Yesterday, BoomTown wrote about the status of the regulatory approval for the Microsoft-Yahoo search and online advertising pact.

While none of the key constituencies wanted to comment or make predictions about the outcome of the government scrutiny, most seem to agree that the MicroHoo partnership is more likely to be approved than not.

One of the few vocal critics of the deal, though, is Jeffrey Chester, the executive director of the Center for Digital Democracy, a public interest group.

CDD, along with several other consumer groups, recently sent a letter to the Justice Department’s antitrust head, Christine Varney, expressing concern about the control and collection of consumer data in the deal.

CDD also has been querying Microsoft (MSFT) and Yahoo (YHOO) directly about the data collection and privacy implications of the deal, which is something the government should be doing.

So, to further get a glimpse into MicroHoo’s arguments, here is a set of important questions Chester asked then that were answered in a memo by the pair:

What specific data collection, interactive ad technologies and targeting applications will be used for search under the 10 year deal?

Today, Yahoo! collects data about Yahoo! visitors to our search product and uses that information to deliver products and to customize advertising and content, among other purposes described in its Privacy Policy. Microsoft and Yahoo! have each adopted industry-leading privacy practices with respect to search. For instance, under Yahoo!’s global data retention policy, Yahoo! anonymizes user log data within 90 days with limited exceptions for fraud, security and legal obligations. For search specifically, Yahoo! will convey certain data to Microsoft to fulfill a user’s search request. This includes the query and the IP address. Microsoft will anonymize this data sent to it by Yahoo! in accordance with Yahoo!’s announced data retention policies. Microsoft is only permitted to use search data that it obtains under the deal to operate and improve its search services and for no other purpose.

Will Yahoo’s behavioral targeting technologies for search still be used?

Yahoo! does not currently employ behavioral targeting in search. [Ed. note: Not completely true; see press release from Yahoo here on new targeting capabilities.]

Will any of Yahoo’s targeting apparatus be incorporated in any way with Microsoft Advertising, including with Bing?

No. This deal is limited to search, and as noted above, Yahoo! does not employ behavioral targeting in search.

Will search ads be sold by either Yahoo or Microsoft that provide for multimedia results, such as video?

Video advertising is still a small and growing area and as such, it’s impossible to predict what video ads in any form, including what a potential video search ad, could look like several years from now.

How may this deal affect the Yahoo! Newspaper Consortium?

The partnership Yahoo! has with the newspapers is broad and includes everything from content distribution, advertising cross sales, and technology platform development, to the display of Y! sponsored search listings on the newspapers’ own Web sites. Yahoo! Does not see the Microsoft deal as having an immediate impact on its newspaper consortium dealings. However, by combining its platform with Microsoft’s, Yahoo! and Microsoft will be in a position to offer the Newspaper Consortium and other web publishers more competitive bids for search syndication deals than either company can offer separately.

What ad research and development will be shared or done in common?

It is premature to speculate about the exact research that will be done, but the increased scale that will result from this search deal is expected to significantly enhance the ability to conduct meaningful research in a timely manner.

What rationale was used to embrace the 3 month data retention time? Why isn’t a shorter retention time adopted?

Yahoo! did an extensive analysis and review of all our data systems globally in 2008. Yahoo! arrived at 90 days retention as the right timeframe for most of its log file data that allows it to deliver the industry-leading products and services its users expect from them, but that also minimizes the duration of time Yahoo! holds data in identifiable form. It’s important to note that some of Yahoo!’s log file systems retain identifiable data for less than 90 days but none will hold data longer except for a limited number of specific systems dedicated to fraud and abuse and to meet legal obligations.

How do you envision Yahoo remaining viable when it no longer has a meaningful independent search service, given the need to have a coordinated search/display environment for digital marketing?

Future growth in online marketing will come from shifting spend from offline advertising to the online world. Offline advertising spend is disproportionately held by the largest advertisers and they control the vast majority of ad spend. Yahoo! has the leading position in branded advertising and Yahoo! also serves the needs for the growing market of performance advertising. So this deal with Microsoft enables Yahoo! to deliver a fully integrated solution that meets marketers’ needs at scale. Through this deal, Yahoo! retains a revenue stream in search without incurring the costs of developing a search platform or engine. Yahoo! will get paid an 88% TAC rate while eliminating significant expenses, enabling Yahoo! to invest more heavily in other areas of focus: amazing audience properties, web products, enhanced display advertising capabilities, and fantastic mobile experiences.

Here’s a video interview I did while at the Monaco Media Forum with Facebook’s Chief Revenue Officer Owen Van Natta about the new ad product from the hot social network–dubbed “social advertising”– that has everyone’s knickers in a knot.

Excuse that metaphor, but I am traveling in England, so it seemed exactly the right one to describe the horror that many have expressed that ever more targeted advertising is going on on the Internet.

Imagine that!

In any case, listen to Van Natta–the longtime and often unsung Facebook exec who struck the sweet deal with Microsoft and is the one most charged with making it so with that pretty explicit chief revenue officer title of his.

Of course, the controversy that has mounted in the United States after Facebook unveiled its efforts last week to use its vaunted “social graph” to tout new ad initiatives that would target users’ behavior and leverage their friends comes as no surprise.

Pretty much every hot online service that has come down the pike–from AOL to Google–has gotten sucked up into this debate, even as more ads have become more targeted and scrutiny of online consumers has grown exponentially.

Facebook’s giant faux pas? Founder Mark Zuckerberg had the cheeky nerve to actually brag about it all at the ad event in New York when his nefarious plot was unveiled.

“Nothing influences a person more than a recommendation from a trusted friend,” Zuckerberg said when he introed the ad scheme. (He also rather cloddishly noted: “The next hundred years will be different for advertising, and it starts today.”)

Well, he kind of had to say it all, didn’t he, especially with MySpace announcing a me-too ad program the day before and with Google slapping him silly with a PR-fueled attack the week before with its the-jury-is-still-out OpenSocial initiative?

Most of all, of course, Zuckerberg had to with the still-fresh $15 billion valuation of Facebook from its $240 million investment deal with Microsoft screaming for justification: There has to be a real business model in here!!

Of course, some of the press and a whole lot of privacy groups have been calling foul about the plan, even though it is just not the biggest leap ever taken related to personal data being used to target consumers by advertisers.

For years now, a range of contextual and behavorial data has been sucked out of online services and used to better aim ads right back at them. Facebook and MySpace are, of course, crossing yet another line, by more explicitly linking data you input into the mix.

That includes the possibility that they could broadcast your purchases to your friends, which some claim is illegal and requires written consent, because apparently you become some sort of unpaid celebrity shill by doing so.

I very much doubt that–all you might become is a pretty irksome friend hawking your deep affinity with, say, Krispy Kreme donuts. (Hey, this picture is an unpaid endorsement, but: Kara says you should eat them constantly until you go into a diabetic coma!!)

That has not stopped the noisy protests, of course. Just yesterday, two more consumer groups asked the federal government–specifically the typically ineffective Federal Trade Commission–to look into the new ad plans by both Facebook and MySpace, calling their efforts a violation of privacy.

“MySpace and Facebook are like the digital-data equivalent of Fort Knox for Madison Avenue marketers,” wrote Jeffrey Chester, executive director of the Center for Digital Democracy in a letter to the FTC. “It is a kind of one-stop data shop for marketers.”

Nice metaphor by Chester, but let’s remember we don’t really rely on that gold locked away anymore to bolster our currency, and the treasure of social-networking data might prove to be just as useless.

In fact, I am more concerned that these ad plans turn out to be underwhelming, proving Facebook and all sorts of social-networking businesses are more fun than, well, actual profit-spewing businesses.

I think the bigger question to ask: What if it doesn’t work so well?

Sorry for being so jaded, but the tracking of online activities is something that will only get more and more customizable over time and is hard to argue with if users choose to share that information directly or via becoming a “fan” of a product.

Like I said: Profoundly annoying, potentially goofy, possibly inane, all a resounding yes! But illegal? Um, no.

Or, as Zuckerberg also said at the ad rollout in New York last week, Facebook is–well, he hopes anyway–an “ad-supported business.”

Oh, that.