As I promote The Numerati, people often ask me how much Google knows about each of its users. So a few months back, I asked Google.

"There's a sense that Google knows everything about you," says Mike Yang, a lawyer working on privacy issues at the company. "The reality is a little different than that." The way he describes it, lots of information about our behavior is swimming around in Google's servers. But much of it is not attached to our names. More important, the company doesn't at this point have a business case for aggregating all those bits about hundreds of millions of single users. "It's not cost effective nor meaningful for us to come up with a whole series of individual data sets," he says.

However, if you have a Google account--such as Gmail--the individual pops into much sharper focus. The company stores the search results of users who have opted in, Yang says, and "uses them to customize and improve their search results." (Have you opted in? Did you perhaps click some disclosure form without bothering to read it? Most of us do it all the time and, in the process, click away rights to our data. I do it often.)

Another way Google knows us is through behavioral advertising. Over the 10 months, the company, like much of the online ad industry, has been harvesting some of our surfing patterns through the use of digital cookies. This leads to more targeted advertising. If you'd like to see what Google's learning about you from these cookies, you can click google.com/ads/preferences. There you'll see which buckets the company puts you into.

My list includes stuff you'd expect: Business, computers, society, data management. (The only surprise is soccer. They must have picked up that one yesterday, when my son was urging me to look for YouTube highlights of Argentina's fabulous striker, Lionel Messi.)

Now you might think that Google's buckets are a bit large. Couldn't a company with that much data and computational smarts place us into more precise groupings? No doubt they could. But even sophisticated companies still love big buckets. For now, at least, it's often more cost effective to give business news to "business readers"--instead of finding 300 different offerings for 300 types of business readers. That will change, no doubt, as the science advances. But for now, big buckets are still popular.

Here's the paradox. Even while sophisticated companies divide us into big buckets, many data companies and consultancies boast about the precision of their marketing campaigns. Those claims, often exaggerated, fuel public privacy fears, which could lead to restrictive new laws. So the hype, while helping individual companies, risks damaging the industry.