Google's attitude to privacy issues is not making it any new friends. Mark Mayne reports.

It's not shaping up to be a good year for Google. The once all-conquering company may be going from strength to strength financially, but in credibility terms, its stock is falling.

Last month saw a harsh report from Privacy International, which gave Google the lowest possible ranking in an analysis of privacy practices among some of the biggest online players.

The human rights watchdog said last month: "We have found numerous deficiencies and hostilities in Google's approach to privacy that go well beyond those of other organisations. While a number of companies share some of these negative elements, none comes close to achieving status as an endemic threat to privacy."

Google responded by claiming that the report was skewed and Privacy International was paid by Microsoft.

In an open letter to Google's chief executive, Eric Schmidt, Privacy International accused the search giant of launching a smear campaign. It said: "Two European journalists have independently told us that Google representatives have contacted them with the claim 'Privacy International has a conflict of interest regarding Microsoft'."

The letter continued to say that no company had made a similar accusation in Privacy International's 17-year history.

Google then seemed to back down and announced it would anonymise stored data after 18 months, instead of after 24 months as previously. The EU justice and home affairs commissioner, Franco Frattini, welcomed the move: "I appreciate the commitment of Google not only to meet our expectations in terms of protection of privacy or better on cutting the time and reducing the time of retention of personal data," he said.

This concession has failed to convince the blogosphere, which is calling for boycotts of Google products. Whether this is still possible is a moot point, but the key point is that a company that was seen as cool just a few months ago is now looking more and more like the bad guy.