CORRECTED-Internet ad self-regulation falling short: US FTC

(Corrects stock symbol in paragraph 13 to (TWX.N) instead of (TWTC.O), as earlier sent)

By Diane Bartz

WASHINGTON, Nov 1 (Reuters) - Internet advertisers have fallen short of promised self-regulation in respecting Internet users' privacy, a Federal Trade Commission official said on Thursday, even as one firm, Tacoda, said it decided to refrain from collecting some sensitive information.

FTC Commissioner Jon Leibowitz said Internet advertisers should tell consumers that information was being gathered, give them a choice to opt out, and protect any data collected.

"In practice, they often leave a lot to be desired," he said at a FTC conference to discuss the privacy implications of the data collected by Internet advertisers.

The audience was a Who's Who of Internet advertising firms such as Google Inc (GOOG.O) and Yahoo (YHOO.O) as well as privacy advocates.

Leibowitz said his 12-year-old daughter and her friends told him that they been exposed to ads that said things like "touch me harder" and "how long is your next kiss?"

"People should have dominion over their computers," he said. "We really mean it."

He left open the possibility of a "do not track" list, similar to the FTC's "do not call" registry which requires telemarketers to refrain from phoning anyone on the list. Such a "do not track" list was proposed this week by several consumer and privacy groups.

"I am concerned ... when my personal information is sold to third parties and when my online (research) is tracked across several Web sites," said Leibowitz, one of two Democrats on the five-member commission.

But several other speakers at the FTC conference cautioned against any government regulation.

Randall Rothenberg, president of the Interactive Advertising Bureau, warned against inadvertently stifling one of the most dynamic sectors of the U.S. economy.

"The government must be prudent," he said.

Trevor Hughes of the Network Advertising Initiative mocked what he called the "shock" that advertisers are trying to develop more targeted ads. "We also have self-regulatory programs," he said. "We have many, many layers of control and protection for consumers today."

ANOTHER FRONT IN PRIVACY RACE?

David Morgan, founder of the advertising firm Tacoda, which was recently acquired by Time Warner's (TWX.N) AOL, said his company considered advertising to children a "third rail" -- a reference to the rail that delivers electrical power to a subway train. Touching it means electrocution.