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That acquisition last April preceded by a few weeks Yahoo's purchase of Right Media and Microsoft's acquisition of aQuantive. Then in July, AOL bought Tacoda, an online advertising company specializing in behavioral targeting technology.

Now concluded, these acquisitions to some degree were all meant to improve the Web giants' abilities to improve the relevance of display ads by tracking consumers' browsing histories.

If a person routinely visits Web sites about sports, he would be more inclined to react to an ad pitching a fantasy football league than to one offering a subscription to Oprah's magazine, the reasoning goes.

More relevant ads mean higher clickthrough and conversion rates, which in turn increase advertisers' return-on-investment (ROI) and enable Web sites to charge a higher premium for their advertising inventories. Internet companies further claim that users want to see ads for products that interest them, and that irrelevant placements are an annoyance.

When a person visits a Web site, a cookie is placed on the computer recording that action. The privacy issue arises from large Web companies aggregating the cookies and cross-referencing them with search histories to build composite profiles about people's Internet habits, a proxy for their likes, dislikes, goals and dreams.

"Business practices have outpaced the law," EPIC's Rotenberg said. "There is a clear need to establish new privacy safeguards now that advertising involves the creation of detailed profiles on individual consumers."

A recent comScore analysis commissioned by The New York Times hinted at just how much data Internet companies are collecting about their users. Yahoo, Google, AOL, Microsoft and MySpace each record at least 336 billion pieces of consumer data each month, the study found. comScore's analysis looked at the searches, pages views and display ads that appeared on those sites, estimating how many ads were served throughout their networks, the Times reported.

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"These things are happening below the radar for most Americans," said Joseph Turow, professor at the Annenberg School of Communications at the University of Pennsylvania.

A whole new world

"The data collection at this point far outruns the analytical capabilities. Companies have far more ability to collect data than they do to analyze and serve results based on that data, Turow told InternetNews.com.

Once that happens, however, "we're going to see a whole new world," he said.

With consumer data becoming the gold standard for the Internet economy, and ownership of that data consolidating into the hands of a few powerful Web companies, privacy advocates are continuing to press for legislation to set boundaries on the collection and usage of personal information.

"Online advertising and data collection is finally breaking into the mainstream," CDD Executive Director Jeff Chester told InternetNews.com. "The FTC is only going to go so far. It's clearly going to be up to the Congress and the next administration."

Chester said that his group and others have been lobbying U.S. and European lawmakers to enact stricter rules on data protection.

In Europe, Chester said that the Article 29 Working Group -- the arm of the European Union dedicated to examining privacy policy -- is expected to issue a statement classifying a computer's IP address as personal information. Doing so could have serious implications for companies' ability to make use of those addresses in building profiles.

No similar legislation is pending in the U.S. Congress, though Chester said he was heartened by a bill that Rep. Ed Markey (D-Mass.) introduced last month. Among other things, the bill would assure confidentiality of online medical records. Both Google and Microsoft have recently launched online services to store people's medical histories.

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