Evan Schuman's StorefrontBacktalk

Here’s one for the marketing ethicists out there (is “ethical marketing” an oxymoron?): 18-year-olds come into the retail CRM world as clean slates, even if they have been active E-Commerce and M-Commerce shoppers for eight or nine years. It is illegal to solicit or sell data about children younger than 13—and what can be collected and used about those aged 13 to 17 is highly restricted. When that veteran shopper turns 18, though, can all of his or her juvenile shopping history be sold or even used?

Between downloaded games, ringtones, ebooks, music, videos and mobile apps, minors account for a huge slice of electronic purchases. One online payment vendor is preparing to sell tons of youth purchase data—apparently, this is the first time anyone has tried—avoiding immediate legal problems by offering the data in aggregate.

Selling to children online has always been delicate and dangerous. Do some standard adult practices—such as asking for an E-mail address or a date of birth or a mailing address—and you’re in huge trouble. Try to market to them directly? Bigger trouble. And try to force children to pay for a legitimate purchase? You can’t, because a minor cannot enter into a legal contract.

A couple of years ago, 7-Eleven ran into its own challenging youth marketing issue. When doing a multi-month promotion in San Diego to collect mobile phone numbers for future marketing efforts, the chain collected E-mails and phone numbers of participants. With the intent to avoid problems, the chain didn’t ask age. Ironically, that caused the problem, as 7-Eleven didn’t know which customers were adults and which were children. Hence, the chain felt pressured to assume that all particpants were children and to not use the data.

The vendor preparing to market the youth data is called Virtual Piggy. What it has created is a mechanism for parents to put money for their children to use online (and, in the near future, in-store). The parents can dictate the amount, the stores where it can be used and the types of purchases permitted.

The program also has a social element to it—similar to a recent Facebook mobile program—where relatives and family friends can log in and add money, with similar abilities to place limits on how it can be spent.

In theory, this program might also train children to be better consumers, because they would learn how to make purchase decisions in a relatively safe environment. “We’re giving the kids some financial literacy,” said Virtual Piggy CEO Jo Webber.

Webber said the program addresses the current legal conundrum that retailers face: Children can use a parent’s credit card, but if the parent disputes the charge by saying that it was not authorized, there’s no legal basis to force the payment, because minors are not allowed to enter into binding contracts.

Given Virtual Piggy’s structure and the language in its contracts, it’s clear that it is the presumably adult parents who are making the purchases, which keeps the liability intact.

For retailers, Virtual Piggy takes a cut of every transaction. Webber said the initial rate is 1.5 percent, but added that it could increase after the introductory period and would decrease for volume for larger chains.