The online ad industry dodged a bullet when the Federal Trade Commission proposed that internet marketers and sites self-police instead of imposing its own rules, as had been feared. Both the Interactive Advertising Bureau and the Network Advertising Initiative are working on guidelines designed to obviate the need for government interference in online advertising.

I spoke with Mike Zaneis Friday, the IAB’s VP for public policy, the day after his 15-member working group held its sixth meeting to discuss the draft on privacy standards. He hopes to submit the guidelines to the FTC on Feb. 22. The IAB’s task force made up of representatives of AOL (NYSE: TWX), MSN, Yahoo (NSDQ: YHOO) as well as ad networks and web publishers. It formed in September, before the FTC held its town hall meeting with advertisers at the end of October. Zaneis described a three-step process, starting with agreement on broad privacy principles followed by deciding how to apply those principles. The third part will cover possible compliance measures, which could range from audits and inspections to seal of approval similar to what’s offered by the Better Business Bureau.

Meanwhile. the NAI, an online marketing organization whose members also include AOL and Yahoo, is focusing strictly on revising its behavioral targeting standards, ClickZ reports. The group is aiming to complete and submit its revision to the FTC within the next six months. At the moment, the NAI is soliciting members’ views. It’s also considering expanding its ranks—Google (NSDQ: GOOG) recently asked to join and its membership is pending.

More from my interview with Zaneis after the jump.

-- A broader scope: The IAB specifically intended to concentrate on privacy as a broader issue than just on the practice of behavioral targeting, Zaneis said. “There’s several reasons for going beyond behavioral targeting. For one thing, what is behavioral targeting? It’s so hard to define it. Everything seems to be getting thrown into that bucket now. Take paid search results – are those behavioral targeting? I don’t know. They use certain data to make the search results more relevant. Instead, we’ve tried to take a broader look at it from a general privacy perspective in terms of how data is gathered and used.”

-- First step: Establishing the IAB’s privacy principles is the first part of the process. The IAB task force will address issues of consumer notice and choice, in terms of deciding the context for selecting opt-in or opt-out. Guarding personal data security and methods for remedying consumers’ losses or harm will also be part of the principles.

-- Implications of Facebook Beacon: Though he declined to say how the IAB’s forthcoming principles might apply in a case like Facebook’s recent Beacon troubles, he said that situation perfectly illustrates how the industry, as opposed to government regulators can solve these issues. “Facebook was clearly within the legal thresholds of what was necessary in setting up Beacon. But what they didn’t do was consider what level of choice their users would accept. The level of appropriate choice needs to be flexible. Context matters when it comes to privacy and we will look at that. The level of opt-in necessary for a social network is different when it comes to search on a general website, for example. Overall, I think the debate sparked by Beacon was healthy. And I think it proved that the concept of consumer regulation will prove to be more efficient and powerful than government regulation.”

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