Children's web sites face an April 21 deadline to comply with rules that outline how sites may collect and use personally identifiable information from children 12 and younger. The rules implement the Children's Online Privacy Protection Act.
That's no problem for sites such as FreeZone, a site for kids 8 to 14, since it already complies with the law. But analysts expect a majority of kids' sites will not comply with COPPA (pronounced COP-uh) by this Friday.
Sites such as TalkCity.com, a chat and community site geared to adults and children, are scrambling to comply with rules that the Federal Trade Commission issued to help implement the law approved in 1998.
In fact, TalkCity Standards Manager Luis Piedrahita admitted last week the site was not yet COPPA-compliant; while children represent less than 1% of its users, sites that have even one child in their audience are required to comply.
FreeZone estimates an average annual cost of $96,600 to comply with COPPA. Much of the expense comes from creating online registration forms that parents print, sign and mail or fax back.
Alloy Online, which says it is COPPA-compliant, spent $100,000 to $200,000 on site upgrades in the past six months, in part to comply with COPPA, even though its users' average age is 16, said Matt Diamond, Alloy CEO.
The Center for Media Education, whose report on the collection of information from kids helped prompt the law, said sites should look at this cost like any other cost.
"The way I look at it is, for marketers this is the beginning stage of what is likely a lucrative enterprise," said CME president Kathryn Montgomery. "There are certain costs of doing business and sites have to demonstrate a concern that children's privacy is protected."
Penalties for non-compliance include fines, elimination of offending information or even shutting the site down.
"We hope it will encourage online merchants to put a higher premium on online privacy protection," said Jean Ann Fox, director-consumer protection, Consumer Federation of America.
WHAT'S AT STAKE
"If you are a children's site and are not compliant, the damning part of that is the potential to lose ad revenue or partnerships or whatever is critical to your business," said Jupiter Communications analyst Michele Slack.
Parental notification is required when Web sites knowingly collect and keep the full name, home address, e-mail address, phone number or other information that would let the site or others contact a child. The kind of notification needed depends on the sensitivity of the information collected and how a site uses it; the most stringent rules apply when kids' information will become openly available in chat rooms or bulletin boards.
Marketers said the immediate effect of the FTC rules may be to require additional disclosure on kids' sites, causing marketers to think twice about collecting information from kids and to prompt kids' sites to move to monitored chat rooms or bulletin boards. The rules also are expected to push kids marketers to seek the approval of self-regulatory groups such as BBBOnLine, TrustE and the Children's Advertising Review Unit of the Council of Better Business Bureaus; such groups have applied or are in the process of applying for FTC approval as certifying bodies.
Advertisers including Kellogg Co., Kraft Foods, Hasbro, Mattel and M&M/Mars support CARU's guidelines, which are almost identical to COPPA's.
INTEGRITY AN ISSUE
Alloy collects no information from kids younger than 13. "You never want to challenge government guidelines," Mr. Diamond said. "For us, it was a good business decision," adding that non-compliance would cause parents to question the integrity of the site.
TalkCity, which has been working on making the site COPPA-compliant since January, has always monitored its kids' chat rooms. It will shut down unmonitored user-created chat rooms if it finds "things are getting out of hand" in rooms "targeting those under 13," Mr. Piedrahita said.
"We will see some sites discontinuing the level of interactivity in order to comply," said Alison Pohn, managing director at FreeZone Network. "Certainly we will see more partnering among sites. And there may be those sites that just can't keep up anymore."
Copyright April 2000, Crain Communications Inc.