I've written before about Ryan's Toy Review, which is now best described as a children's brand that first got its start on YouTube.   

But what a start it was. In 2017, Ryan's Toy Review (the eponymous "Ryan" was then 6) reportedly made $7 million on YouTube. Last year, it was up to $22 million.

Then, earlier this year, Ryan's Toy Review and other similar brands started to become a big problem for YouTube.

The reason: the Children's Online Privacy Protection Act (COPPA), which prohibits websites from collecting data from users under age 13.

The law has been on the books since 1998. But in June, members of Congress and the Federal Trade Commission started looking closely at YouTube's practices.

YouTube claimed it wasn't a children's website, but as Sen. Edward J. Markey of Massachusetts (who helped draft the law) pointed out, some of its biggest channels were things like Ryan's Toy Review, which had 19 million subscribers and "explicitly characterize[d] itself as '[t]oy reviews for kids, by a kid.'"

The FTC also filed a complaint noting that YouTube called itself "today's leader in reaching children age 6-11' and "the "#1 website regularly visited by kids" in pitches to toy manufacturers like Mattel and Hasbro.

YouTube could likely see the writing on the wall, and reports emerged that it was considering big changes. Ideas included things like like moving all children's content from YouTube into its completely separate, walled app (YouTube Kids), or disabling autoplay on children's content on YouTube.

On Wednesday however, we learned what the ramifications really are.

YouTube agreed to pay $170 million to settle its case with the FTC (and the attorney general of New York State). It also announced on its blog that it will take four other steps:

  1. First, for data purposes -- and starting in four months -- YouTube will treat anyone who watches content geared toward children on YouTube as a child for purposes of COPPA. 
  2. They'll keep investing in YouTube Kids, and promoting it for kids as an alternative to regular YouTube.
  3. They'll establish a $100 million fund over three years for the creation of "thoughtful, original children's content on YouTube and YouTube Kids globally."
  4. They'll introduce "new, mandatory annual training for our teams about our requirements in this area."

"This means that we will limit data collection and use on videos made for kids only to what is needed to support the operation of the service. We will also stop serving personalized ads on this content entirely, and some features will no longer be available on this type of content, like comments and notifications," YouTube wrote.

The $170 million fine is interesting. It amounts to a very small percentage of the annual profit of YouTube's parent company, Alphabet, which had $38.9 billion in revenue in the second quarter of 2019.

But, it's by far the biggest COPPA fine ever. As FTC Bureau of Consumer Protection director Andrew Smith noted, $170 million is "roughly the budget of the Bureau of Consumer Protection for one year."

So, in the end: Kids get protected under the settlement. YouTube and Alphabet walk away relatively unscathed. As for brands that built a kids' following on YouTube?

They've got issues.

"We know these changes will have a significant business impact on family and kids creators who have been building both wonderful content and thriving businesses," YouTube's official blog said, "so we've worked to give impacted creators four months to adjust before changes take effect on YouTube." 

Time will tell if that's enough time. Although, I suspect Ryan's Toy Review will be fine: It transcended YouTube a while back, and announced Ryan's World Toys last year.

The brands that might be facing more trouble are the ones that didn't move fast enough on YouTube -- and build an off-platform following before the party on YouTube came to an end.

Published on: Sep 4, 2019
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