Kids digital media report 2019May 2019Commissioned byPwCSummary findingsKids Digital Media Report | 20192 Kids digital advertising spend is distributed across a range of platforms, including: kids broadcasters, VOD platforms, search engines, social media, YouTube, and a broad range of publishers/ networks Over the course of the forecast period, 2018-21, we anticipate global kids digital advertising spend accompanying compliant content to overtake YouTube, growing to nearly 30% share by 2021 The rollout of GDPR in Europe (with its GDPR-K kids component) has accelerated the understanding of compliance globally beyond major brands and is supporting growth in the emerging kidtech sector Additionally, current activity in the US indicates that COPPA (Childrens Online Privacy Protection Act) regulation may be extended to 16 year olds (up from 13 today) and that other countries, such as China and India, are planning to legislate similar laws; these actions would expand the market size and growth trajectory, to govern the digital privacy of c.800m kids by 2021 (vs. c.130m today). We have not accounted for these extensions in our estimated market forecasts We estimate that the global kids digital advertising market will continue to grow in excess of 20% p.a. (2018-21). We estimate the market will be worth c.$1.7bn by 2021 As kids media and content is increasingly consumed via desktop, mobile and tablet devices, we expect brands to move more advertising spend onto these digital platforms, and shift spend away from traditional (non-digital) channels Additionally, increasing regulatory requirements and awareness of the benefits of compliance support a shift in spend towards dedicated kidtech playersNote: throughout this report, we use compliant to refer to products, services or content delivery which has been designed for the requirements of COPPA or GDPR-K or other similarly designed kids digital privacy legislationPwCKids TV audiences are declining, as kids increasingly prefer digital alternativesKids Digital Media Report | 20193Hours spent weekly watching (live and time shifted) TV by age group (US), 2014-18hoursSource: Ofcom, Nielsen, PwC Analysis40% 49% 46% 49%42%37% 38% 35%18% 14% 15% 16%100%2018201720182017Dont knowPrefer to watch YouTubePrefer to watch TVLike both the sameAge 8-11 Age 12-15Preference for watching YouTube vs. TV, among those that watch both (UK), 2017-18% of respondents Despite this decline, TV still reaches a substantial portion of the U13 audiences media time, albeit with questions around its ongoing effectiveness. As audiences volumes fall, it has become more challenging for brands to secure TV inventory during key seasonal periods (e.g. Q4) TV reach and effectiveness is being eroded by the fragmentation of addressable audience time across YouTube, Subscription VOD (e g. Netflix) and games (e.g. Fortnite) Despite growth, kids digital channels aren't yet considered as effective as TV in terms of influencing product sales- 5 0 %- 2 5 %0%25%2014 2015 2016 2017 2018US pop.Change in time spendwatchingTV35-4918-342-1112-1765+50-64PwCkids (globally) go online for the first time every second262mkids (globally) went online for the first time in 2018This is over 40% of the total net new internet users in 2018Kids are now one of the fastest-growing online audiences, and are spending more time online Kids Digital Media Report | 201941 7 . 21 0 . 57 . 26 . 61 2 . 52 0 . 51 3 . 69 . 68 . 91 5 . 3Age 5-15 Age 8-11 Age 12-15+22%Age 5-723%+33%+35%+19%Age 3-420182014Hours spent weekly consuming internet by age group (UK), 2014-18hoursNote: 1) Adult data refers to 2014-17; however, as internet consumption for 5-15 year olds was stable 2017-18 at 15 hours 18 minutes, it is comparable to adult figures - for which 2018 data is not availableSource: UNICEF, Internet World Stats, OfcomIn our 2017 report, kids were a relatively hidden audience. In 2019, (mostly due to ongoing news stories) there is much more public discussion about digital health, privacy and content safety for kidsComparatively for the adult population, weekly internet consumption has increased 18% 2014-171of internet users globally are kids1/3PwC 5Growing kids online adoption is driving investment from leading technology and content platformsKids Digital Media Report | 2019 FB Messenger Kids Continued investment in kids content on Amazon Prime Fire tablet Freetime on Kindle Increased activity with toy companies Investment in kids and family content on new Apple SVOD service Investment in kids content (e.g. StoryBotsacquisition)Facebook Amazon Apple Netflix Google When choosing tools for kids engagement, brands overwhelming consider safety and compliance, in addition to reach and engagement. Platforms with a provenance in targeting adults and meeting the requirements of adult advertisers, have up until recently been less active in updating existing or building new platforms to accommodate these priorities. While these businesses have all invested in tools and technology to help protect kids (e.g. parental controls), it is generally viewed that these are not always sufficient to provide 100% safety for kids Increased legislation, media coverage and kidtech solutions have enabled transparency, which was not always possible previously because of the ad-hoc repurposing of adult platforms. This has in turn driven confidence in spending by brandsNot exhaustiveRecent examples of kids-related investments made by FAANG YouTube Kids, a dedicated AVOD offering Family Link Internal Project Unicorn to make services COPPA compliant Platforms ContentPlatformsPlatforms3rd party toolsContentPlatformsContentPlatformsPwCMost kids content investment is being channelled into Subscription VOD platforms (not ad funded)Kids Digital Media Report | 20196Source: Industry Interviews, Variety, BARB$2-3bnspent on high quality kids content annually by Apple, Disney, Netflix and Amazon This content will be behind a subscription paywall, making it unaddressable to advertisers This is significantly higher than financial investments (e.g. M additionally: 4 others have extended to U-15s, 6 to U-14sSource: UNICEF, Internet World Stats, Ofcom, Better Internet for KidsPwCIt is expected that by 2021, as many as c.800m kids could be protected by regulationKids Digital Media Report | 20190300900600Numberofkids protected2019F+674m2021F2017804m77m53m231m53m443m54m130m77m+77mUSEUChinaIndiaCOPPA COPPA COPPAGDPR-K GDPR-KChina PIS Standard2India PDPA3The expansion of kids privacy laws outside of Western markets would significantly increase the number of protected kids globally As kids become a larger percentage of the daily internet audience, laws to protect them are expected to be passed with greater urgency Kidss digital privacy laws are reasonably standardised across the US and EU, consistently focused on tracking, anonymity and parent-focused verification If new laws (under discussion) are implemented in China and India, this would increase the number of kids protected by privacy regulations to over 800m globallyNumber of kids1 protected by data privacy legislationSource: World Bank, FTC, GDPR, Freshfields, Baker McKenzie, PwC Analysis Relevant regulation Timing of implementation is uncertain, but is anticipated in the next 2-3 years Note: 1) Where GDPR-K legislation is not yet implemented, member states are assumed to apply legislation to under-16s;2) Personal Information Security Standard; 3) Personal Data Protection ActThis represents 2% of the global under-18 population in 2017, growing to 6% in 2019F and 34% in 2021F9PwCEnforcement of these regulations has become more pronounced, with significant fines issued in the USKids Digital Media Report | 2019In parallel, civil class actions have been filed alleging collection of kids data from apps and games. It expected that a similar pattern may follow in EuropeThe two most recent fines issued by the FTC have been the largest in history: AOL/Oath/Verizon ($5m, 2018) and TikTok ($5.7m, Q1 2019)The FTC is now pursuing actions relating to the underlying technology stack (i.e. beyond publishers)Additionally, in early 2019, the FTC stated it will seek to extend liability to individual executives in companies acting illegally371325220246824860Fines ($m)6.120170.12016 YTD May 19NumberofActions5.720181.30.820131.1201420120.420151.9ActionsFines ($m)Prior to 2018, compliance breaches in the US were primarily pursued by the FTC (Federal Trade Commission). In the last two years however, individual State Attorney Generals (e.g. New Mexico, New York) have initiated separate actions Recent eventsLooking forwardCOPPA enforcement actions issued for compliance breachesSource: FTC, New York Attorney General, New Mexico Attorney General10