The probe, which could take several months to complete, is initially focused on AdWords — Google’s flagship advertising product and main source of revenue. But the agency conducting the investigation, the Competition Commission of India, could expand it to scrutinize other Google services if it sees fit, the officials said.

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Now a series of specialized companies are pitching products to simplify the landscape by helping marketers navigate the online-advertising world.

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The venture-backed company is in IPO registration, so it was required to disclose in an amended S-1 filing Tuesday that a recent breach disrupted its customers’ advertising campaigns and resulted in its Australia platform going offline for 36 hours.

However, measured against social networking site Blippy, which accidentally published the credit card numbers of several of its customers on Google (GOOG) earlier this week, the lapse doesn’t look so bad. None of ReachLocal’s customer credit card data or its internal human resources information was compromised, it said.

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The industry is finalizing an ad campaign to educate consumers about how digital advertising works, creating an icon that would appear on Web pages or ads alerting consumers if their activity is being tracked and deploying new technologies to police the Web for illegal activities. At issue is the practice of tracking consumers’ Web activities–from the searches they make to the sites they visit and the products they buy–for the purpose of targeting ads.

The efforts follow calls from the FTC earlier this year for Web advertisers and Internet companies to do a better job explaining how they track and use information about consumers’ Web activities and creating a simple way consumers can opt out of being tracked.

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According to the FTC, the roundtables will address topics such as social networking, cloud computing, online advertising and mobile marketing, the goal being “to determine how best to protect consumer privacy while supporting beneficial uses of the information and technological innovation.”

Behavioral advertising, in particular, has come under fire by privacy groups. Earlier this month, Electronic Frontier Foundation, Consumers Union and other related organizations called for stronger rules limiting what kinds of personal information are collected by marketers and how long they can hold on them.

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The publisher was able to take a big chunk out of operating costs, knocking them down 20 percent. But revenue fell faster. The paper did say, though, that things got less bad as the quarter progressed, and that they’ll get slightly less bad next quarter, too.

The numbers: After factoring out one-time charges and benefits, the Times posted earnings of eight cents per share, well above the four-cent loss the Street was expecting. But revenue dropped 21 percent, to $585 million; the consensus was $603 million.

The Times posted an operating profit of $23.3 million; without one-time charges that number would have been $66.1 million. That’s worse than the $100 million the paper made a year ago, but much better than the $74.5 million it lost (net) in Q1.

But! Ad revenue declined 30.2 percent, an acceleration from last quarter’s 28 percent drop. In addition to the regular culprits, the Times noted a “lower volume of online advertising.” More details on that: Internet revenue dropped a shocking 14.3 percent, and Internet ad revenue was down 15.5 percent; last quarter they were down 5.6 percent and 6.1 percent.

The assessment from Times CEO Janet Robinson:

Based on what we have seen so far in July, we expect the advertising environment to continue to be challenging. We believe the rate of decline will moderate slightly in the third quarter from what we experienced in the second quarter.

As we look ahead, an enduring constant is the outstanding journalism of The New York Times Company and the esteem in which it is held by our readers. For the balance of the year, we are focused on developing innovative new products and platforms based on our high-quality journalism, particularly in the digital area, and continuing to aggressively lower our cost base to better align it with our revenues. When the economy and ad markets improve, we believe we will be very well positioned to benefit from the restructuring of our business.

Revenue rose 22 percent, year over year, to $87.6 million, behind Street estimates of $88.5 million, while profit of 13 cents per share was a penny ahead of estimates. For Q3, the company, which produces software to plan online advertising, said sales would be relatively flat with Q2.

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Citing “uncertainty regarding consumer spending,” the company declined to give a forecast for the current quarter. “The company expects 2009 to be a challenging year for consumer spending, online advertising and corporate infrastructure spending,” reads the company’s press release.

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In the old days, this might have qualified as news. But for the past year or so, Zenith Optimedia, along with just about every other ad forecaster, has been revising its forecasts downward every couple of months as the reality of the financial meltdown sinks in. So it’s hard to get worked up about this stuff.

More stuff you pretty much knew already: Online advertising is doing better than traditional ads.

Citigroup (C) analyst Mark Mahaney summarizes his chat with the CEOs of PubMatic and the Rubicon Project, which help online publishers sell inventory through ad networks. Their takeaway is that while pricing for online display ads has dropped dramatically in the past couple quarters–by as much as 50 percent in some cases–overall spending should remain flat this year. And as we all know, that’s the new up.

If you’d like to see concrete numbers from the ad market, hang tight until Thursday, when we’ll get earnings reports from two companies at the opposite end of the media spectrum: Gannett (GCI) and Google (GOOG).

“We are deeply concerned that the Department of Justice may be considering a preemptive lawsuit to block Yahoo’s nonexclusive online advertising agreement with Google,” the letter says. “If such action were taken, we believe such an unprecedented [lawsuit] would detrimentally affect the online advertising market and electronic commerce. … We believe that robust competition serves the public interest but if the DOJ blocks this agreement we fear that the threat of additional scrutiny may chill future agreements. Similar agreements are commonplace in many industries and standard among Internet companies.”

Well, not exactly, as Norman Hawker of the American Antitrust Institute points out. “Contrary to the letter, similar agreements are not commonplace because industries with this level of concentration are not commonplace,” Hawker said. “If you ignore the economic text when you read the words, you can easily be misled into thinking the agreement is harmless. Read in context, however, the words of the agreement explain how Google could easily acquire Yahoo’s paid-search business.”

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In a research note this morning, Pacific Crest analyst Steve Weinstein reports that Q2 online advertising is likely to grow in “the high teens” versus a year earlier, down from Q1 growth just under 20% and Q4 growth of 23%, “indicating a modest but steady deceleration.”

Weinstein says the weak economy has lead to a tightening of overall ad budgets. While that is driving some advertisers to spend a larger slice of their budget on the Web, taking share from television in particular, he finds that “online advertising would be growing faster in a more robust economy and ad market.”

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