Update: Yahoo lets users know how advertisers are targeting them

[Updated to include Google’s ad preferences manager, which shows you some basic information on how ads are targeted at you based on your interests.]

Yahoo is launching a pre-emptive move against the federal scrutiny it may face for its search and advertising partnership with Microsoft. It’s releasing an ad manager that will let users see a history of their online activity and decide how they want to be exposed to interest-based advertising.

“Ad Interest Manager will show users what interests we think they have, and also let them edit and change those interests to reflect the most up-to-date information,” said Yahoo’s Vice President of Policy and Head of Privacy Anne Toth. “Importantly, users who don’t want interest-based ads can turn them off completely.”

It’s a really fascinating move and one that I wish other competitors like Google and Facebook would follow. Google recently launched a privacy dashboard that allows users to manage the data they’re sharing with the search giant. [Update: The company also reveals some basic inferences about what users are interested in through an ads preference manager it released in March.] Google, with the leading position in search, and a host of other sticky products including Gmail and Google Analytics probably has the richest data set in the world tracking the intent and motivations of its roughly 1 billion users.

Because I haven’t used Yahoo products in some time, the company doesn’t have all that much on me other than my browser and computer model. That isn’t all that unique since Google Analytics also collects browser and OS data too.

AllThingsD’s Kara Swisher points out that this product comes just as the Federal Trade Commission hosts a roundtable on privacy. Privacy advocates are pushing for regulations that would prohibit companies from collecting and storing data for beyond a 24-hour period, a move that could cripple targeted advertising efforts online. Although Microsoft and Yahoo said Friday that they finalized the agreement for the deal, they still need regulatory approval.