Google’s Schmidt Pledges Europe Privacy Controls to Fight ‘Elephant’ Image

Google Inc. (GOOG) is trying to rehabilitate its image in Europe after years of rankling regulators, artists, publishers and privacy advocates in the region.

The owner of the world’s largest search engine is pledging increased hiring, more respect for intellectual property and improved privacy safeguards to win over critics. The efforts appear to be working, with politicians including French president Nicolas Sarkozy and German chancellor Angela Merkel softening their stances toward the Mountain View, California- based company.

“When an elephant enters a crystal room, you have to be cautious, and we realize that we’re an elephant now,” Carlo d’Asaro Biondo, the French-Italian head of Google’s southern European operations, said in an interview in Paris. The company had to change, or “long-term, we would have paid for it.”

Europe is home to some of Google’s most loyal customers. Its search engine had an 88 percent market share in March, compared to 66 percent in the U.S., where Yahoo! Inc. and Microsoft Corp. (MSFT)’s Bing are stronger competitors, according to comScore Inc. Governments have been less welcoming, with the European Union investigating Google’s advertising practices and Germany threatening a fine over the Street View mapping program.

Chairman Eric Schmidt is leading the outreach, appearing at events in Berlin and the U.K. since stepping down as chief executive officer in April. At a “Google Zeitgeist” event outside London yesterday, he said the company has made changes to ensure privacy.

Reining In Engineers

“We’ve learned to the let the engineers build but not launch without a long conversation,” which includes consulting with public policy specialists and advocacy groups, Schmidt said. “You should be able to delete information about you that we can control. You should own your data and we should be transparent.”

In Germany, Google suspended Street View photography after giving residents the right to remove their homes from its images and is planning an “institute for internet and society” in Berlin, part of an expansion that will see 1,000 European staffers hired in 2011.

Google has signed agreements in France and seven other countries to give artists and copyright holders a cut of revenues from material on YouTube, and is making similar deals for content on the Google Books project to scan the contents of the world’s libraries. Sarkozy had warned in 2009 his country could be “deprived of our heritage” by Google Books and suggested the government would block the effort.

World View

By being proactive on issues like rights for artists and homeowners, Google is trying to “avoid a situation where people get resentful, and governments fill the hole with new laws to respond,” said Alice Enders, an economist at London technology consultancy Enders Analysis. “It’s no longer sufficient to view the world from the West Coast of the U.S.”

The most significant challenge may be in Brussels, where the European Commission is investigating whether Google’s search results and third-party advertising services discriminate against competitors like Microsoft. Google has said its practices are fair, and that it’s cooperating with the investigation.

If Google is found to have broken European Union rules, fines could total up to 10 percent of global revenues. Intel Corp. (INTC) was fined more than 1 billion euros ($1.42 billion) in a 2009 antitrust probe.

‘Positive Relationship’

“Google had to put some water into their wine, as we say in France,” said Hervé Rony, the head of France’s 28,000-strong SCAM artists’ syndicate, which signed a copyright holders’ agreement with Google in November. “It’s possible now to work with them, and to have a positive relationship.”

Photographer: Alexander Zemlianichenko Jr/Bloomberg

Carlo d'Asaro Biondo, head of Google Inc.'s Southern European operations. Close

Carlo d'Asaro Biondo, head of Google Inc.'s Southern European operations.

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Photographer: Alexander Zemlianichenko Jr/Bloomberg

Carlo d'Asaro Biondo, head of Google Inc.'s Southern European operations.

The bond was on display on May 9, when Google invited 250 French artists, writers, and government dignitaries to a dinner of foie gras, sea bass and Champagne in the Chateau de Versailles outside Paris. The company is paying for the restoration of a wing of the Baroque castle, a symbol of French royal history that dates to the 17th-century reign of Louis XIV.

Google is also opening a “European Cultural Center” this year near Paris’s Saint-Lazare train station. An exhibition space will showcase the company’s partnerships with organizations like the Chateau de Versailles, with adjacent offices housing Google’s Paris operations, which will grow to 500 staff from the current 250 in the next two years.

Google is courting companies as well as governments. A program in Poland to help small businesses go digital has put 40,000 online for the first time, and is being rolled out in other European countries.

Skeptical Regulators

Google still faces considerable skepticism from regulators. Officials in Germany view the company with caution after the introduction last year of Google Buzz, a social-networking feature that automatically mined e-mail contacts in its initial version, Peter Schaar, Germany’s federal commissioner for data protection, said in an interview.

Another service, Google Analytics, prompted a showdown with German officials over tracking IP addresses that wasn’t resolved until “we showed our muscle,” and threatened to fine participants, said Ulrich Kuehne, a member of the data privacy bureau in Hamburg, home to Google’s German headquarters.

While disagreements remain between Google and Europe’s governments, communication has improved, company executive Biondo said. “To me, a big success is being allowed to sit at the table and talk. I’m not sure we would have been allowed to sit at the table some years ago.”

Whatever the regulatory challenges, Google is betting its unique digital brawn will prove essential on a continent that’s eager to keep up with the U.S. and Asia in technology. A French Senate report on that country’s national book-scanning project suggested as much last year, recommending that the National Library team up with Google to speed work. The report’s estimate of the time required to put collections online without Google’s help? 375 years.

To contact the reporter on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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