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Back in 2013, when Dylan Collins went fundraising for his kid-safe tech startup, SuperAwesome, he was surprised by the lack of interest. “No one really was interested in having a conversation about digital privacy in Silicon Valley,” says the CEO. “We realized that kids were a blind spot for most of the big technology companies.” Ultimately, not a single investor would finance his suite of tools to help childproof the internet.
In the seven years since, kids largely have abandoned legacy media for online entertainment at a rate that the technology industry no longer can ignore. In 2018, for example, children under 18 represented more than 40 percent of all new internet users globally, per PricewaterhouseCoopers, and some experts estimate that soon they will make up half of all people on the web. But with regulators cracking down on sites like YouTube over ads targeting underage users, the need to create protected environments for kids inside the vast (and often seedy) digital world has never been greater.
That’s put companies focused on the kid-safe media space in high demand. Now, London-based SuperAwesome is fielding interest from companies like Microsoft, which made a $17 million strategic investment in January. Meanwhile, Encantos, the media company behind animated bilingual preschool brand Canticos, has raised $2 million in seed funding to expand its focus on multicultural storytelling.
“We hadn’t been planning to raise any capital,” says Collins, revealing that SuperAwesome is on track to hit $100 million in revenue this year. But, he continues, “Having one of the world’s biggest technology companies investing in the kid-tech category, it really does send a signal.”
Entrepreneurs recognized the opportunity to invest in digital kids programming years ago as parents began to eschew basic cable stalwarts like Nickelodeon and Disney Channel for on-demand platforms like Netflix and YouTube. “There’s a huge demand on any platform right now for kids and family content,” says René Rechtman, co-founder and CEO of Moonbug, which acquires and distributes children’s programming to platforms including YouTube, Netflix, Amazon and Hulu. He describes it as “retention content,” explaining, “Sports will drive subscribers, and kids and family content will make sure the subscribers stay on board.” Just look at Disney+, which amassed 28.6 million subscribers in three months largely because of its family-friendly library.
Attention to kids’ content providers has grown in recent months, since the Federal Trade Commission’s $170 million settlement with Google-owned YouTube over allegations that it collected the personal information of children under 13 without their parents’ consent, a violation of the Children’s Online Privacy Protection Act (COPPA).
As a result, on Jan. 6, YouTube began restricting targeted ads and turned off comments on kid-centric videos. Though some individual creators have said they’ve seen a decline in viewership as a result of the change, it has largely had the reverse affect for established brands. Encantos, for example, has seen viewership to its Canticos YouTube channel triple in the past month, says CEO Steven Wolfe Pereira. And Pocket.watch — which has begun selling YouTube advertising inventory alongside brands like Ryan’s World in a COPPA-compliant way — expects ad sales to increase as much as fivefold this year.
YouTube, which made $15.1 billion in revenue in 2019, will counterbalance the negative impact on some creators’ businesses by investing $100 million into original children’s programming for the YouTube Kids apps. In a brief sent to partners, which a source shared with THR, YouTube said the funding will roll out over the next three years and will be given to “differentiated, high-quality kids programming that aims to enrich and delight our young audience” between the ages of 3 and 8.
YouTube’s settlement with the FTC is likely to place increased scrutiny on the entire kids programming space, but many executives say they ultimately see it as a positive because it will help boost content providers and platforms that are focused on creating safe spaces for children and that comply with COPPA.
“The broad interest in the space is growing and will continue to grow,” says Pocket.watch CEO Chris Williams. Adds Collins, whose SuperAwesome launched ad-supported video streaming platform Rukkaz in July, “I think you’re going to see a huge wave of development and activity in free ad-funded online video for kids in the next two to four years.”
This story first appeared in the Feb. 12 issue of The Hollywood Reporter magazine. Click here to subscribe.
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