By Eric McWhinnie, courtesy of Wall St. Cheat Sheet.

Earlier this year, the Federal Trade Commission issued a report on a survey of mobile applications aimed specifically at kids. The organization found that little or no information was available to parents regarding privacy practices and interactive features in many of the apps. The FTC called for increased transparency and recently conducted a follow-up report called “Mobile Apps for Kids: Disclosures Still Not Making the Grade.” As the name suggests, there is still plenty of room for improvement from the app ecosystem.

After taking a second look at Apple’s (NASDAQ:AAPL) App Store and Google’s (NASDAQ:GOOG) Android Market, the two largest domestic app stores, little progress has been made in providing parents with information about how data is collected from their children, how it is being shared, or who will have access to it. The FTC randomly selected 200 apps from each store using the keyword “kids” and looked at disclosures and links on each app’s promotion page, the developer’s website, and within the app itself. It found that only 20 percent of the apps reviewed disclosed any information about the app’s privacy practices.

Furthermore, nearly 60 percent of the apps surveyed are transmitting information from a user’s device to the app developer, an advertising network, analytics company, or some other third party. Information shared includes details such as device ID, geolocation, or phone number. The most common piece of information shared was a user’s ID, which is a combination of letters and numbers to uniquely identify each mobile device. The majority of those went to third parties. With so many apps sharing information with the same third party, it becomes relatively easy for a company to develop a detailed profile of all data associated with a particular device ID.

“While we think most companies have the best intentions when it comes to protecting kids’ privacy, we haven’t seen any progress when it comes to making sure parents have the information they need to make informed choices about apps for their kids. In fact, our study shows that kids’ apps siphon an alarming amount of information from mobile devices without disclosing this fact to parents,” said FTC Chairman Jon Leibowitz. “All of the companies in the mobile app space, especially the gatekeepers of the app stores, need to do a better job. We’ll do another survey in the future and we will expect to see improvement.”

Many apps in the survey also contain features such as advertising, links to social media, or the option to purchase goods with real dollars. The FTC found 58 percent of the apps contained advertising within the app, but only 15 percent disclosed it prior to download. Twenty-two percent of the apps contain access to social networking services, while only 9 percent disclosed the links. Facebook (NASDAQ:FB) and Google+ were the two most popular social networking integration features, being found in 10.4 percent and 9.1 percent of the apps, respectively. LinkedIn (NYSE:LNKD) was the least commonly found at 0.3 percent. Prices paid for virtual goods ranged from only 99 cents to as much as $29.99.

The report urges all those involved in the app ecosystem to speed up efforts to make sure parents have access to key information needed to make decisions about which apps they download for their kids. The FTC recommends incorporating privacy protections into the design of mobile offerings, providing easy-to-understand choices, and providing more transparency about how data is shared. In addition, the agency is launching non-public investigations to determine whether some entities are violating the Children’s Online Privacy Protection Act, or deceptive practices in violation of the Federal Trade Commission Act.

As of September 2012, there were over 700,00 apps available in Apple’s App Store, representing a 40 percent surge since December 2011. There are also more than 700,000 apps in Google Play, a whopping 80 percent increase since the beginning of the year. Any changes to the privacy practices could have a significant impact. A recent Pew study found that 54 percent of app users did not install an app once they knew how much personal information would be collected. Another 30 percent of app users said they uninstalled an app because of privacy issues.

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