I don't seem to recall any big story about regulation at the time. It seemed that they carelessly had their internal facial recognition tools (probably also use

I don't seem to recall any big story about regulation at the time. It seemed that they carelessly had their internal facial recognition tools (probably also used in Picasa, etc. grouping by person) run on all public content, and the results were feed into public image search. Then people started to notice that Google knows about ALL of their photos posted on the Web, and that probably negatively affected their opinion on the prospects of sharing all their photos and personal data with corporations. Also, such data collection abilities are generally limited to governments, so it was clear that many of them (US first and foremost) would ask for exclusion of certain individuals, and so forth, and so on, so the public tools were crippled. Yandex image search does have some facial recognition, but it also seems bit-starved and/or mixed with text search (there's a bigger chance to match if the name and surname is present). Also, Google is pretty Victorian about porn these days. It's almost like it has a whitelist of “acceptable” porn sites to suit the tastes of potentially angry old ladies.