Mobile industry 'is in denial' about underage gamers

Roy Smith wants to save mobile app and game developers from themselves.

The Federal Trade Commission is about to begin enforcing an updated version of the Child Online Privacy Protection Act, which seeks to safeguard children and young adults online, as VentureBeat reported last week.

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So Smith’s most recent startup, AgeCheq, is coming along at an opportune time, because it aims to help gaming outfits and app developers avoid the impending crackdown.

“This is a huge opportunity to help prevent an unwanted catastrophe,” Smith told VentureBeat from his home in York, Pennsylvania.

“If you’re a game or app [developer whose product is] being used by a kid under 13, there’s a lot you have to do.”

Congress’ 1998 COPPA law was created during the pioneer period of the Internet. As technology has advanced — particularly in the mobile arena — the law has been in danger of becoming less relevant. To keep pace, the feds tweaked the law, with new rules going into effect in July 2013.

COPPA II’s tweaks means that game publishers and others in the mobile space have to self-enforce the law, making sure that anyone 13 years old or younger isn’t downloading their apps and logging into their game sites.

The feds gave game devs and ad crews a few months to adjust to the updates.

For game publishers and mobile sector operators, the grace period is now over. This impending FTC crackdown will affect everybody in the mobile ad industry.

Indeed, the feds’ gameplan will likely follow a previous pattern of government enforcement ops in the Internet space, Smith said.

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The FTC will first go after the larger ad and gaming companies that can afford the law’s steep fines: $16,000 per infringing download, which could put total fines per company in the $3 million to $5 million range. This will set a precedent for the smaller ad and gaming operators who can’t afford that big a hit, and pretty soon, everyone will fall into line behind the law.

The feds’ fixation hangs on what they call “personally identifiable information,” or PII. Companies must obtain permission from parents and guardians for the kids before engaging with the children based on that PII — for example, by targeting an ad for another game based on the child’s previous gaming activity.

The feds are concerned that mobile sites, app publishers, and advertisers can obtain information about children’s online behavior — and that information could end up in the hands of unsavory marketing brokers who then sell the valuable intel to third parties for financial gain.

Under COPPA, the onus is up to the companies to comply with the law and ensure those logging into the sites are who they say they are. The rub, of course, is that kids lie about their ages. But it’s a safe bet that a hefty share of the downloaders from popular gaming sites — think King’s Candy Crush Saga — are kids.

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Naturally, Smith has a dog in this hunt. His startup, AgeCheq, is aimed an ensuring COPPA compliance for app publishers by verifying the ages of people using apps and games and giving parents control over what information about their children gets shared. It also allows parents to simultaneously know what their kids are doing online.

Smith is a startup veteran and successful tech entrepreneur. He sold the development tools division of his startup, Appmobi, last year to Intel for an undisclosed sum. His first tech endeavor, gaming headset maker Turtle Beach, was sold for $10 million in 1993. There are three other companies in his portfolio.

AgeCheq is running on a $1 million single round raised last year.

“Most of the money the gamers are making are from kids buying virtual goods. Lots of people have been waiting for the government to begin enforcing COPPA II. But the industry is in denial,” Smith said.

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If the FTC makes good on last week’s promises, people won’t be able to stay in denial much longer. And that, in turn, could be very good for AgeCheq’s business.