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Last update: August 2021

4 mins to read - 2021/08/13

Monetization for Kids Apps: How to Be Profitable and COPPA Compliant

In the current ecosystem of free-to-play (F2P) – or, as they’re commonly known, “freemium” apps – it can be difficult to know where and how to draw the line when it comes to monetization. In the app economy, it’s something that has to be done. Kids expect to be able to download free apps, and app development, debugging, liveops, and upgrades don’t pay for themselves. On the other hand, plenty of parents are concerned about excessive monetization on apps their kids are using, as well as what 3rd parties have access to their kids personal data. For apps targeted at users younger than 13, here are some monetization tactics for kids apps that are responsible and COPPA compliant.

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monetization kids apps coppa compliant

What Types of Monetization Do Kids Apps Use?

First of all, how does monetization for kids apps differ from apps overall? When it comes to F2p apps, you tend to see the same main tactics forming the bulk of the app’s business model. In-app advertising and in-app purchases. (Push notifications are a powerful tool for augmenting your profits from both of these strategies.) And it’s largely the same for children’s apps.

However, as mobile monetization is widely an unregulated area, the responsibility is on app developers to ensure they’re incorporating ads in an ethical way. This is especially the case when it comes to apps for users younger than 13. The FTC has an extensive statement advising how and when it’s acceptable to advertise to kids. However, this largely refers to analog advertising. And as we know, kids media has changed enormously since then.

In-App Advertising: The Do’s and Don’ts

Many parents are concerned at the amount of advertising that exists on kids apps. Advocacy groups such as the Campaign for a Commercial-Free Childhood point out that young children don’t have the sophistication to understand when they’re being advertised to. The Atlantic points out that advertising is a prevalent monetization tactic in kids apps, in many cases used extensively and inappropriately.

“About a quarter of the free apps had regular old banner ads, some of which were pushing things that clearly weren’t intended for the 5-and-under crowd: a shopping app, information about bipolar disorder, help with tax prep.”

Vox explores the manipulative techniques many mobile advertisers are taking, and the harmful effects they can have. They point out that even apps marketed as “educational” are frequently disrupted by video ads, which can hurt children’s attention spans. And many apps and games for kids employ covert techniques directing them to ads or in-app purchases, such as disguising links to ads or shops as features of the game.

So, is there an ethical way of monetizing your app or game for children using ads? Yes, but you have to be very careful about it. In order to comply with COPPA, you will need parental consent before sharing users’ data with 3rd-party companies, such as advertisers. However, as you can see above, irrelevant advertising is also a problem. When advertising to kids, it should be sparse and straightforward. Only advertise apps and products that are appropriate for your user base age range. And don’t try to be tricky or manipulative. Even if kids can’t see through such tactics, their parents will, and this will result in your app being uninstalled, or banned from app stores.

in-app purchase mcommerce

In-App Purchases: The Do’s and Don’ts

The second pillar of the mobile app economy is in-app purchases (IAP). When done well, they can be an effective and economical way of supporting a multi-tier app experience. IAPs allow for a wide base of users to try out and enjoy free gameplay, and those who want to pay for a more premium experience can do so. However, as with in-app advertising, this monetization tactic is subject to abuses and unethical treatment that can alienate users, especially in the kids app sphere.

Like ads, in-app purchases also employ emotional manipulation, which can be distressing to children. Vox gives the example of the Slovenian app, “Doctor Kids,” that shows a cartoon character crying if you exit out of an in-app ad without making a purchase. Other apps or games make it so that users can’t progress in the app unless they put money into it. Others use tactics that have been made illegal by the FTC in traditional media, such as having the character of the game or app be the means of selling the product. Many games also use loot boxes, which authorities in various countries consider to be a form of gambling, due to the randomized rewards they give users.

When incorporating in-app purchases into your mobile app, a lighter touch is better when targeting kids. Most parents will understand an extent of micropurchases built into a free app. However, IAPs should always be add-ons, or embellishments to standard gameplay. You should never penalize your user for not making purchases. Similarly, IAPs should always be obvious and easy for the user to navigate away from.

Personalized In-App Purchases That Are COPPA Compliant

When it comes to being COPPA compliant, personalized in-app advertising is only permitted if you gain parental consent first. This is because sending kids’ data to 3rd-party advertisers without parental consent is illegal under the provisions of COPPA. (This explains why many ads in kids’ apps are so far off the mark.)

The mobile advertising industry is still in flux, given Apple’s recent introduction of App Tracking Transparency (ATT). The ban on processing kids’ data can have other repercussions when it comes to personalized in-app purchases and push notifications.

Luckily, OpenBack provides a safe, secure, and innovative method of sending personalized notifications that is totally private and COPPA compliant. Using our hybrid mobile engagement platform, data processing takes place entirely on the device itself. Under our default data privacy mode, data remains in the user’s possession at all times, and users (or their parents) can request deletion of data at any time. As this mode is automatically COPPA compliant, it enables mobile apps to personalize push notifications without gaining parental consent beforehand.

To learn more about using OpenBack for your mobile engagement campaign, get in touch with one of our experts.

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