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Google Confronts Gmail Privacy Furor in Amended IPO Filing

Google filed an amended initial public offering yesterday that added privacy concerns to its list of risk factors that might hurt the company's prospects.

The filing cited the privacy uproar caused by Google's announcement in April of its free e-mail service, Gmail. In exchange for 1,000 megabytes of storage and the ability to search through e-mail messages, Gmail will scan incoming e-mails to match them up with keyword advertisers, whose listings are shown on the right side of the screen.

Privacy advocates howled that the system amounted to an invasion of privacy, while also railing against Google's policy of continuing to store deleted messages on its servers.

“Concerns about our collection, use or sharing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and operating results,” Google's amended filing states.

Google's filing also amended its founders' “owner's manual” to address Gmail concerns. Under the section “Making the world a better place,” Google founders Larry Page and Sergey Brin defend Gmail.

“We know that some people have raised privacy concerns, primarily over Gmail's targeted ads, which could lead to negative perceptions about Google,” the letter reads. “However, we believe Gmail protects a user's privacy.”

Gmail, which Google plans to release sometime this year, spurred Yahoo last week to increase its storage capacity for users of its free Web e-mail service to 100 megabytes. Gmail potentially could greatly expand the reach of Google's AdSense content-targeted advertiser listings.

Concerns over Gmail led the California Senate to pass a bill last month that would restrict Google's new e-mail system's data retention practices. The measure's original version would have banned Gmail from scanning incoming messages to display advertising. The state Assembly is considering the measure. A Google representative has said the company is now “neutral” on the bill.

Google's amended filing said that legislation like what originally was proposed in California could prevent it from offering Gmail in a state.

“Google intends to address privacy related concerns and future proposed legislation by educating the public and legislators about the Google products and services, and by working closely with legislators to craft laws that are not overly broad,” the filing states.

In May, Google posted an explanation of Gmail's privacy practices on its site to “correct some misconceptions” about the service. It also posted positive reviews of the service from journalists selected to try Gmail, which has not been generally released.

In addition to domestic privacy concerns, Google faces challenges in Europe, where some privacy groups alleged Gmail would violate European Union laws on data protection. Google said the interpretation of those laws is “uncertain and in flux.”

Google added other cautionary notes to its filing. It further defines its “long-term” focus by stating that it generally looks for projects to make progress within two years. The letter says the company typically charts its course based on three- to five-year projections.

“Our long-term focus may simply be the wrong business strategy,” Page and Brin's letter warns in a new passage. “Competitors may be rewarded for short-term tactics and grow stronger as a result.”

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