• by Denise Tayloe , November 19, 2014

The risk of violating the Children’s Online Privacy Protection Act (COPPA) has increased dramatically in the past few months and marketers that target affluent consumers are perhaps most susceptible.

COPPA, which was revised last year by the Federal Trade Commission (FTC), requires that online companies collecting information about children under 13 ensure that the children’s information is protected. These online properties must also seek verifiable parental consent before collecting any information from a child and clearly disclose to parents how the information will be used. 

The consequences of violating COPPA became painfully apparent in September when the FTC reached separate settlements with online review site Yelp, Inc. and mobile app developer TinyCo, Inc. following charges that they improperly collected children’s information. Yelp agreed to pay a $450,000 civil penalty, while TinyCo took a $300,000 hit.

COPPA’s strict rules on how online properties must interact with children under 13 make it difficult to understand. The rules cover the type of information that can be collected, advertising practices, social/sharing features allowed, obtaining the proper level of parental consent, as well as the specific elements that must be included in a privacy policy. Online properties not compliant are putting their brand reputation at risk and could be ned by the FTC. 

Complying with COPPA is a challenge all marketers, gaming companies and app makers face, even if their websites, online services and apps are not specifically geared towards children under 13. But marketers that cater to affluent consumers are at greater risk for three reasons: 

1. Children in affluent households are more likely to have smartphones and tablets, powerful handheld computers that provide completely unfiltered access to the Internet, as well as thousands of sophisticated apps. According to mobile security firm, Lookout Inc., at least 56% of parents of kids aged 8-12 years old say their children have smartphones. And the percentage of kids with mobile devices goes up with their parent’s income. A recent survey by Common Sense MediaandGfK found that there remains a substantial gap in mobile ownership based on household income. For example, the survey indicates that 20% of lower-income children had a tablet device at home, compared with 63% of higher-income children. All told, the children of the affluent are in a position in which they are much more likely to provide personal data to advertisers who ask, despite any rules that prevent it.

2. Another issue is that affluent parents are more likely to have caregivers overseeing their children’s activities when they are home. These caregivers are less likely to be actively involved in monitoring the children’s online forays, potentially giving rise to an environment in which the children can roam the Internet unchecked.

3. Children of the affluent are more likely to have a credit card, or occasional access to one, with which they can purchase goods online or in-app.

These factors create a potent scenario in which a luxury marketer could find itself at great risk, not only legally but from a reputational perspective as well. A recent survey from the Luxury Institute found that well-heeled consumers are very protective of their privacy. According to the survey, 63 percent of affluent consumers would choose to keep their online history and Internet activities private through an opt-out tracking policy. These consumers are already wary about trusting the safety of their information when giving it to a brand; any marketer caught violating children’s privacy rights could expect their brand reputation to take a significant blow as well. 

Marketers have four choices. First, they could ignore kids altogether, and pass up an extremely fast growing – and lucrative – market. Second, they could pretend to be ‘general interest’ sites and claim they are not required to implement COPPA. Unfortunately, that didn’t work out well for Yelp or TinyCo. Thirdly, they could implement an in-house solution, an onerous but feasible option for large companies. For small- to mid-sized online businesses, COPPA compliance is excessively expensive. Keeping it in-house requires businesses to hire staff to oversee their online privacy policies, retain attorneys to review the policies, and coordinate the collection and secure storage of parental consent forms.

The fourth option is to turn to one of seven FTC-approved, neutral third-party COPPA “safe harbor” providers. These groups enable websites, apps, games and other online services to comply with the COPPA when they interact with and market to children online under the age of 13. These safe harbors provide easy to use, safe management of parental consent for children, enabling subscribers to initiate and manage responsible and effective youth and parent relationships online. Websites and services that display a COPPA safe harbor certification signal to consumers, partners, advertisers and the government that the online property meets or exceeds the basic COPPA guidelines.

The alternative, keeping children off their sites and services, is hardly a good one.