To satisfy regulators, YouTube officials are finalizing plans to end “targeted” advertisements on videos kids are likely to watch, according to three people familiar with the discussion. The move could immediately dent ad sales for the video giant — though not nearly as much as other proposals on the table.

The Federal Trade Commission is looking into whether YouTube breached the Children’s Online Privacy Act (COPPA). The agency reached a settlement with YouTube but has not released the terms. It is not clear if YouTube’s changes to ad targeting are a result of the settlement. The plans could still change, said the people, who asked not to be identified citing an open investigation.

A spokeswoman for YouTube declined to comment. A spokeswoman for the FTC declined to comment. The agency is expected to levy a multimillion-dollar fine.

Since targeted, or “behavioral” ads, rely on collecting information about the viewer, COPPA effectively bars companies from serving them to children under 13 without parental permission. These commercial messages that rely on mountains of digital data, such as web-browsing cookies, are integral to the business of Alphabet Inc.’s Google, YouTube’s owner.

Right now, YouTube sells two different types of video ads, broadly speaking. One simply pairs the context of a video with a commercial message. So, a YouTube clip about basketball might have an ad from Adidas. The other type uses an array of digital signals. With these ads, marketers can reach viewers in a demographic group, such as homeowners or new parents, based on Google’s vast data troves — websites people visit, searches they make and so on.

Loup Ventures, a research firm, estimates YouTube’s revenue from children’s media between $500 million and $750 million a year. Paring back targeted ads would dent that revenue, although Google has the ability to make its contextual ads more compelling to mitigate the damage, said Doug Clinton, a Loup Ventures analyst. He pegged the potential impact of YouTube curbing targeted ads at 10% of its overall intake from kids’ videos– so about $50 million. “That would be the worse case, in my mind,” he said.

It’s not clear how YouTube would deliver this targeting ban with the thousands of video channels with whom it splits ad sales. It’s also unclear how YouTube would define which videos are “directed at children” and which aren’t.

Original Source Bloomberg


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