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Kids Don’t Have Credit Cards, And Other Challenges Of Monetizing Apps For Children

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kidsafeIt’s not easy monetizing kids. Even the words “monetizing kids” are unfortunate.

But the developers of kid-focused games still “need to eat,” said Yuri Shilin, owner of KidGames, an Israel-based game developer with a portfolio of dozens of apps for kids, with around 30 million downloads overall.

“It’s for sure very hard to make money,” Shilin said, admitting that he’s been forced to rely on advertising to monetize since he started KidGames about three and a half years ago, although he hopes to move away from ads as his main business model.

And that’s because most in-app ads just aren’t relevant to kids, said Shilin, who’s been using AdMob as his go-to ad network and Outbrain for content recommendation.

“They both have a feature that allows you to say that you only want ads for a family audience, but then you still get ads for insurance companies and ads for how to earn a degree – it’s just not relevant for my audience,” Shilian said, noting that his target age range is generally between 3 and 11.

Just because content is “family safe” doesn’t mean it makes sense to show that content to a kid.

“An article about Obama, for example, that may be safe, but it’s definitely not relevant for a three-year-old,” said Gai Havkin, CEO and co-founder of KIDO’Z, a kid-centric content and discovery platform that’s a bit like a COPPA-compliant version of Outbrain or Taboola.

KIDO’Z, which raised $3.5 million from Millhouse Capital in November, maintains a content library of more than 200,000 items, everything from apps and onlines games to videos and websites, which can be targeted to individual kids.

But because profiling children is a flagrant no-no, KIDO’Z employs an almost Amazon-like recommendation model.

“An ad network might look at a kid and say, ‘What type of content does this particular kid like?’ while we say, ‘Which type of kids like this type of content?” Havkin said. “We match entities with content based on the content. We cluster content, not users.”

Havkin, a developer and tech entrepreneur living in Israel, came up with the idea for the company in 2008 when his daughter was 5 years old because he wanted to give her a safe way to browse the Internet.

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From a kid-safe PC-based browser, the technology soon developed into a mobile OS when device makers and carriers came knocking about two years ago. To date, more than 40 device manufacturers and telcos have integrated the KIDO’Z software into their hardware, including Acer, Hisense, Polaroid, US Cellular, Deutsche Telekom and kid tablet maker KURIO.

In late November, KIDO’Z launched an SDK for Android – iOS is in the works – that allows developers to integrate kid-safe content recs directly into their apps. Shilin is an early adopter, having already integrated the KIDO’Z SDK into several of his apps, including Christmas Games, one of his most popular.

“The CPMs have been good [with KIDO’Z], between $2 and $5, which is very competitive compared to other networks like Admob, where I get about half a dollar,” Shilin said, who also noted that KIDO’Z serves up content that’s both contextual and relevant to his app.

Which makes more sense for the app’s youthful users and for the advertisers wasting cash targeting tots.

gaihavkin“No advertiser wants to pay for clicks made by someone who’s a) 4 or 5 years old, and b) probably just clicked by mistake,” Havkin said. “And on the developer side, in-app purchases and premium versions only work for a few specific kinds of apps, but conversion is generally very bad because the kids need to call their parents to get the credit card or the password to the app store.”

Shilin is living proof that it’s hard to make the subscription model fly in the kid world. He recently experimented by creating a paid version of one of his free apps. The free version was downloaded around 1,000 times – the paid version was downloaded just once.

But it’s not just about money with kid apps; it’s also about staying on the right side of the law. In March 2014, KIDO’Z got certified by the kidSAFE Safe Harbor Program, an independent body that’s been approved by the Federal Trade Commission to designate companies as compliant with the Children’s Online Privacy Protection Act (COPPA).

And COPPA compliance is no joke.

On Dec. 18, the FTC settled with two apps developers – Retro Dreamer and LAI Systems, which does business under the name TapBlaze – who each agreed to pay a combined $300,000 for purportedly allowing third-party ad networks to collect personal info from kids in order to target them with ads.

Regulators are likely to remain vigilant as the users of mobile devices get younger and younger.

“Between the age range of zero and 2, 44% of kids are using mobile devices regularly – you see babies tapping on screens and learning, which is great,” Havkin said. “But there are some downsides, too, of course, and it’s very important to stay aware of that. There is no arguing, though, that today, devices have become the main toy of kids.”

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