The FTC examined privacy policies of 400 popular children's mobile apps, and only 20 percent of the apps offered disclosures about their data collection procedures. The mobile apps that did outline data collection policies typically linked to technical privacy policies "filled with irrelevant information," the report said. Other apps offered misleading information about their policies.

"Most apps failed to provide basic information about what data would be collected from kids, how it would be used, and with whom it would be shared," the FTC report said. "It is clear that more needs to be done in order to provide parents with greater transparency in the mobile app marketplace."

In-App Ad Concerns

The FTC said the transmission of kids' information to third parties that are invisible and unknown to parents raises concerns about privacy, particularly because the survey results show that a large number of apps are transmitting information to a relatively small number of third parties.

"Indeed, using the device ID and other information obtained from multiple apps, these third parties could potentially develop detailed profiles of the children using the apps, without a parent's knowledge or consent," the FTC report said. "Although it is not clear from the survey results whether the information was, in fact, used for this purpose, the frequent transmission of data, coupled with the apps' poor disclosures overall, raises serious questions."

The FTC also looked at in-app advertising and discovered this practice is on the rise. The FTC said there are a variety of reasons why parents may have concerns about the presence of advertising within an app that their child will use, ranging from objections to the content of the advertisements to complaints about the data collection associated with such advertising. The FTC said parents should be given the opportunity to make this choice for their children prior to downloading the app.

Oversight Impending?

On the social media front, the FTC noted that 22 percent of the apps surveyed actually link to Facebook, Google+, Twitter or some other social network . Parents may be concerned about apps linking to social media for several reasons.

"For example, parents may not want their children to communicate with other users who they have never met or to post information about themselves or their whereabouts," the FTC report said. "Parents may also be worried that their children may post comments, photos, or videos that can damage a reputation or hurt someone's feelings. The presence of social features within an app is therefore highly relevant to parents selecting apps for their children and should be disclosed prior to download."

We talked to Marc Rotenberg, executive director of the Electronic Privacy Information Center. He told us we will probably see a formal announcement from the FTC about new oversight for children's apps.

"This report is more evidence and support for the need to update the children's privacy rules, which the FTC has proposed and which is backed by consumer groups and privacy groups and family rights groups," Rotenberg said. "As it becomes increasingly clear that companies are not able to police themselves regarding the use of children's data, the need for action by the FTC grows."