The Federal Trade Commission (FTC) fined Google 136 million dollars (£111 million) and the company will pay an additional 34 million dollars (£27.9 million) to New York state to resolve similar allegations.
The fine is the largest the agency has levelled against Google, although it is tiny compared with the five billion dollar (£4.1 billion) fine the FTC imposed against Facebook this year for privacy violations.
Google said YouTube will limit data collection on users who watch children’s programming on its main site, even if the user is an adult.
Google already does that on its children-specific site, YouTube Kids.
Content identified as children’s programming on YouTube’s main site will not offer features like comments and notifications and will not serve personalised ads.
Those sharing the video will have to identify children’s programming as such. The service will also use artificial intelligence to flag content that targets children.
Google said the changes will happen in four months to give family and child creators a chance to adjust.
Meanwhile, Google said it will promote YouTube Kids with a new marketing campaign.
The FTC has been investigating YouTube for the way it handles the data of children under 13.
Young children are protected by a federal law that requires parental consent before companies can collect and share their personal information.
YouTube has said its service is intended for ages 13 and older, although younger children commonly watch videos on the site and many popular YouTube channels feature cartoons or singalongs made for children.
The FTC’s complaint details Google’s mixed messages about who the site is geared for, and includes as evidence Google presentations made to toy companies Mattel and Hasbro where YouTube is described as the “new Saturday Morning Cartoons” and the “number one website regularly visited by kids”.
“YouTube touted its popularity with children to prospective corporate clients,” FTC chairman Joe Simons said in a statement.
Yet when it came to complying with the law protecting children’s privacy, he said, “the company refused to acknowledge that portions of its platform were clearly directed to kids. There’s no excuse for YouTube’s violations of the law”.
YouTube has its own app for children, called YouTube Kids.
The company also launched a website version of the service in August.
The site says it requires parental consent and uses simple maths problems to ensure that children are not signing in on their own.
YouTube Kids does not target ads based on viewer interests the way the main YouTube service does.
The children’s version does track information about what children are watching in order to recommend videos.
It also collects personally identifying device information.
A coalition of advocacy groups that last year helped trigger the FTC’s investigation said in a joint statement that the outcome will reduce the amount of behavioural advertising targeting children.
But they said it does not go far enough to hold Google accountable.
“We are gratified that the FTC has finally forced Google to confront its longstanding lie that it wasn’t targeting children on YouTube,” said Jeff Chester, executive director of the Centre for Digital Democracy.
But he said the “paltry” fine sends a signal that politically powerful corporations do not have to fear serious consequences for breaking the law.
Indeed, the fine will barely dent Google’s finances.
Google’s parent company, Alphabet, made a profit of 30.7 billion dollars (£25.1 billion) on revenue of 136.8 billion dollars (£112.2 billion) last year.
The federal government has increased scrutiny of big tech companies in the last two years – especially questioning how the tech giants collect and use personal information from their billions of customers.
Many of the huge Silicon Valley companies are also under antitrust investigations aimed at determining whether the companies have unlawfully stifled competition.
YouTube has faced a number of child safety issues this year.
In one case, comments that paedophiles left on innocuous family videos of children pushed YouTube to turn off comments on nearly all videos featuring children.
The FTC imposed a smaller fine of 5.7 million dollars on video site Musical.ly, now called TikTok, earlier this year after finding it illegally collected personal information about children.
Google was fined 22.5 million dollars in 2012 for violating that settlement when the FTC found it improperly used tracking cookies on Apple’s Safari browser.
The FTC’s fine against YouTube now needs to be approved by a federal court in Washington.