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Dear Subscribers:

This week: Part 3 of our series on what everybody was talking about at Digital Kids, the premier conference of providers of Internet content for kids. Net Family News went to San Francisco a couple of weeks ago (as we do every year) to get an earful about the two hottest topics of the year by far: online safety and e-commerce.

In Part 1 we were your ears 'n' eyes at conference discussions, sharing insights into what the industry is saying about the Internet and kids. Part 2 was the latest in online safety solutions.

Here's our lineup for this final week of June:

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E-commerce & kids

"E-commerce" is quite the buzzword these days. The reason why we're hearing so much about online shopping is that the Internet industry recently had an epiphany. After several years of trying to figure out how actually to make money in this medium (banner advertising wasn't going to cut it for most Web sites), the light bulb went on this year, when companies decided that online retail, or direct sales, was going to be the main revenue source. Two different studies put global e-commerce revenue at more than $1 trillion by 2002.

Even "content providers" like TV and newspaper Web sites were going to have to sell stuff. CBS Sportsline, once an information provider, is selling sporting goods, USAToday flowers and candy, Discovery videos and CD-ROMs.

An example in the kids space is Nickelodeon's recent purchase of kids e-retailer Red Rocket. Nick hasn't yet figured out how it's going to blend kids programming and online retail - buying Red Rocket and putting its banner ads in the Nick site are only first steps. We'll keep an eye on that for you.

That brings us to how e-commerce for kids is taking shape. We all have concerns. We're no more interested in giving our children free, unlimited use of our credit cards on the Internet than at a shopping mall! And we wonder if our kids will be able to distinguish between content and sales pitch. In fact, the number of parents concerned about online advertising aimed at kids has gone from 18% to 45% just in the past year, according to Internet research group Jupiter Communications.

The good news is, research groups like Jupiter - which hosts Digital Kids and makes most of its money selling strategic and market research to corporations - are advising clients that, for e-commerce to take hold in the children's market, it has to be done responsibly. At the conference in San Francisco two weeks ago, Jupiter offered children's Internet programmers, marketers, and retailers some advice that indicates what responsible e-commerce might mean:

  • "Delineate commerce with buffer screens." Nickelodeon is doing that now with ads - click on the banner ad marked "Advertisement" and you'll first go to a page saying, "You're leaving nick.com to go to another Nickelodeon Web site that may have stuff for grownups as well as kids."

  • "Teach kids value of money, how to evaluate a purchase, manage finances." See our report below on "Digital wallet sites for kids."

  • "Entertain, engage through commerce: chat/auctions, games, downloading music." This is a reference to "adding value," building on widespread agreement in the industry that today's kids expect "value" - more than a sales pitch.

  • "Ensure privacy." They're referring to collection of kids' personal information through their joining Web site clubs and registering online, reinforcing FTC insistence that it not be sold to third parties and that there be no data collection from kids under 13 without parental consent.

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    Online 'allowance'

    Just how will kids shop online? Already the most well-established method, the "digital wallet" is a kind of electronic allowance. It allows kids to shop on their own but keeps parents in control.

    Here's how digital wallets generally work: A parent, the credit card holder, signs a child up with his/her credit card number and tells the service how much money the child is allowed to spend. The parents can add whatever amount they want at whatever frequency (say, a weekly allowance). Kids can use this virtual pile of money to shop at e-stores with which the digital-wallet site is affiliated. If the child wants to use her money for other than shopping purposes, these sites often include opportunities to give to charity, deposit to a savings account, or even learn how to invest money (via information on how to open custodial investment accounts or mutual funds). Here are some examples:

    Digital wallet sites for kids

    iCanBuy - We reviewed this one last month. It targets the broadest age range: "kids and teens" (we couldn't find a reference to specific ages). We're sure its list of retail partners is growing, but at this writing it seems a little limited, eToys being the most well-known. But maybe your kids have heard of: Gotmerch.com, JustBalls!, MXG Online, Graffiti Online, Buycurious, Whutever, and X-Radio. PC Flowers is everywhere, of course (nothing's changed - we still have to give them an allowance to buy us flowers). Unique to this site is a partnership with Security First Network Bank, so parents can help kids open a savings account online.

    DoughNET.com - This is the one for teenagers (13-18-year-olds). To us it seems a little less earnest and a little more straightforward than iCanBuy. It also offers a budget feature, so teens can learn that aspect of personal finance. The list of retail partnerships isn't huge here either, but some of the names are more familiar, at least within the Internet industry: CDNow, Barnes & Noble, Delia's, Egghead.com, Alloy Online. This is the site that teaches the basics of investing. Giving to charity is part of both iCanBuy and DoughNET.

    RocketCash - Just launched the first of this month, RocketCash targets the more than 20 million teens (with $141 billion in buying power) they expect to be online by the end of this year. This digital-wallet site is pure e-commerce; there's no educational component, no charitable giving, no savings or investing opp. What RocketCash has in common with DoughNET and iCanBuy is the "allowance" part, giving parents control over amount of purchase and choice of retailer. Though they have some retail partners in common with the other two, they seem smart in having signed some big names: J.Crew and Amazon, in addition Delia's, Reel.com, and eToys.

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    Hot e-commerce teen sites

    If you have a child spending a lot of time at Delia's, we hope she doesn't have your credit card number! But you'd find out soon enough. In addition to this hot little e-store, here are a few other sites targeting teens with a shopping component (whether subtle or in-your-face):

    Delias.com - It's really spelled dELiA*s, but it takes us too long to get the upper- and lower-case arrangement right every time! There are five Delia's stores around the country, as well as a handful of outlet and premium-outlet stores, but they're very focused on the Internet - smartly so, given their Generation Y customer base (girls 13-24, they say). Droog is the male counterpart to Delia's (boys 13-24). Delia's is also working on a broader destination (as opposed to pure e-commerce) site called iTurf. Another subsidiary of Delia's, gURL.com, focuses on community.

    Alloy Online - This is more an e-zine with a shopping component. "E-zine" increasingly means a destination site that builds on and serves a specific community with multiple services (discussion, information, shopping). Here's how Alloy describes itself: "a leading Web site providing community, content and commerce to Generation Y, the 56 million boys and girls between the ages of 10 and 24." They add that this group, "which is growing 19.5% faster than the overall US population," represents more than $250 billion in annual disposable income. That's even more buying power than RocketCash assumes!

    Bolt - The amount of information Bolt offers parents (or anyone else) on its site is as short as its name. It's the same type of complete destination site that Alloy is, with heavy emphasis on community: free e-mail, discussion boards, chat, an instant messaging feature, a buddy list feature, and e-postcards. Ah yes, there's e-commerce, too!

    For further reading….

    "Teens entering the virtual mall: Startup targets credit card-challenged shoppers with teen buying site" at ZDNet - you may enjoy the comments from readers at the bottom of the story in "Talk Back."

    CNN's story on e-commerce for Generation Y

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    Web News Briefs

    1. FTC workshop on kids' privacy online

      Now that the Federal Trade Commission has received comments from the Internet industry and parents about its proposed regs for the Children's Online Privacy Protection Act (passed last fall), it's holding a workshop next month on how Web sites can comply with COPPA. The law requires sites to obtain "verifiable parental consent" before collecting, using, or disclosing personal information from children. Those three words are what the workshop's about. It will look at: 1) Web sites' actual experiences with obtaining 'verifiable parental consent'; 2) the adequacy of e-mail in obtaining parents' consent; and 3) technologies other than e-mail that are available now or in the works for meeting the parental-consent requirement (some kids sites that are already actually requiring a signed fax or snail-mail letter from parents). The official FTC announcement can be found here.

    2. Of filtering in schools and fresh 'Net-use numbers

      From this week's AOP Bulletin (Association of Online Professionals):

      a. Filtering law may yet happen

      An initiative started by now-presidential candidate, Sen. John McCain (R) of AZ, got closer to becoming law last week, according to the AOP Bulletin. Two bills are in the works. The Bulletin describes the one furthest along this way: "On Thursday, the House of Representatives passed the "Children's Internet Protection Act as an amendment to the Juvenile Justice Bill." There was some interesting wording: "The Internet act requires all schools and libraries that receive e-rate funding to install and use filtering and site blocking tools to screen out information that is 'harmful to minors.' In a slight nod to constitutional free speech, the bill was worded so that obscene materials and child pornography must be filtered and blocked at all times, while content deemed 'harmful to children' need only be blocked during use of the Internet computers by children." Here's what's next for the bill: "Since the Senate version of the Juvenile Justice Bill contains no such Internet filtering provision, the bill will now go to a House-Senate conference committee to iron out the differences."

      Then there's Senator McCain's own bill, S.97, on the Senate Commerce Committee's agenda for consideration this week. McCain is the committee's chairman. Here's News.com's piece on the subject. Do you think there should be a law requiring filtering in schools? Do e-mail us your thinking, via feedback@netfamilynews.org.

      b. Whopping North America 'Net numbers

      "Nielsen Media Research reports that the number of people over 16 in the US and Canada who use the Internet has climbed to 92 million, almost evenly divided among men and women. The study says that 72 million people use the Internet from home, 46 million from work and 28 million from school."

    3. Commerce is bullish

      The US Commerce Department says, in the results of a recent study, that technology and the Internet are benefiting all of us (economically speaking). According to the New York Times, the infotech industry "has generated at least a third of the nation's economic growth between 1995 and 1998." Furthermore, things like PCs, routers, and Internet connectivity (goods and services) "got cheaper and allowed businesses to become more productive, cutting inflation by seven-tenths of a percentage point in 1996 and 1997." We couldn't find a negative note in the story!

      Another study, by the IBM Institute for Advanced Commerce and cited in TechWeb, found that the "Internet economy" generated $301 billion in US revenue last year. That's small compared to the $8.6 trillion overall US economy, the item said, but almost equal to the size of the Swiss economy. And the Internet economy's annual growth averaged 174.5% over the last four years, resulting in the creation of 1.2 million US jobs just in the last year.

    4. From the Universal Service Dept.

      Here's an encouraging piece in ZDNet about an experimental, Web-based education program for kids who could really use it. Working with teenagers in Illinois, Montana and New York, the program is exploring how online coursework may help increase the 50% graduation rate of children in migrant worker families.

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    A subscriber's tough question

    Subscriber Ani in Florida wrote us this week with a tough question, which we're publishing with the hope that a fellow subscriber might have encountered a similar situation and can offer a solution or idea that could help. Please e-mail us your comments and let us know if we can publish them. You'll see that we deleted her friends' phone number. For anyone, including NFN, to call them would of course be an invasion of their privacy.)

    "I would really appreciate it if you would somehow contact a friend whose e-mail address I don't have. These are Internet-illiterate parents who allow their young boys free use of the Internet at their house. They won't hear it from me - maybe you can shed some light on the situation. They live in Miami, FL, and their phone number is [deleted]. Thanks in advance for any help you can provide them."

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    That does it for this week. Have a great weekend.

    Sincerely,

    Net Family News


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