Congress to Push Web Privacy

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He also says more companies will let people see the data being collected by ad tracking services. Google is already headed down that path, rolling out a new feature in late July that lets people see how search results are customized, using data such as past searches and IP addresses.

Lessons From the Do-Not-Call List

Privacy advocates argue that for now, the industry's response doesn't go far enough. The Center for Democracy and Technology urges companies to put opt-out links right on ads and says that the industry should establish a Do Not Target list, akin to the telecommunications industry's Do-Not-Call list.

Others want Congress, now that it's paying attention, to require opt-in for behavioral targeting. "It shouldn't have taken them by surprise, they haven't been looking at the new medium," says Jeffrey Chester, executive director of The Center for Digital Democracy. "No one was looking where this was going."

Most industry execs are eager to do whatever they can to avoid regulation. They prefer a combination of self regulation, education campaigns, and technological responses, such as tools that block so-called cookies, which follow a user's movements across the Web. Legislation is hard to tailor to the ever-changing tech industry, they say. "The challenge with legislation is that we're in a fast-moving industry," says Anne Toth, Yahoo's head of privacy and its vice-president of policy. "With things moving so quickly, from our standpoint a self-regulatory approach would be able to respond more rapidly."

Courting consumer trust

Yahoo and others also say they believe most people prefer to see more targeted ads. "We're not talking about more online advertising," says Trevor Hughes, executive director of the Network Advertising Initiative, an industry group. "We're talking about relevant advertising that consumers appreciate."

Privacy advocates contest that notion, pointing to surveys like the one released this spring by TRUSTe, a privacy policy accrediting group. In the survey, 57% of 1,015 respondents said they weren't comfortable with advertisers using their browsing history to serve relevant ads.

Some in the industry think that legislation might be the way to set a common standard and avoid inconsistent, piecemeal legislation on the state level. Microsoft came out in 2005 in favor of federal privacy legislation and thinks others are beginning to agree. "Companies are coming around to the notion that it's not only compatible with their business practices but [that it] can help them by enhancing consumer trust and making compliance more streamlined," Microsoft's Hintze says. Microsoft advocates privacy baselines that cover not just the online collection of data, but offline collection as well.

David Hallerman, analyst at researcher eMarketer, says legislation would go a long way toward assuaging fears of advertisers who fret consumers don't want their privacy compromised. He says that if an online privacy law were passed, "the benefit would be there for advertisers, publishers, and the public."

Green is an associate editor for BusinessWeek .