GOOGL Alphabet Inc

By Ryan Tracy 

YouTube will soon limit the data it collects on videos designed for children to comply with a federal privacy clampdown, pleasing consumer advocates but delivering a potential financial blow to creators of free children's content on the video platform.

The unit of Alphabet Inc.'s Google recently began requiring the makers of videos to designate whether the content they post is targeted at children or a broader audience. YouTube will limit data collection on videos geared toward children starting in early January. A failure to properly designate videos could lead to Federal Trade Commission fines for creators.

Videos made for children won't allow comments or other features that can boost viewership, such as certain pop-ups that suggest more content to watch. Most significantly, kid-targeted videos won't carry personalized ads based on Google's data about the viewer.

That would squeeze the ad dollars that Google shares with creators. That, in turn, could result in less child-friendly content on the platform. The dilemma highlights one of the difficult trade-offs of life online: How to ensure privacy without undermining a flourishing business model?

For YouTube, the changes attempt to balance concerns about children' privacy with the company's desire to keep easy access to all videos. Under federal law, websites directed to children must get parental consent before collecting data about children.

YouTube now effectively will assume a child is watching if the content is clearly directed at children -- limiting data collection on those videos -- while still collecting data on all viewers, including children, if the content is aimed at a broader audience.

Supporting the changes are federal regulators, privacy advocates and YouTube itself.

Even though some regulators and privacy advocates would prefer farther-reaching curbs, many prefer the new system to the old one, where children watched YouTube in droves and the platform treated them no differently.

But worried creators are protesting the new system and urging their fans to do the same, flooding the FTC with demands to leave YouTube alone. The FTC has received more than 175,000 submissions as part of a broad review of children' privacy rules -- a record number.

The change is YouTube's response to FTC allegations the platform has been tracking children' online activities in violation of the 1998 Children's Online Privacy Protection Act.

The FTC's allegations stemmed, in part, from the company's compilation of "identifiers" that follow viewers online, building a profile for advertising. If someone watches a toy video on YouTube, for example, toy makers can chase them with ads across the web. The FTC has said these identifiers constitute personal data under COPPA, and that YouTube was using them to track viewers of child-directed content.

YouTube has never admitted wrongdoing, but in September it paid a $170 million fine to settle the allegations and agreed to create a system to flag videos designed for children. YouTube has said the changes will take effect in early January, without setting a date, and has already begun rolling out some of them.

The FTC simultaneously is considering broader revisions to children's privacy rules that apply to all websites -- and that has stoked the debate.

YouTube doesn't break down its audience by age, but the platform says more than two billion users visit a month. Popular kid-video creators can make millions of dollars a year in sponsorships and other revenue, but most fall short of making YouTube their primary job. YouTube pays creators based on how many views -- and ads -- videos generate.

Children's videos will still have what is called contextual ads, based on a post's content or other information, but YouTube has told creators to expect less revenue without targeted ads based on personal data.

Mike Moore in November posted a video warning the new system might be "the end" of his family's "The Moore The Merrier Vlogs" YouTube channel, where one of the most popular videos is his wife cutting his children's hair. The new rules, he said, could cost him revenue and the ability to see feedback from roughly 39,000 subscribers.

He now plans to keep posting while avoiding videos that could be interpreted as solely for children, such as those only featuring children. "We believe that our content is for a general audience, but the government can come tell us, 'No, it's not,'" he said in an interview.

"That's the scary part," he said.

Andrew Smith, director of the FTC's bureau of consumer protection, said he is sympathetic to the concerns of creators but also understands concerns about children' privacy. The FTC is reviewing its rulebook "to strengthen the rule to make it work better for children and parents," he said.

Privacy advocates worry the furor could lead regulators to undermine protections for children online. Josh Golin, executive director of the nonprofit Campaign for a Commercial-Free Childhood, said YouTube has been a hugely popular online destination for young children for years, without oversight to ensure it doesn't track or manipulate them.

"Google should have been obeying the law and the creators wouldn't be in this mess," he said.

A YouTube spokeswoman said "responsibility is our number one priority at YouTube, and this includes protecting children and their privacy."

YouTube has long said that its platform isn't for children under 13, and that it closes down accounts for users in that age group when it discovers them. It operates a separate app for younger children, YouTube Kids, which doesn't include personalized ads, though the children's channel is far less popular.

However, the main YouTube platform consistently ranks among the most popular brands with children under 13, according to academics and market researchers. The FTC investigation unearthed evidence that YouTube not only knew this, but also used it as a selling point with advertisers.

"YouTube is unanimously voted as the favorite website of children 2-12," read a slide the company presented to toy maker Hasbro Inc., released as part of the FTC's complaint.

Meanwhile, some critics say that by making creators designate their videos' audience, YouTube is effectively shifting liability.

Jeremy Johnston, whose family-oriented J House Vlogs channel has nearly 2 million subscribers, said, "YouTube and the FTC entered into a settlement that I feel in a lot of ways throws creators under the bus."

Write to Ryan Tracy at ryan.tracy@wsj.com

(END) Dow Jones Newswires

December 30, 2019 05:44 ET (10:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.