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Document 53 of 67.

Copyright 1998 Information Access Company,
a Thomson Corporation Company;
ASAP
Copyright 1998 Capital Cities Media Inc.
Children's Business

June, 1998

SECTION: No. 6, Vol. 13; Pg. 11; ISSN: 0884-2280

IAC-ACC-NO: 20827642

LENGTH: 1681 words

HEADLINE: Is online on the line? kid-based Websites

BYLINE: Azoulay, Julia Fein

BODY:
As children's privacy rights and online information-gathering processes become a growing concern, the FTC steps in to monitor kid-based websites.

Conservative estimates predict that by the turn of the century, 15 million children under the age of 18 will be online. Combine that fact with their well-documented spending power - in a single year, children under the age of 12 spend a total of $ 14 billion, teenagers spend $ 67 billion, and both groups combined influence $ 160 billion of their parents' spending - and the fiscal potential of online marketing becomes crystal clear. Indeed, marketing to children via internet websites has gained a great deal of momentum recently as both juvenile cyberspace traffic and websites designed for kids have grown by leaps and bounds. Major players such as GapKids, Nike, and Nickelodeon have unveiled sophisticated sites, while even smaller-scale enterprises have established a presence on the internet, either through their own modest homepages or cyberlinks with established sites.

Designed to be fun for visitors and informative for marketing departments, these sites typically feature both interactive "games" and data-collecting devices. Kids are urged to input information such as their names, ages, addresses, preferences, buying habits and even socio-economic indicators - but they're asked to do it in such a way that it ends up feeling more like interactive fun than a market research interview. Animated characters, membership clubs, contests and light-hearted language mask a data collection process that then facilitates micro-targeted marketing on the part of the homepage sponsor company. Other sites feature interactive forms of product placement, whereby kids can click on icons of their favorite children's marketplace "characters" and hotlink directly to advertising sites.

Website designers are hailing the internet as a powerful, highly targeted, cost-effective tool that entertains and engages children while it gathers critical information to streamline and strengthen children's business marketing efforts. By launching, maintaining and monitoring well-designed websites, kid-related companies get an unprecedented degree of bang for their buck, site designers urge. Internet-related market analysts are confident. And yet, the enthusiasm of those who endorse the value of a website presence notwithstanding, the phenomenon of web-marketing to children may soon prove to be less of a panacea than suspected as both children's rights and Federal agencies clamp down on the business of targeting cyberkids.

The Center for Media Education (CME), the National PTA, the Electronic Policy Network and other public interest agencies see a deceptive invasion of privacy in all this internet interaction. While specialty divisions of advertising agencies and market research firms are convinced that the techniques they employ and the information they provide current and prospective clients is both valid and valuable, children's rights watchdogs feel otherwise: ". . . national advertisers and content providers are targeting the new 'digital kids' marketplace by creating sophisticated interactive electronic environments designed to capture a child's attention," an initial report issued by CME in 1996 warned.

Since that early report, a diverse group of agencies and institutions nationwide has begun to voice similar concerns. "Knowing that children cannot resist the mesmerizing effect of cyberspace, advertisers are now using this unregulated medium - one where children are more adept than adults - to leverage children's buying power," the CME's Action For Kids In Cyberspace (ACC) submits.

Initial concerns revolved around the hundreds of websites online promoting alcohol and tobacco use, creating a sense of virtual community based on product brand. Now, the concerns are more subtle and more complex, such as "the use of websites to generate brand loyalty, manipulate young website visitors and foster intimate relationships that compel children to buy specific products and services," according to the ACC. "Children . . . may be unaware that they are providing information for marketing purposes, when the format of the site leads them to believe that they are simply playing a game or entering a contest." Television advertising and product promotion are easy to recognize, these critics of online marketing say, but interactive website design has made the boundary between entertainment and marketing dangerously seamless. Disguised, interactive, "fun" data collection may constitute a violation of Section 5 of the FTC Act (15 U.S.C. s45) prohibiting deceptive, unfair marketing practices and a violation of privacy. Enter the Federal Trade Commission (FTC).

In July of 1997, the FTC issued an opinion describing online "information collection practices which could be found to be deceptive or unfair." In October of 1997, the FTC conducted a "Kids Privacy Surf Day," during which agency staff surveyed over 120 sites listed on the popular kids' directory "Yahooligans!," and found that 86 percent of them were "collecting personally identifiable information from children" such as names, e-mail addresses, postal addresses and telephone numbers, while fewer than 30 percent of them posted either a privacy policy or confidentiality statement, and only 4 percent of them required parental authorization. In announcing these findings, the FTC issued a clear warning: "Protecting children's privacy online is a high priority. Any company that engages in deceptive or unfair practices involving children violates the FTC Act. The FTC can bring legal action to halt such violations and seek an order imposing restrictions on future practices to ensure compliance with the FTC Act," said FTC Consumer Protection Bureau director Jodie Bernstein in a staff opinion letter authorized by the Commission.

In March, 1998, the Center for Media Education together with the Consumer Federation of America submitted information collection and tracking guidelines to the FTC. This report suggests that websites collecting data from children must include a full disclosure that information is being gathered, how the information is being used and by whom - in language that children can understand, as well as adults. Furthermore, the guidelines advise that parental consent must be obtained prior to collecting data from children and that the parent must be provided with the information gathered and given an opportunity to have the data deleted, changed or withheld. Also in March of this year, the FTC again conducted a "systematic review of websites' information collection practices;" the findings from which will be reported to Congress this month. The FTC will continue to monitor websites randomly on an ongoing basis, and Federal interest in online sites for children is heating up: the National Telecommunications Information Administration, for example, is holding a conference this month that will feature a special plenary on children's privacy.

The terminology might be intimidating, but the message is simple: if your website is using the data you collect from cyberkids for purposes other than, let's say, mailing a newsletter or running a contest, state it loud and clear. Be forthcoming. Let parents know what you're up to. Explain when and how information will - or may - be used. And get parental consent.

Shelley Posnik, Director of Children's Policy at CMF's ACC division, puts it like this: "Parents are becoming savvy and simply will not stand for a company that violates their child's privacy. It's important that parents feel confident when they send their children online that this is an engaging, educational and challenging place for their children to be - and not simply a privacy trap."

At the new NHL for Kids website (accessed by hotlink through the 50,000 hit-per-day NHL site homepage), children are required to mail back a signed parental consent form before any information they provide is used. In addition, the site is careful to use only first names and cities, reports Director of Youth Marketing Ann Kiely.

Launched in July of 1997, the Healthtex "Girls' Club" site, designed for girls ages 5-10, originally included an icon stating "Yes, I've gotten permission from my parents," on which visitors were to "click." In light of recent developments, however, Healthtex decided to become "more proactive" in safeguarding site visitors' privacy, according to communications manager Judy Revels. "As of May 1998, Healthtex has introduced an extensive privacy statement that explains to parents we will not be releasing their children's information; that it's for internal use only; that it's a secure site; and that keeping the information within our own database is a priority."

In addition, the Healthtex site has a form that can be printed out, signed by parents, and mailed back to corporate headquarters. Girls then get their own passcode, which entails membership privileges. A "members-only club" should be up and running on the site by Fall of 1998. Revels says it will offer cyberkids even more incentive to secure their own passcode by returning the parental consent form.

Two helpful resources are available to assist kids' businesses in adhering to both the letter and the spirit of the law. The Children's Advertising Review Unit (CARU) of the Council of Better Business Bureaus (Tel: 212-7050111) has published a set of self-regulatory "Guidelines for Interactive Electronic Media." The Direct Marketing Association (DMA) conducts workshops on cyberspace and privacy, has adopted self-regulatory principles and maintains a "Privacy Action Now!" educational section on their website (www.the-dma.org/policy.html), which offers website operators guidance in drafting online privacy policies for homepage posting. The DMA can be reached at 212-768-7277.

The DMA's Chet Dalvell points out, "To win the consumer we need a comfort level. Responsible marketing is win/win. Without consumer confidence, E-commerce is not going to thrive."

LANGUAGE: ENGLISH

IAC-CREATE-DATE: August 19, 1998

LOAD-DATE: August 20, 1998