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US says children have easy access to smartphone apps but parents are unaware of privacy risks

By RICHARD LARDNER.

WASHINGTON (AP) - Who is monitoring the apps that kids use on their phones? The government complained Thursday that software companies producing games and other mobile applications aren't telling parents what personal information is being collected from kids and how companies are using it.

Apps could quietly be collecting a child's location, phone number, call logs and lists of friends, said a report by the Federal Trade Commission. The FTC blamed the companies that make the apps, and the stores that sell them, for failing to explain where that data might be recorded, for how long and who would have access to it.

"As gatekeepers of the app marketplace, the app stores should do more," the report said. "This recommendation applies not just to Apple and Google, but also to other companies that provide a marketplace for kids' mobile apps."

Apple declined to comment on the FTC report. Google, which created the Android software, said it has an "industry-leading permission system" that tells consumers what data an app can access and requires user approval before installation. "Additionally, we offer parental controls and best practices for developers to follow when designing apps that handle user data," Google said in a statement.

The FTC report signals a renewed interest by federal regulators who could pursue legal action against companies they accuse of violating the Children's Online Privacy Protection Act. The law bans collecting and disclosing personal information for children under 13 without their parents' consent.

The FTC is especially aggressive protecting the privacy rights of children. Last year a mobile app developer paid $50,000 last year to settle FTC charges that it violated the children's privacy law.

That company, W3 Innovations, doing business as Broken Thumbs Apps, developed and distributed apps for the iPhone and iPods that allowed users to play games and share information online, according to the FTC. Several of the apps, including Emily's Girl World and Emily's Dress Up, were directed at children and encouraged them to email their comments, the commission's complaint said. The FTC said the company collected and maintained thousands of email addresses from users of the apps.

The new FTC report does not identify any of the apps or software vendors that were part of its survey, which began last year. Using the word "kids," the government searched Apple's App Store and the Android Market and examined promotions for apps for word, math and number games and entertainment purposes. Most said they were for children. Prices ranged from free to about $10. The FTC said it found almost no relevant disclosures about data collection practices or information sharing on Apple's service and only minimal information on just three of the Android promotion pages.

Tessa Donner of Evansville, Ind., bought her teenage daughter a smartphone because she wanted to be sure she could reach her, especially in an emergency. But she didn't know that the mobile apps her daughter is able to download to the phone could act as hand-held spies.

"To know now that it could be unsafe, that is concerning," she said.

Advocacy groups credited the FTC with drawing attention to a problem they said has grown as the market for mobile apps has exploded. In 2008, there were about 600 apps available to smartphone users, the FTC said, and now there are nearly one million that have been downloaded more than 28 billion times.

"There is almost no information on what data is being collected and how it is being shared," said David Jacobs of the Electronic Privacy Information Center.

The FTC said most Android apps require children to allow the software to access at least some services on the phone. The government report said Apple relies on its own review process to prevent apps from targeting minors for data collection but added, "The details of this screening process are not clear."

Common Sense Media, a nonprofit group in San Francisco that studies children's use of technology, said privacy is eroding as the mobile app industry grows. More than half of U.S. kids have access to smartphones, tablets and other digital devices, said James Steyer, the group's chief executive. But the mobile app industry, which includes developers, stores and wireless carriers, are not providing the tools and information to monitor and protect a user's privacy, Steyer said.

"While industry lobbyists are concerned about the burden that basic disclosure will place on mom and pop app developers," Steyer said. "we're worried about the burden for real moms and pops."

The FTC urged app developers to describe clearly their data collection practices. Developers should also disclose whether the app connects with any social media services or includes advertisements, the government said.

Associated Press writer Michael Liedtke in San Francisco contributed to this report.

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Apps for kids get poor grades for privacy

By Cecilia Kang.

The Federal Trade Commission on Thursday criticized the privacy policies of mobile apps aimed at children and Apple's and Google's apps stores, saying a broad range of information about young users could be being collected and parents aren't being adequately informed that it might be happening.

In a report titled "Mobile Apps for Kids: Current Privacy Disclosures Are Disappointing," the FTC said it surveyed apps designed for children and found that data such as geolocation, phone numbers, contact lists, call logs and other "unique identifiers" could be being collected.

But the consumer protection agency said the Apple iTunes store and Google's Android Marketplace failed to disclose the collection and sharing of that data by businesses.

"Companies that operate in the mobile marketplace provide great benefits, but they must step up to the plate and provide easily accessible, basic information, so that parents can make informed decisions about he apps their kids use," FTC Chairman Jon Leibowitz said in a statement.

Lawmakers and the FTC have been showing much greater interest in the protection of children, from toddlers to teens, online. Children and teens are among the most active users of smartphones and tablets, and scores of apps are targeted directly at them, from teaching them the alphabet to propelling Angry Birds.

The FTC recommended that app developers provide simple and short disclosures on how they collect and share information about users, including whether children's data are connected with social media apps such as Facebook. The agency said parents should be informed if kids' apps have ads - a concern of privacy groups who say games and other youth-oriented apps contain behavioral, and sometime mature, ads hawking everything from soda to concert tickets to children.

App stores such as iTunes and Android Marketplace should also give parents more information about privacy practices of the apps it sells and allows users to download for free.

"As gatekeepers of the apps marketplace, the app stores should do more," the staff report suggested. The FTC noted that apps stores create their own age ratings for apps.

An apps trade group agreed that developers need to do a better job of informing users of the privacy policies. But federal rules are confusing for app makers, who often don't know what their requirements are.

"Many children's education app developers are unaware of existing privacy regulations and how they may be interpreted to prevent seemingly innocuous features," said Morgan Reed, executive director of trade group The Association for Competitive Technology.

Privacy advocates have pushed federal regulators for greater enforcement of privacy violations on kids apps. They lament that parents are often left with little guidance on what kids of data is being collected about their children online and if that data is being shared with third-parties to target the preferences of individual users.

Sometimes, according to public interest group Common Sense Media, ads and inappropriate content are deeply in apps, when users progress levels of a game, for instance.

Parents need to be clearly informed if a puzzle game or other children's apps are connected to social media features such as chat rooms and apps like Google+ or Facebook, the agency said. Such third-parties can also collect data about users without their knowing.

"Consumers, especially children, should not have to contend with mobile phone spies," said Jeff Chester, executive director of privacy advocacy group, The Center for Digital Democracy. "Both Google and Apple, the two leading mobile app companies, must do a much better job protecting children's privacy."

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Facebook Cites Google+, Mobile Shift Among Potential Risks

Editors: Nick Turner, Dan Reichl, VIA:businessweek.com.

(Updates Zynga share trading in 14th paragraph.)

Feb. 2 (Bloomberg) -- Facebook Inc., the social network that filed for an initial public offering yesterday, listed rivalry with Google Inc., regulatory scrutiny, hacker attacks and the shift to mobile technology among the risks it faces.

Facebook's competition with Google, Twitter Inc. and other social-networking providers could impede growth, the company said in the risk-factors section of its filing. Facebook also said it would face competition in China if it manages to gain access to that market, where it's currently restricted.

"Certain competitors, including Google, could use strong or dominant positions in one or more markets to gain competitive advantage against us in areas where we operate," Facebook said. Their tactics may include "integrating competing social -- networking platforms or features into products they control," the company said.

Facebook, the world's biggest social-networking service, has attracted more rivals as its popularity among users and advertisers soars. The company said it faces "significant competition" in almost every aspect of its business.

The company also cited concerns about its mobile strategy. Almost all of its revenue comes from ads delivered to computers, not phones and tablets. Facebook's mobile software currently generates no "meaningful revenue," the Menlo Park, California- based company said.

Apple, Android

Facebook further cautioned that key mobile devices, such as Apple Inc.'s iOS products and gadgets running Google's Android software, may not feature Facebook in the future. If either of these companies gives preference to another social network -- say, if Google promotes its own Google+ more aggressively -- Facebook's growth could be jeopardized.

Bigger pitfalls could yet emerge, said Kevin Landis, the portfolio manager for the Firsthand Technology Value Fund, which holds Facebook shares. Google, for instance, couldn't have foreseen the emergence of Facebook in 2004, when it went public.

"Let me put it this way: If you go back to Google's S-1 in their risk factors, there's no mention of Facebook," Landis said. Facebook was founded in 2004.

Facebook also has considered entering China, which would bring its own challenges. The country has censorship laws that have kept Facebook and other social-media companies, including Twitter Inc. and Google's YouTube, from operating there.

China Question

"We continue to evaluate entering China," Facebook said. "China is a large potential market for Facebook, but users are generally restricted from accessing Facebook from China. We do not know if we will be able to find an approach to managing content and information that will be acceptable to us and to the Chinese government."

Another risk: Facebook relies on Zynga Inc. for 12 percent of its revenue, according to the filing. San Francisco-based Zynga is the biggest developer of Facebook games, including "CityVille" and "Texas HoldEm."

The revenue comes from Zynga's sales of virtual goods and from direct advertising purchased by Zynga. In addition, Zynga produces a "significant number" of pages on which Facebook displays ads. The dependence goes both ways. Zynga gets more than 90 percent of its revenue from the social network.

"If we are unable to successfully maintain this relationship, our financial results could be harmed," Facebook said of Zynga.

Zynga's Bounce

The IPO filing helped make Zynga investors more bullish on that stock. Zynga shares jumped 17 percent today to $12.39.

Facebook also said it faces pressure from governmental bodies. It's possible that a regulatory inquiry might lead to changes to policies or practices, the company said.

"Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could negatively affect our financial condition and results of operations," according to the filing.

Facebook agreed last year to settle complaints by the Federal Trade Commission that it failed to protect users' privacy or disclose how their data could be used. The proposed 20-year agreement would require Facebook to get clear consent from users before sharing material posted under earlier, more restrictive terms, and it would include independent reviews of Facebook's privacy practices.

Private Shares

The U.S. Securities and Exchange Commission, meanwhile, is probing transactions involving shares of closely held companies, including Facebook. Secondary exchanges, such as SecondMarket Inc. and SharesPost Inc., have been used to buy and sell Facebook stock ahead of the IPO.

"We have received both formal and informal requests for information from the staff of the SEC and we have been fully cooperating with the staff," the company said in the filing.

The company also could suffer if its users' data is compromised by attacks from outsiders.

"Any failure to maintain performance, reliability, security, and availability of our products and technical infrastructure to the satisfaction of our users may harm our reputation and our ability to retain existing users and attract new users," Facebook said.

The media could hurt Facebook as well, by portraying its privacy and product changes in a negative light. The company received a "high degree of media coverage," Facebook said.

The company has 845 million active users. That compares with more than 90 million for Google+, which started last year.

--With assistance from Peter Burrows and Adam Satariano in San Francisco.

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