Google's Got a Privacy Problem

Updated from 8:05 p.m. EDT

SAN FRANCISCO -- Google's(GOOG Quote) foray into the Internet browser market may be its best defense against the hold Microsoft(MSFT Quote) has over the search giant's users.

But a lot will ride on whether consumers take a shine to Google's Chrome browser -- and whether users are OK with knowing even more personal information will be piling into Google databases.

The company timed the release of Chrome earlier this week to coincide with Microsoft's beta-version release of Internet Explorer 8, an improvement of its widely used browser that holds about 72% of the market.

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Google hopes that Chrome will chip away at that dominance by becoming a formidable challenger to IE8. Its new browser is packed with features meant to woo users, such as the ability to capture Web sites on separate tabs and offering an "Omnibox" that combines the address bar and search bar into one.

What it doesn't have, however, is Internet Explorer 8's capability to block Web sites from collecting information about users -- and for good reason -- Google's entire business model is dependent on funneling much of that information to online advertisers.

That's a big reason why Chrome needs to win over users. By controlling the browser experience, Google can keep attracting advertisers by offering them key metrics about its users. But if users instead stay with Explorer en masse and decide to exercise the new blocking feature, that could put a huge damper on Google's revenue stream.