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YouTube plans sweeping changes to kids videos after $170M fine

YouTube will halt personalized ads on all kids-oriented videos. That could starve out some kids channels.

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Angela Lang/CNET

YouTube Wednesday announced massive changes to how it treats kids videos, as the US Federal Trade Commission hit Google with new rules and a record $170 million penalty to settle a probe into the privacy of children's data on giant video site. It's the largest penalty ever levied for violations of the Children's Online Privacy Protection Act, or COPPA. 

YouTube's CEO and some large creators -- including the father of Ryan from the massive kids YouTube channel Ryan ToysReview and Hank Green, an influential YouTuber specializing in educational videos -- emphasized that the most important thing is that YouTube improves children's safety. 

But critics, including Democratic dissenting FTC commissioners, noted that even a record-breaking penalty wasn't enough, given Google's scale. Based on Google's performance last year, $170 million roughly equates to two days' worth of profit. Google generates the same amount in revenue in about 11 hours. 

Andrew Smith, the director of the FTC's Bureau of Consumer Protection, said the significance of the FTC's order goes beyond the $170 million fine. The settlement is "a new front" in the FTC's battle to protect children's data privacy, he said, because it went after a platform rather than a content creator for the first time. Wednesday's deal settles allegations that YouTube illegally collected personal information from children without parents' consent.

"We are holding a platform liable under COPPA for content posted by somebody else. That's a really big deal," Smith said during a press conference. 

Around the end of this year, YouTube will, in effect, start treating all views of kids-directed videos on YouTube as if every watcher is an actual child, regardless of the viewer's real age. That means it'll limit the data it collects on those views to the bare minimum -- only what's "needed to support the operation of the service," YouTube said

YouTube will also halt kids-oriented videos from having personalized ads, comments and notifications. And it'll require that uploaders tell YouTube when their videos are directed at children. Most of the changes are required by the FTC settlement. One measure -- YouTube tapping machine learning to help police videos being classified correctly for kids -- goes beyond what the FTC requires. 

Channels that post kids videos but don't identify them as such run the risk of getting hit with their own "aggressive" FTC fines, according to the commission. 

YouTube is the world's biggest online video source, with 2 billion monthly users, and a huge number of the billions of videos viewed on the site are aimed at kids. One study suggests kids content may be the most-watched video category on YouTube overall. But YouTube has come under fire for a range of scandals involving children. Wednesday's $170 million penalty addressed the data YouTube collects, without a parents' consent. But YouTube has also faced scandals involving videos of child abuse and exploitation, nightmarish content in its YouTube Kids app and predatory comments that sexualized clips of young children. 

Parent effects

Kid viewers and their parents won't necessarily notice dramatic changes to the YouTube experience from these changes alone. Beyond the absence of comments and notifications, parents won't need to worry as much about the data Google collects whenever their kids spool up a video on YouTube. The changes may mean fewer ads on kids content because most of YouTube's ads are the personalized kind that will be banned from kids content. And the changes could mean that recommendations for kids videos are less sophisticated.

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But YouTube may be making additional changes beyond those announced Wednesday. The company said it would also be investing in its YouTube Kids app, including product improvements and a promotional campaign to raise awareness with parents. YouTube recently tightened its standards for which channels can be a part of YouTube Kids, cutting the number of channels on the app, and last week it widened YouTube Kids to the web, rather than offering it solely as a mobile app. 

YouTube will be creating a $100 million fund to be disbursed over three years to invest in "thoughtful, original children's content" on YouTube and YouTube Kids.

"Responsibility is our number one priority at YouTube, and nothing is more important than protecting kids and their privacy," YouTube CEO Susan Wojcicki said in a blog post Wednesday about the changes. 

Smith, the FTC official, said he hoped YouTube's actions would eventually lead to YouTube, and other general-audience platforms, creating "kid-safe zones." 

The group affected most deeply by the changes will be creators of children's content, who stand to make less money and also face the risk of getting swept up into their own FTC penalties. And that may mean YouTube simply has fewer kids-video creators. Advertising is the main way many channels make money, and YouTube returns the majority of its advertising revenue back to creators. People who rely on YouTube for their business are significantly affected by anything that disrupts how much channels get paid for the ads that run with their videos. 

Ryan ToysReview, one highest viewed kids channels on YouTube, said that protecting kids on YouTube was more important than financial effects on creators. 

"The new policy may impact the YouTube Kids space ecosystem, but kids' safety should be a priority," Shion Kaji, the father of the channel's star, Ryan, said in a statement Wednesday.

Ryan ToysReview has 21.4 million subscribers and a staggering 31.8 billion views -- a full third more than PewDiePie, the world's most-subscribed YouTuber. It is more insulated from YouTube's planned policy changes than the average kids-video channel: Ryan ToysReview's popularity on YouTube has unlocked lucrative other businesses beyond the ads running alongside its billions of views, including merchandising and partnerships with the likes of Amazon and Nickelodeon.

Next targets

The settlement with Google was the FTC's first battle of this kind, but it won't be the last, the commission said. Smith said more actions against large tech platforms, including possibly those that record voice commands, are more likely following the action against Google and YouTube. 

"If you think about all the platforms out there, and all the economic power that they wield and the amount of content that they host, this is game-changing," Smith said. 

The FTC also warned that deceptive kids-content creators on YouTube could face their own aggressive fines. As part of the settlement, the FTC will make a sweep of YouTube's videos after the company has implemented its required changes. Because YouTube will now require uploaders to identify videos directed at children, any channels that lie about the nature of their kids videos could be caught by the FTC in that sweep -- and face "strong" civil-penalty fines, Smith said. 

Google's track record

Google has had run-ins with the FTC in the past. In 2013, the agency wrapped up an investigation that decided unanimously that Google wasn't violating any antitrust laws, after allegations of biased search results. 

But government officials have since taken a sharper stance toward tech companies. On Tuesday, The Washington Post reported that more than half of the country's state attorneys general are targeting Google in an antitrust investigation that could be announced next week. 

Regulators and government officials are also scrutinizing the tech industry more broadly. The Justice Department in July announced an antitrust probe targeting Google, Apple, Facebook and Amazon. Meanwhile, House Democrats in June announced their own investigation into tech giants, meant to explore whether the companies are engaging in "anti-competitive conduct." 

Google has also faced pressure from regulators in Europe. In March, the search giant was hit with a $1.7 billion fine from the European Commission for "abusive" online ad practices. The Commission said Google exploited its dominance by restricting its rivals from placing their search ads on third-party websites. Last year, the EU's executive arm fined Google a record $5 billion for unfair business practices around Android, its mobile operating system. 

CNET's Carrie Mihalcik contributed to this report. 

Originally published Sept. 4. 
Update, Sept. 5: Adds comment from Ryan ToysReview.