By this reasoning, isn't email also "public" to all recipients? Does Google Hangouts not have an expectation of privacy, since it's fundamentally no different from chat on a game server?

You have control over who you email or invite to a Hangout. You do not have control over who you connect with in an online game.

You're trying to reason this through from a technology perspective, which is not how others are thinking about it. What matters more is the perception, not the software that makes it happen. We think of Gchat, email and hangouts as private communication. But playing an online game is more like being in a public space, so we have less expectation of privacy. Online games already have mechanisms for reporting toxic players, so you know going in: someone else may look at what I said.

Genuine question : isn't there a more objective standard to be appealed to than perception? Is that really the only thing that's stopping Google from snooping through their own employees private emails, or from reselling them to the highest bidder?