Google will pay out $8.5M over Buzz privacy snafu

Bad buzz over a faulty service can exact a price from an Internet giant. But what’s the real cost?

Google has settled with plaintiffs over the privacy concerns stirred up by its attempt at a Twitter-like social network, Buzz, to the tune of $8.5 million — only $2,500 of which will be paid out to the individual users that filed the lawsuit.

For a company with revenues of $25 billion a year, that payout is peanuts.

The rest will go to attorney’s fees and organizations that promote privacy for Internet users and education on privacy concerns. Google has also agreed to tweak its privacy policies.

Google Buzz launched in February this year, and was designed to integrate seamlessly with the inboxes of users of Google’s Gmail email service. The integration worked a bit too well, stirring up a hornet’s nest after users discovered any Buzz user could see their entire list of contacts.

While the privacy settings could be tightened contacts were visible by default — causing Buzz to be universally panned. About a month later, Google said it had misstepped and had designed the service without enough thought.

While the financial cost was relatively small, the episode caused many to ask if Google had lost its way in a world of social media dominated by Facebook and Twitter.