The fallout over Google's bumbling social-network Google Buzz venture continued into its second week with a class-action lawsuit on behalf of Gmail users who feel their privacy was violated.

And as blogs buzzed with comparisons to Facebook's badly received Beacon feature and the risk to children who use Gmail, an analyst speculated that there could be an impact on future Google business prospects.

Cloud Burst?

"When Google won the contract with the City of Los Angeles last year, they made a statement: The cloud is safe, you can trust us with even your most critical data," said Scott Menter of Shire Ventures, a California-based technology and business consulting practice and former CIO of WaMu Investments. He referred to a deal to outsource e-mail for 30,000 LA municipal employees to Google.

"The Buzz debacle, which has much greater visibility than the LA deal outside the IT world, has considerably diminished the credibility of their position," Menter said. "While I don't see consumers fleeing Google or Gmail en masse as a result of this issue, it's likely to have a chilling effect on future corporate IT deals."

But it's not just Google who should worry, Menter said. "That effect may spread to other cloud providers as we are reminded, once again, that one instance of poor judgment on the part of a vendor can compromise privacy and create an unacceptable level of risk," he added.

A Tough Week

Google Buzz went online last week, utilizing Gmail accounts and profiles as the template for a network that shares contacts and content from Google Reader and Picasa. In response to complaints, Google changed the privacy settings to make it easier to opt out and for users to choose who follows them.

But anger lingers. "Tying Buzz to Gmail, and then fumbling the privacy aspect of that service, served as a jarring reminder that a great deal of sensitive and personal data about our lives is in the hands of a large, for-profit corporation," Menter said. "It's a little like discovering that the friendly and helpful neighbor who loaned you his lawn mower has a pair of binoculars sitting on the windowsill opposite your bedroom. Maybe he's using them to spy on you, and maybe not, but you're not happy about it either way."

On Monday the Harvard Crimson reported that two law school students at the university, with the help of a Washington lawyer who specializes in class actions, would sue the search giant, alleging the company breached the privacy of users.

Courts Will Decide

A Harvard Law School professor, William Rubsenstein, told the Crimson the outcome of the case may hinge on whether Google was aware of the potential problems with Buzz before it launched.

"I don't know what Google's motive is in all of this," third-year law student Benjamin R. Osborn told the paper. "I think they were just trying to jump-start their social network."

Osborn is pursuing the class action with second-year student Eva S. Hibnick as a plaintiff. The lawyer is Gary E. Mason.

Jules Polonetsky, cochairman of the Future of Privacy Forum, a public-policy advocacy group, told us that any successful case would hinge on proving that Google engaged in "unfair or deceptive trade practices."

He added, "This was a commercial product that drives activity to Google's other commercial products. It will be up to the courts to decide whether anyone was harmed. But it certainly caused a lot of consternation and calls for a good, hard look at what happened."

The Los Angeles Times reported that Google has held privacy briefings for reporters and bloggers, during which a lawyer said the company "followed rigorous protocols before rolling out the product, but conceded there were some problems in the 'execution.' "

Asked for comment about the lawsuit, a Google spokesperson said a statement would be forthcoming Monday, but it hadn't arrived at publication time.