Microsoft gutted a new privacy control system from Internet Explorer 8 at the behest of the advertising industry and its own marketing executives.

When he heard of the ideas, Mr. Brian McAndrews, the executive involved with Microsoft’s Internet advertising business, was angry, according to several people familiar with the matter. Mr. McAndrews feared the Explorer group’s privacy plans would dramatically reduce the effectiveness of online advertising by curbing the data that could be collected about consumers.The debate widened after executives from Microsoft’s advertising team informed outside advertising and online-publishing groups of Microsoft’s privacy plans for Explorer. Microsoft Chief Executive Steve Ballmer assigned two senior executives, chief research and strategy officer Craig Mundie and the general counsel, Mr. Smith, to help referee the debate, according to Peter Cullen, Microsoft’s chief privacy strategist.

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