How the $170M YouTube fine will better protect children

Alphabet, the parent company of YouTube, was recently fined $170M for violating the Children’s Online Privacy & Protection Act (COPPA). This law is designed to protect the privacy of children 13 years old and under. The Federal Trade Commission found that YouTube violated COPPA by sharing information with 3rd parties about children so they could sell advertising to their clients. While many have argued that the fine is insufficient because it’s such a small portion of Alphabet’s annual revenue and profit, I think they are missing the point. Due to this fine and violation, Alphabet and other technology companies will have to make significant changes in how they collect, aggregate and utilize data on children. This will lead to a better environment for kids going forward.

One of the most useful features about technology based systems is their ability to collect and aggregate lots of data. This data can and often is used to better target consumers. For example, most people know that every time they visit a website, a cookie is stored on their computer. This cookie enables the website owner to know everything about what someone does while on their website and if the cookie is not removed prior to subsequent visits, the website can learn about visits over a period of time.

Given this knowledge, many people choose to browse incognito or frequently delete their cookies within a given period of time (few days or few weeks). Although kids are digital natives, they may not be as knowledgeable on cookies or how that information can be used. As a result, information collected on kids can be especially valuable.

With this recent finding, YouTube and other kids focused sites will no longer have the ability to hyper target. This is actually a return to how advertising used to work. When most advertising was television based, you knew that a kid’s show like Tom & Jerry or Sesame Street was on. And, advertisers like cereal makers or toy manufacturers knew that their target audience was likely watching this show.

For web-based content, advertisers could learn where else their target audience had been on the web before watching a show.  So, if a child had recently visited the website for a remote controlled car then during the YouTube show they were watching, an ad for that car could be shown throughout and one the very same show for another child, an ad for cereal could be shown because he or she had recently visited the manufacturer. 

As you can see this is quite different from traditional television advertising and could create quite a bit of desire within a child for that toy. On the other hand, when parents see these ads, they know that the only reason they are seeing an ad from a clothing store is because they recently browsed that site.

Going forward, technology based systems will not be able to collect, aggregate and share this information which levels the playing field and creates a better environment for kids.

Search engines pioneered the use of structuring and aggregating data. What the founders of these companies realized before everyone else is that content was going to explode on the Internet once everyone became a publisher. 

To make it easier to find what people were looking for, search engines developed sophisticated algorithms to surface the content that matched exactly what their audience was looking for. In addition, they also found that if you placed advertising close by that advertisers were willing to pay a premium for this placement.

As video content exploded, YouTube became the 2nd most popular search engine. Alphabet, parent company of Google and YouTube, realized that they could develop another sophisticated algorithm to surface video content and once again they could place advertising side by side.

Over time, advertising rates began to increase and so advertisers wanted more proof that their ads were being shown to their target audience. So, companies began to collect increasingly specific data points and aggregated this on their audience.

With the recent FTC ruling and the threat of fines and sanctions, it is no longer attractive for companies to collect personalized data (even when anonymized) on their target audience for sharing with their advertising partners.

Given that these violations were primarily focused on insufficient protection of the privacy of kids, this is a good thing. In essence, both advertisers and technology providers will have to develop a business model that places the privacy of kids at the forefront.

However, it is not just search engines and video content sites that focus on kids. There are other models (influencers, content aggregators) that are focused on advertising to kids which will also have remove the ability to share data with their advertisers.

While this may feel heavy handed to those who weren’t directly collecting the data, ultimately the intent (privacy protection for kids) is spot on and will mean that kids have better experiences and data protections during their formative years.

For many years, one of the most popular kids focused channels on YouTube has been a young child who unboxes toys from major manufacturers all around the globe. This channel grew in popularity and earned millions for the channel owners.

In terms of structure, the content and this channel and other copycats was not all that dissimilar from an infomercial or home shopping channel. However, once again, the distinction between the child brain and that of an adult is important. As an adult, we typically know when we are being sold to and can respond accordingly. We can dismiss or discount the claims as the theatrics associated with selling. Even with this knowledge, those infomercials are pretty persuasive. That is why years later we have to Maria Kondos our homes because all those useless knickknacks and baubles no longer bring us joy.

For kids, their still developing brains does not know that an unboxing channel is designed to get them to become a consumer. More recently, I’ve noticed a similar dynamic with makeup. Channels will show young girls how to apply makeup from major manufacturers with the hope that the target audience will then go out and purchase the items that they have just sent on these popular channels.

Let’s face it, there will be many opportunities for kids to become consumers. However, it shouldn’t be because advertisers and content partners have taken a very powerful technology platform and used it to slice and dice personal information on young people. With this fine and corresponding action from the FTC, advertisers and technology platforms are going to have to go back to 1st principles.

These 1st principles are likely going to revolve around making more high quality content that attracts a large number of kids because it involves learning or entertaining these kids. In this scenario, the advertising will be secondary not the core package of what the content is built around. This should lead to more informative and education content that parents will be happy to have their kids watch and then occasionally be shown an ad from an advertiser that is broadly targeted based on the thematic content of the show.

Although some have argued that the FTC’s fine on YouTube was not meaningful due to the dollar amount relative to the total amount of revenue and profit Alphabet earns annually, in reality their action will make the environment safer for kids going forward. As advertisers and other 3rd party aggregators who don’t have the financial resources of Alphabet think about misusing children’s data, they will think twice knowing that there is a risk of significant penalty and sanctions should an FTC investigation find a violation.

Given the specificity of how the COPPA violations outlined against Alphabet, companies now have a roadmap going forward of the proper way to protect children’s privacy online.