With all of the recent news about privacy and Facebook, it is no surprise that Google jumped on the bandwagon to offer more privacy options. Google Analytics recently announced that they will be offering more options to help keep Web user information even more private. There are now two options for Internet users to install a privacy add-on and the ability for Website owners to make user IP addresses anonymous.
Google also released the option for Website owners to offer their visitors anonymously reported IP addresses to add privacy. Through an added line in your tracking code, "_anonymizeIp()", the tracker will ignore the last octet of the IP address prior to storing it. This functionality only gives Google Analytics enough information to get a general idea of geographic location for reporting purposes, while maintaining the privacy of the user. Though this may be a great add-on for sites where users prefer a higher level of privacy, this option can have an effect of making the geographic reports in Google Analytics less accurate since the IP addresses will not be wholly accessible. Details on installing the anonymous IP functionality can be found at: http://code.google.com/apis/analytics/docs/gaJS/gaJSApi_gat.html
While these new privacy features may appeal to some Web users and Website owners, it comes as a disappointment to others. These new features would make Analytics data less accurate and would lessen the amount of data collected. This seems counter intuitive to the purpose of Google Analytics.
Google Analytics also relies on cookies to determine visitor makeup and sessions. Cookies are stored on browsers to track visitor sessions as well as to track whether visitors are new or returning. Cookies also track the path visitors take when viewing a Website. Users can delete cookies from their browser which can skew the data since their visitor sessions will be wiped clean and restarted. When this happens, a visitor who should be counted as a returning visitor may be counted as a new visitor as all the previously gathered information about that visitor is no longer taken into account.
Because of these factors, Google Analytics cannot always accurately track these users. It is more important to watch trends over time and not to focus on individual points of data. While it is possible that these options could create a significant change in your data, it is probably not likely since majority of your Website users will not know about, or won't use these options unless Google puts it front and center for them.