I can almost see how you could view that as a fish blended in very well with its environment, but I believe that is stretching it. The "eye" looks like a hole in the organic material, and the white "whiskers" look the same as the white sand highlights that appear to the left in the picture. Digital picture white balance and other issues can sometimes make parts of pictures stand out, and this can be deceiving.
If you look at the entire object, there are holes, pits, and irregularities that make it look more like a formation, instead of a fish. I have seen my share of frogfish.
Don't worry...it reminds me of looking at cloud formations. One person will see a building, while the next person will see a ship. Our mind can make our eyes see what it wants to sometimes!
I may be wrong, and your kids may be wrong, but I'll vote with them on this one.