The times they are a-changin’: YouTube’s monopoly over kids content is finished

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FX Digital question whether YouTube's time creating content for children is over.

In early January 2020, YouTube introduced the policy changes that every children's content creator had been dreading. The changes - which were announced back in September 2019 - aim to better comply with the US Federal Trade Commission (FTC) who found that YouTube was in violation of the Children’s Online Privacy Protection Act (COPPA).

YouTube has finally agreed to play ball and comply with the FTC’s regulations, however the new rules have left children’s content creators reeling, with many brands reporting that revenues are down by up to 50%.

Companies that specialise in content for children are now looking for new revenue streams and a new home for their content. This article will help you understand these changes and take a look at the viable new alternatives to YouTube that could be the new revenue stream your brand needs.

The FTC:1; Youtube: 0

In September 2019, Youtube and its parent company Google had to pay $170 million to the FTC for illegally collecting personal information from children without the consent of their parents.

YouTube harvested information from child-directed channels on its platform and used this information to serve targeted adverts, violating the terms of COPPA.

Post-settlement, YouTube has been forced to introduce measures to ensure that this practice does not continue. YouTube released its own statement outlining the changes which states that: “All creators will be required to designate their content as made for kids or not made for kids in YouTube Studio, and data from anyone watching a video designated as made for kids will be treated as coming from a child, regardless of the age of the user.”

This landmark rule change has been heralded for safe-guarding children’s data and parents everywhere will certainly be happy to know that there is more protection in place.

In Europe, the EU has introduced GDPR-K, a version of the General Data Protection Regulation aimed at protecting children’s data. GDPR-K is very similar to COPPA, however GDPR-K deems a child as anyone 16 and under, as opposed to COPPA who deems a child 13 and under.

The knock-on impact is that kid’s brands and children’s content creators are losing revenue as personalised ads, comments, click-through info cards, end screens and other features have all been disabled on content aimed at children.

Seeking alternatives to YouTube

Children’s content brands are in greater need of new revenue streams now more than ever. Ultimately, many content creators are now looking to create their own OTT applications, to take control of how they serve their content to their audience.

Creating a custom OTT application offers brands two viable options. The first is to create an AVOD (Advertising Video On Demand) platform and the second is to create an SVOD (Subscription Video On Demand) platform.

The benefits of an AVOD OTT application

When a content creator hosts their content on YouTube, they generate revenue through the adverts served to viewers who are watching that content. YouTube takes a hefty 45% of all ad revenue generated on its platform. This is a higher margin than third party ad platforms, such as Freewheel, take from its customers. More brands are turning to their own AVOD OTT applications to keep a larger share of their hard earned ad revenue.

Not only do content creators with their own apps keep a lion’s share of ad revenue, but they also have much greater control over the adverts that are served to their customers. For brands serving up content aimed at children, this allows content creators to serve more relevant, contextualised ads and also ensure that no inappropriate adverts are served to their audience.

One of the drawbacks of an AVOD solution is that generating sizeable revenues requires huge audiences. On the other hand, audience acquisition is easier than SVOD, because the user does not have to pay to access content.

Brands utilising this option, of course, have to ensure they are not collecting children’s personal data and comply with the FTC and COPPA/the EU and GDPR-K.

The benefits of an SVOD OTT application

Alternatively, brands can go ad-free with a subscription style service (like Netflix). SVOD is becoming more and more popular, with dedicated fan bases willing to pay a monthly fee to gain access to full content catalogues, bonus content and exclusive releases.

The audience also gets a better experience, with access to large amounts of content uninterrupted, in a contained and safe environment - perfect for children’s content. Removing advertising eliminates a multitude of fears around children’s data protection and being on a contained platform stops kids accidentally stumbling upon age-inappropriate content.

If a brand can tap into their key target audiences, they can stand to gain great financial benefits from this approach. SVOD platforms allow for branded experiences which are great for user retention and brand awareness, whereas brands that host their content on YouTube can find their brand overshadowed by the YouTube brand. This also leads to brand association with YouTube when things go wrong (see the FTC issue above!).

SVOD audience acquisition is certainly more challenging than AVOD - convincing users to sign-up for paid subscriptions requires sufficient marketing and higher expectations from customers. However, the benefit is that brands require smaller audiences to make an SVOD solution profitable.

Is YouTube’s dominance coming to an end?

It would be an exaggeration to say that YouTube’s relationship with kid’s content is over. In response to its troubles with the FTC, YouTube is pushing YouTube Kids - a platform that removes personalised ads in favour of generic ones.

However, if brands really want to take control of how their content is delivered, they will need to look outside of YouTube for new revenue streams. The two are not mutually exclusive - brands can keep their content on YouTube Kids and still create their own branded OTT experience, as long as the branded OTT experience provides extra benefits (such as those mentioned above).

There is so much engaging, fun and informative content made for children out there - it is time for brands to give their audiences the right playground in which to enjoy it.

Ramsey Marwan, marketing manager at FX Digital.

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