The lack of privacy is due to a lack of regulation and funding of regulatory agencies. It happens precisely because the US is very adverse to adding new privacy laws or enforcing the ones on the books (you need to fund federal regulators if you want them to regulate).

Frankly, I think a large reason it goes unaddressed is because governments love to invade privacy just as much as advertisers do. Adding new laws to curtail consumer products from spying also means the likes of the NSA, FBI, or local law enforcement can't also tap into that spying machine. They want google to log everything you do because they are all to happy to use those logs.