This post is part of a series sponsored by Internet Explorer 9. Learn more here. Missed the tweet and just now seeing this post? Pin this page in IE9 to see all of the content as it happens.

I’m here at the ad:tech conference in San Francisco and one thing is certain; as hard as Silicon Valley is working to create new social products, the advertising industry is working that much harder to keep up with the innovation.

Monetization is a dirty word when it comes to social services on the web, however, most of us forget that to create a sustainable product and business, making money from users is the only way to survive. Sure, you can raise gobs of money like Twitter, but even it has introduced its own ad model to rake in some cash to stay afloat.

In an era where everyone expects something for free, asking someone to pay a monthly fee for their Facebook account seems absolutely absurd. How can Facebook make money then? Advertising, of course. The problem is that the advertising model that has kept the web making money is old and isn’t performing as well as it has in the past. We’re all trained to skip over certain types of ads, and at some point our eyes simply won’t “see” them anymore.

How are these social services going to make the ads more relevant and interesting to us? Our data, of course. All of the things that you “Like” on Facebook and retweet on Twitter will be factored into the type of advertising that you see. The closer the ad is to your actual interests, the better chance there is that you’ll click. Makes sense, but it’s starting to kick up dust when it comes to privacy.

Recently, Senator Al Franken gave a speech where he delivered the line:

…accumulating data about you isn’t just a strange hobby for these corporations. It’s their whole business model. And you are not their client. You are their product.

We don’t mind telling Facebook who our friends are and what TV shows that we like to watch, but now that it wants to make money, people are starting to fuss about it and now realize how important their privacy online may be. It’s a fine line, and when it comes to social services that we pour private data into, it’s all fun and games until they try to make a buck off of us.

That leads us to the ad:tech conference, advertisers and companies who display ads are trying to come up with the right way to get us to “pay the bills” without creeping us out or turning us off completely.

Just how many companies are working on solving this problem? Take a look at a report compiled by a company called LUMA Partners, called the LUMAscape:

SOCIAL LUMAscape
View more presentations from Terence Kawaja

If you click through and see how all of the parts fit together, there are companies that sit as middle men between social networks and ad networks, middle men for those middle men, and more. I spent about a half hour last night digging through this mapping and it made my eyes cross.

At the end of the day, we’re going to be shown advertising whether we like it or not. Take “on demand” television for example. When I watch a TV show or Movie on Comcast, they don’t let me skip through the commercials. That’s my way of paying to see the content. Sure, if I wanted to see it ad-free, I could go to a service like iTunes and pay for it, but I enjoy “free”. Free comes with a cost, and that cost is our eyeballs and data.

There are companies here at ad:tech who are trying to make the advertising model more interactive though, while keeping our privacy safe. Companies like Google track our activity as we surf the web and display ads to us based on those preferences. It’s getting them into a bit of trouble though, and that behavioral tracking and ad display is starting to freak people out.

One company that’s paying attention to this space is called TRUSTe, and it launched an advertising platform at the conference that allows consumers to opt out of specific types of ads and give some feedback to advertisers on what they’d rather see. It’s not perfect, but it’s better than what we have today. Here’s an interview that my good friend Jake Ludington did with TRUSTe’s VP of Product, Kevin Trilli:

What Trilli keys in on is the fact that users are starting to think about their privacy and the best way to handle those concerns is to give consumers choice in return. Again, ads aren’t going away no matter what, so is this type of “choice” good enough? It’s the best option that I see right now, simply because users are already behaving in a social way on platforms like Facebook. Giving its users a choice on what they’d like to see, and how they’re targeted, is the best way to interact.

The more transparent the industry is, the quicker it can grow and monetize. Yes, thinking about being a “product” is a bit scary as a user, but as long as we have control over how our information is shared and with who, we can settle into the idea that this is nothing more than having to watch ads when you fire up On Demand on your TV.