The Real Consequences of the Record Fine on YouTube

In June, reports began to surface of YouTube recommending videos of children to pedophiles. Last week, the video platform reached a $170 million settlement with the Federal Trade Commission over allegations regarding how it handles children’s privacy.

The FTC complaint claimed that YouTube was illegally collecting personal information from children without their parents’ consent. Though the multimillion-dollar settlement sets a record fine, critics — notably Sen. Josh Hawley (R-Mo.) — claim that this slap on the wrist is an “insult to every parent in America.”

To truly understand the impact of this settlement, however, one must look further than the monetary punishment and consider the impact it will have on the product in question — as well as its users.

The FTC claimed that YouTube violated the Children’s Online Privacy Protection Act by collecting “persistent identifiers” — also known as “cookies” — from viewers of channels directed toward children without first notifying parents or receiving their consent. Cookies are small files of information used to track users across the internet and better tailor the online experience of each particular user. For example, when a child watches the “Baby Shark” animated video on YouTube, cookies track that history and allow the platform to recommend similar videos they might enjoy, like Sesame Street’s “Elmo’s Sing-Along.” Incidentally, cookies cannot determine any information about a user that they do not provide, meaning that they also enable YouTube to recommend videos of children to a user who is already watching other videos of children – even if that user is a pedophile.

To ensure that YouTube is complying with COPPA’s parental notification and consent requirements, the settlement requires YouTube users that create children’s videos to identify or label them as “child-directed.” The FTC loosely defines several factors that determine whether content is child-directed, including the video’s subject matter, visual content, use of animated characters and the presence of child-oriented activities, as well as the age of the models appearing in the video and the complexity of the language used. This means that every creator will need to review all of their videos and label each one that fits these criteria.

Determining what constitutes child-directed content under the FTC’s rules is a task in itself. But here’s the real kicker: If a video is labeled as child-directed, the platform will turn off its comments and notifications functions, as well as the algorithm that recommends similar videos. It will also turn off ads.

How does a YouTube video creator make money? That’s right — through ads and YouTube premium subscribers. A creator’s ability to feature ads and gain premium subscribers, in turn, is linked to their ability to gain followers, which often come from recommendations and comments. What this means is that instead of penalizing YouTube, the FTC settlement penalizes honest, hardworking creators of children’s videos. Soon enough, there will be no incentive for them to make children’s videos at all.

In theory, requiring parental consent for the use of children’s data is a great idea. However, obtaining this consent is still a shaky process. Children frequently lie about their age online. Even if they don’t, parental verification would require parents to provide data about their relationship to the child — data that COPPA was designed to protect.

For those who claim that no more recommendations means it will be harder for pedophiles to see videos of children, there is more bad news: If a pedophile would like to watch videos of children, he can still simply search for videos of children. Banning recommendations will amount to nothing but the difference between 1 second and 5 seconds until the next video.

With that being said, Sen. Hawley is right: This settlement does not really punish YouTube. Instead, it punishes honest people who create children’s videos. As with many government decisions, there appears to have been little thought on how the settlement’s terms would play out in practice.

In the meantime, YouTube has set up a $100 million fund “dedicated to the creation of thoughtful, original children’s content on YouTube and YouTube Kids globally.” In the short run, this will help compensate for the financial loss these content creators will have to bear and encourage them to keep creating. Yet in the long run, if government continues with these kinds of decisions, children may no longer have the privilege of benefiting from the wonders that the internet has to offer.

As Maureen Ohlhausen, a former acting chairwoman of the FTC, stated, “There is a lot of free content available for children. You want to be sure that you don’t kill the goose that lays the golden egg.”

Daisy Soderberg-Rivkin is a policy fellow at the R Street Institute, where she investigates the role of technology as it affects children.

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