U.S. marketers and consumer advocates are preparing for battle over the rules governing online advertising tailored to individual browsing habits, often tracked and collected without notice or permission.

The U.S. Congress is due to intervene in the issue in the coming weeks, with a bill in the House of Representatives that would oblige websites to state explicitly how they use the information and allow those using the site to opt out.

A billion-dollar industry and consumer privacy are at stake.

Advertisers and popular websites say visitors prefer ads that are targeted to their interests and must accept advertising as a necessary condition to obtain free content.

But 75 percent of Americans said in a recent survey they were opposed to tailored advertising if it meant their behavior surfing the Internet was being tracked.

People want the benefits of the Web but don't know about the surveillance aspect, said Stephen Baker, author of The Numerati, about the extent of online data collection. And when they hear about it, they get the heebie-jeebies.

Researchers at the University of California, Berkeley, and the University of Pennsylvania who surveyed 1,000 Americans from June 18 to July 2 concluded there was a deep concern that tracking Internet habits for tailoring ads was wrong.

The survey came at a time when the debate in Washington over privacy and online advertising is at a roiling boil, said Mike Zaneis, vice president of public policy at the Interactive Advertising Bureau, an industry trade association.

TARGETED ADS

There's a battle for the online policy marketplace, Zaneis said, leading to a paternalistic effort to restrict information online, even if it's anonymous.

Targeted ads account for $1.1 billion -- up from $500 million in 2007 -- or 4.5 percent of the overall $24.5 billion dollars projected for online advertising in 2009, according to eMarketer estimates.

In Washington, Democratic Representative Rick Boucher and other House members are introducing bipartisan legislation later this year aimed at helping consumers better understand what information is collected about them and how it is used.

Boucher, the chairman of the House Energy and Commerce Subcommittee on Communications, Technology and the Internet, told Reuters: We want to enhance the sense of security and privacy protection,

The bill would oblige websites to display a privacy policy and explain to users how their information was collected and how it would be used. It would also require sites to allow visitors to opt out of having their data used to create an advertisers' profile.

Last winter the Federal Trade Commission published guidelines for advertisers, which prompted the ad industry to put out its own set of self-regulatory principles in July.

Government agencies and consumer advocates argue that some form of regulation is needed to inform and protect consumers when they go online.

The privacy implications of new technology are vast, said David Vladeck, head of the Bureau of Consumer Protection at the Federal Trade Commission.

COOKIE MONSTER

Each time a consumer points his or her browser to a website, it creates what are called cookies, essentially chunks of code that marketers can read and interpret to determine how to target their ads.

Consumers can avoid some of this tracking by either deleting cookies on their browser or by instructing the browser not to accept cookies. But this can also disrupt web surfing as many websites will not function properly with the cookie function turned off.

Consumers have been tracked and followed by advertisers in the offline world for generations, often through credit card information, or supermarket cards.

But the Internet raises the stakes because people are living their lives online, for essential transactions, said Jeff Chester, of the consumer protection group Center for Digital Democracy.

(Editing by Daniel Trotta and David Storey)

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