Facebook Inc. (FB): New COPPA Rules May Provide Ad Loophole

Facebook Inc. (NASDAQ:FB) has been actively pursuing some clarification of rules surrounding the federal Children’s Online Privacy Protection Act (COPPA) that was passed in 2000. The Federal Trade Commission has followed through on Facebook’s request, recently sending some specific guidelines and some changes to the rules in the Act – and these changes and clarifications may actually help Facebook reach out to young users under the age of 13.

Yes, the same Facebook Inc. (NASDAQ:FB) that officialy bans underage children from accessing the site – though many young’uns  get on the site through their parents.

It is reported recently that the FTC has announced some “updates” to COPPA to bring the law up to date with the highly evolved Internet compared to the Web in 2000. There were several changes announced Wednesday morning, and perhaps one in particular may open the door for sites like Facebook Inc. (NASDAQ:FB) to be able to advertise to young users – thanks to a clarification that Facebook itself reportedly lobbied to receive. The most noteworthy rule change under COPPA is that parental consent will not be required as long as a web site (like Facbook) uses user data of children “for the sole purpose of supporting the website or online service’s internal operations, such as contextual advertising, frequency capping, legal compliance, site analysis, and network communications” (emphasis mine).

The concept of contextual advertising means that web sites like Facebook Inc. (NASDAQ:FB) can allow users under age 13 without parental consent as long as the sites provide advertising that is relevant to the content on a given page. Behavioral advertising – which is based on user data and browsing behavior and preferences – is still expressly forbidden without parental approval.

Among other changes in the law that keep up with modern Internet technology (including mobile devices, which were not conceived in 2000) are the following points (continue to next page).