The problem is that you're talking to customers, not the general public, not the children. Of course your clients are going to love your product. That's why they're buying it. It doesn't mean they're right, however.

The other problem is that social acceptance (i.e. your anecdotes about your clients) != social acceptability. Society can agree on some really terrible things to do to people, as history can attest.

Another problem is the fact that you're potentially dealing with minors here who are being coerced (through being given an iPhone) into using this system. Even if it's by their parents, this raises serious alarms, since it's a severe power imbalance against kids who can't necessarily think through the consequences of accepting it in a rational manner like adults can (or should be able to).

The other other problems are related to the information the app generates, the potential misuse of that information, and what other commenters before have said about phones being mislaid, hijacked, etc.

Did you actually talk to kids at all? Or just their parents? If not, why not? They're as big a stakeholder, if not bigger, than the parents involved!

I'm not trying to say you're not a great company or good people. I'm just trying to point out some of the serious ethical issues with the product you've put out.