights into humanity‘s needs and desires – an irresistibly valuable asset for advertisers.
The core bargain will persist: trading personal data for free services, packaged in slick interfaces. Google has built a foundational model of the digital economy atop you, the user, as its most precious product.
