There is now a 'safe' social networking site for kids called Togetherville. It is still a start up so I'll go a little easy.
Aside from the cheese of the name and the unoriginality of the concept (come on, Facebook could always have been used by kids), the inherent concept behind this venture is slightly flawed. The idea behind it is that parents log in to the website with their Facebook IDs and create an online social network for their toddlers on Togetherville. Meanwhile, in real life, there's something better for kids to have a network, it's called a playground.
The site is primarily designed for adults and kids to use it together to have an educational experience. There are tools for 'art projects', watching videos and competitive games that present this function. Add to this, the money management feature where kids are assigned an online allowance to help them learn the value of money.
Now, according to me, a definite reality check is needed to someone somewhere. Clearly folks are going nuts trying to milk every last demographic out there on the internet.