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  • CFO.com | US

Google’s Flaws Start to Show

Are data-security and privacy issues causing uncertainty among the search giant's stakeholders?

In its third quarter 2013 financial results, Google reported its eighth consecutive decline in price per click, the money it can charge advertisers. But what’s worrisome is that this eight percent year-over-year loss in pricing power for its core business, a symptom of reputational value loss, is associated with other signs of stakeholder disaffection.

We at Consensiv rank global companies’ reputational values based on numbers from reputation insurer Steel City Re. Google fell from the No. 2 spot in November to the 100th spot in December among the 1,000 most valuable companies traded on major Western exchanges. Stakeholders may be scared by the recent data-privacy issues surrounding Google, but the central question is: Has Google’s professed mission to “Do No Evil,” like BP’s mantra of “Beyond Petroleum,” set stakeholders’ expectations beyond what the company can reasonably achieve?

Historically, Google has been very successful at collecting vast amounts of data to parse and use in targeting users on behalf of its advertiser clients. Consumers believed its somewhat vague promise to “Do No Evil” because it made their web experiences easier and better in dozens of ways, for free. Investors expected Google to continue making money at it, and other stakeholder groups were forgiving of its immense power because they profited, too. Google’s profit-and-loss statement reflected the value, and Google’s competitors shared in many of the benefits of similar expectations.

google_imageBut in the past couple of years, the company’s glib governance descriptor (“Do No Evil”) has come under scrutiny. In mid-November 2013, Google was fined $17 million by the Federal Trade Commission for circumventing the Safari web browser’s privacy features, allowing the company to track user’s internet activity. This was after Google forked over $22.5 million to the FTC in 2012 and promised not to track users without disclosure. Google is still embroiled with six European nations over its general privacy policies, and it was fined by French regulators in September for breaking rules on data privacy. This past spring, German regulators and a coalition of U.S. state attorneys general separately fined Google for unintentionally collecting email, photos and passwords from the unprotected Wi-Fi networks of its users.

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