Over five days this past December, Faisall Shugaa spent $6,593 on dinosaurs. Faisall isn’t a fossil collector—he’s a seven-year-old kid from the U.K. who was playing Jurassic World: The Game on his unsuspecting father’s tablet and who, with a few naive taps, authorized 60 in-app purchases in his quest to upgrade his digital herd. Mohamed Shugaa only discovered the activity when his bank card was declined.
Mohamed isn’t alone. Parents of the new crop of digital natives are struggling to manage what their children watch, listen to and play, creating strong demand for better tools to regulate how much time and money children spend online—and giving developers whose apps have robust controls an edge in the hyper-competitive business of digital entertainment for kids.
Shortly after her daughters, now seven and eight years old, were born, Noemie Dupuy noticed that very little digital content was suitable for children. “Kids were playing games that were not made for kids,” she recalls. “There were a lot of links out of the apps; there were ads that were not proper for kids; there were even sometimes in-app chat rooms.” So Dupuy founded Budge Studios, a Montreal developer specializing in mobile games for children. While its apps use the freemium model—a no-charge download with in-app purchases to access bonus features or accessories—the company has deployed measures to avoid the kind of kiddie overspending that garners bad press. For instance, Budge’s titles require players to answer a math question that a typical kid can’t solve before making a purchase: A game targeted at four-year-olds might ask, “What’s nine times eight?”
Itavio, a startup based in Moncton, N.B., offers a solution that minimizes add-on addicted kids’ overspending and parental nagging. Parents who download the company’s app to family devices can set a weekly or monthly allowance and access a history of transactions on all the games their children play. Kids have the power to choose how to spend the money between the games that have integrated Itavio’s program, and they learn an early lesson about budgeting in the process. “If they try to spend $30 and they don’t have it, it’ll say, ‘Nope, sorry, you don’t have that much money anymore,’” explains CEO Melani Flanagan, who co-founded the company with her former gaming industry colleague Matt Pichette last year. The company is also working on a feature to allow parents to regulate and track time spent on individual apps.
Itavio’s platform is still in testing, but app studios have incentives to use it. Piracy and the rise of the freemium model have made it hard for gaming companies to monetize, and knowing how much a player has to spend—anonymized, of course—allows them to allocate marketing dollars cost-effectively. Plus, when kids are involved, the in-app purchase model is risky: A parent who discovers her kid has overspent is likely to not only uninstall the offending app but trash it on social media too, costing the developer more than one lost customer. And that’s not factoring in the time and expense of resolving disputed purchases. “Our tests suggest that parents are pretty generous and kids spend responsibly, and that works out to be a much better scenario for [studios],” says Flanagan.
Still, monetizing kids’ content remains a challenge for digital media producers. Regulations like the U.S. Children’s Online Privacy Protection Act restrict the collection of personally identifiable information in content meant for kids, which prevents the use of the kind of hyper-targeted advertisements that dominate digital marketing today. Working within these constraints, SuperAwesome, based in London, U.K., developed an ad platform specifically designed to host compliant campaigns for kids. “It’s our role to make sure that content owners can monetize and be sustainable, so that the next Thomas the Tank Engine can survive,” explains CEO Dylan Collins. SuperAwesome platform users include the likes of Lego, Mattel and Nickelodeon.
Such creative solutions are welcome. The “touch-screen generation” is still a huge, largely untapped market—2013 research from Mintel pegged these kids’ collective allowances alone at US$44 billion a year. Building useful parental controls is a fair price to pay for their favour.
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