Google's Hot Spot: Privacy

Google's (GOOG) WiFi ambitions may generate a few hits on the privacy front.

Inside the tech titan's wireless Internet access strategy is a bit of free security software called Google Secure Access that funnels all user traffic to a Google server. This encryption service, which is optional, allows users to send sensitive data like online banking info or work files without worrying about eavesdroppers.

Well, almost.

In exchange for providing a free ride on the Net and pro bono security, Google can work its logarithmic magic and glean not only the topics that seem to interest you, but your general location.

If this approach is successful, the already targeted advertising that appears in the margins of your Google pages will put a bull's-eye on you for advertisers hawking goods and services in the vicinity.

Google says the primary reason for branching into wireless Internet access is to allow the company to explore opportunities in location-based services.

The Mountain View, Calif., tech shop is one of the bidders vying for a contract to provide free wireless Net access to the city of San Francisco. Google already provides free WiFi service in San Francisco's Union Square and is a sponsor of free wireless service in New York's Bryant Park.

The potential problem is that for Google's location-based services to work, the company needs to know where you are and what you are interested in. And to get that info, the company will track some of your Web page viewing and roughly pinpoint your location.

Industry observers say there's nothing really new here. All network operators keep logs of users activities. The big difference in this case is that Google actually uses some of the info to tailor advertising, say analysts. Ads, by the way, happen to represent 98% of the company's revenue, says Mike Smith, an analyst with Stratecast Partners. Google shares rose $3.17 to $319.73 Monday.

"From a privacy standpoint, I don't think it's a huge issue. But targeting ads makes it more visible to the user," says ABI Research analyst Sam Lucero. "Google is going to slap them right in the face with it. And that might be a public relations problem."

Google's electronic snooping, as minimal as it may be, has raised the ire of critics in the past.