Lets start with something simpler first. How about websites asking for user permission before using cookies instead of being genteel and saying "please note that we use cookies thank you", or at least have a 'delete cookie' button next to 'ok'? Doing this shows the respect for user's wishes wrt privacy. If this can't be done, then there is no hope of changing a billion dollar industry which is essentially based on similar tactics.

As for the topic, I can't understand why people demonize targeted advertising. This has been happening forever. On TV, you see products targeted towards housewives during soaps and products targeted towards men during sports. The same goes to news papers and magazines. You wouldn't find an ad for sanitary pads in a car and bike magazine. Stereotypes rule here. What we have now is just a more advanced technique, with good amount of maths helping it.

I think I know the answer myself - people conflate breach of privacy with targeted advertising. For me, breach of privacy would be something like my phone number being sold to telemarketers who make cold calls for bovine excreta, or gmail showing ads based on email content. However, google showing ads related to items I have recently searched is perfectly acceptable, even beneficial when done right.

That said, the point about ads that discriminate racially or based on other social factors is unethical and worrisome. I have no idea how the ad industry works behind the scenes, beyond the technology, but a business that socially discriminates in real world will always discriminate online as well. So this point is really sociological and not technological.