Supplementary written evidence by Dr Karen Middleton (SMH0077)

Briefing Paper for UK Parliamentary Select Committee Inquiry

The Hidden Forces and Harms of the Digital Advertising Ecosystem

Submitted to:

Social Media, Misinformation and Harmful Algorithms Inquiry, Science, Innovation and Technology Committee

Submitted by:

Dr Karen Middleton (University of Portsmouth, Conscious Advertising Network)
 

Conscious Advertising Network

Executive Summary

The digital advertising ecosystem plays a crucial role in funding online content. However, its opaque structure can also inadvertently incentivise fraud, lies, consumer privacy violations and content which causes harm. Transparent supply chains, which minimise information pollution and promote information integrity around key topics, will create more healthy incentives for the production of quality content, and restore trust in business (United Nations, 2024).

This paper examines structural flaws, economic and social harms, regulatory gaps, and calls for greater oversight to ensure transparency and accountability.

Introduction

Digital advertising connects advertisers, publishers, and intermediaries to target users. While this promises efficiency, the system’s opacity raises ethical and regulatory concerns. The digital advertising supply chain has become excessively complex, involving multiple intermediaries—including ad networks, data brokers, and automated trading platforms—each of whom profit from the transaction without bearing responsibility for its consequences. This is also bad for British advertisers, as it renders their advertising less effective. This paper explores how digital advertising funds harmful content and why self-regulation is inadequate.

Hidden Forces in the Digital Advertising Ecosystem

Key Players and Mechanisms

Digital advertising relies on real-time bidding (RTB), where user data is collected and sold to advertisers in milliseconds (Chaffey, 2018). The system’s opacity allows breaches of user consent and data protection while monetising harmful content (Barnett, 2024; United Nations, 2024). RTB auctions involve thousands of advertisers simultaneously bidding for a users’ attention, often without their knowledge. This process not only exposes users to intrusive tracking but because it operates with limited transparency, the system poses significant challenges for user consent and data protection. It also funds harmful content in ways that threaten information integrity and contribute to polarisation and misinformation (Barnett, 2024; Leerssen et al., 2023; United Nations, 2024).

Dominance of the ‘Duopoly’

AdTech is dominated by two players: the ‘Duopoly’ of Google, which monetises around 70-80% of the open web (Google, 2021), including a significant proportion of climate misinformation (Center for Countering Digital Hate, 2023), and Meta (Jones, 2024), which takes around 20% of the digital advertising market. Newer players like Amazon and TikTok have expanded their share, diversifying the market. Regulatory pressures and shifting consumer privacy preferences are challenging this dominance, but the system remains highly concentrated.

Lack of Accountability in Ad Placements

The sheer number of advertising middlemen obscures brands’ ability to track where their ads and money go. AdTech companies often fail to proactively vet the sites they monetise, threatening information integrity and enabling fraud to thrive until users report them (Adshead et al., 2020; Hwang, 2020). As key funders of platforms, advertisers play a crucial role in the business model, but many lack the time or capacity to scrutinise their supply chains fully. This results in a highly unregulated market where consumer privacy is violated, fraud linked to organised crime is rampant, and the monetisation of harmful content continues (Nadler et al., 2018). Some responsible advertisers are engaging platforms to address these concerns, but their individual efforts have limited impact without regulatory support (Conscious Ad Network, 2024). Advertisers' businesses are deeply affected by falling information integrity, including via depression of GDP (International Monetary Fund, 2021) or economic impacts of slow responses to natural disasters created by misinformation (Science Direct, 2022), and need democratic regulation to provide a level playing field and mandate transparency in advertising supply chains.

Harms of the Digital Advertising Ecosystem

The Disinformation Economy

Advertising funds both high-quality journalism and harmful content. Advertisers rely on flawed brand safety tools, leading to blocked access to legitimate journalism while failing to prevent misinformation. This result in perverse incentives for the production of both hate speech and misinformation, degrading information integrity (Broda & Strömbäck, 2024; United Nations, 2024).

Meta’s recent policy shift could impact 97% of its enforcement efforts, allowing 277 million instances of hate speech and misinformation to go unchecked annually (CCDH, 2025). Such changes threaten public safety, democracy, and mental health. For users, this will mean encountering more of this content across Facebook, Instagram, and Threads, as Meta weakens its detection systems and removes its fact-checking.

The Attention and Outrage Economy

AdTech and online platform companies benefit from the situation above, acting as a distribution system for harmful content, which drives revenue for them. Outrageous, misleading, and otherwise harmful content creates engagement on the platform companies, which keeps users on them for longer, and allows them to be served more adverts (National Anti-Bullying Research and Resource Centre, 2024; Wu, 2017). Algorithms prioritise content that garners high engagement, including hate speech and misinformation, often at the expense of accuracy. Meta’s internal research revealed that 64% of extremist group memberships were driven by its algorithms (Amnesty International, 2023; Irish Council for Civil Liberties, 2024). These systems prioritise emotionally charged and extreme content, targeting users most likely to react with outrage (Brace et al, 2024). This strategy increases user engagement, enabling major tech companies to maximise advertising revenue. Additionally, the CCDH (2025) highlights that in 2018, Meta stated that content hovering near policy violations generates the highest levels of engagement. These incentives therefore ultimately lead to the widespread dissemination of misinformation, disinformation, conspiracy theories and coercion, which degrade the quality of public information and may push people toward devise and hyper-polarised narratives. Algorithmic systems require a fundamental redesign to protect users from exposure to harmful content and prevent broader societal harm. As such, this business model necessitates urgent regulatory intervention.

Ad Fraud, Organised Crime, and Misinformation

Ad fraud is projected to reach $172 billion by 2028 (Juniper Research, 2023) and represents organised crime's second-largest revenue source after drugs (World Federation of Advertising, 2016). Fraudulent ad networks operate within misinformation ecosystems, sustaining harmful narratives (Chen et al., 2024). Google’s opaque ad placement system has placed ads on sanctioned websites in Iran and Russia (Adalytics, 2024). Sophisticated bot networks generate fake traffic, stealing advertising budgets while reinforcing misleading engagement metrics, while criminal groups exploit this revenue stream to fund illegal activities.

Addressing ad fraud is a crucial step in tackling information integrity, and the government has a key role to play in ensuring greater accountability within the digital advertising ecosystem (Henricksen, 2021). Platforms must be mandated to provide advertisers with full transparency over where their ads are placed, allowing them to manage their advertising supply chains to avoid waste, fraud and extreme content. Regulatory intervention, for example via Ofcom, is necessary to strengthen oversight of digital advertising practices, ensuring that major platforms and ad tech companies implement robust fraud detection measures. Policymakers should also enforce higher industry standards, require independent audits, and introduce legislative measures to cut off the flow of advertising revenue to disinformation networks (Marsden et al, 2020). With stronger transparency and oversight, the financial incentives that threaten information integrity will minimise.

Economic Impacts of Misinformation

Misinformation-driven events, such as civil unrest, can reduce GDP and destabilise economies (Barrett & Chen, 2021). False economic claims disrupt decision-making, heightening unemployment volatility and harming businesses (Assenza et al., 2024; World Economic Forum, 2025). For example, financial misinformation spread via digital advertising during market crashes has been linked to widespread panic selling and economic downturns. In the long term, the spread of misinformation undermines economic stability, creating persistent challenges for businesses, financial institutions, and policymakers. Ultimately, the spread of misinformation is not only a societal or political concern but critically, also a business and economic threat. The influence on business cycles, market stability, and policy responses highlights the urgent need for regulatory intervention to mitigate macroeconomic risks.

Review of ASA’s Role in Regulating Digital Advertising Harms

The ASA enforces the UK Code of Non-broadcast Advertising but lacks jurisdiction over algorithmic targeting and engagement-driven amplification. Current self-regulation is insufficient (Adshead, 2020). Despite the ASA’s Intermediary and Platform Principles Pilot (Advertising Standards Authority [ASA], 2023), major platforms remain largely unaccountable, allowing misinformation to spread unchecked.

Limitations of ASA Regulation

• ASA rules apply only to ad content, not to algorithmic amplification.
• Platforms control engagement-driven content distribution, leaving regulators without oversight.
• Self-regulation fails to prevent misinformation-driven advertising harms.
• Existing enforcement mechanisms lack the power to impose meaningful sanctions.

Potential Areas for Strengthening Regulation

Potential Areas for Strengthening Regulation

1. Increased Transparency in Digital Advertising

• Require platforms to provide advertisers with clear data on where their ads appear and whether they are funding harmful content so that they can reduce waste, fraud and harmful content in their supply chains.
• Introduce standardised reporting on algorithmic advertising risks, similar to financial risk disclosures.

2. Expanding ASA’s Scope to Cover Algorithmic Targeting

• Require platforms to disclose how engagement-driven algorithms shape ad placement and exposure to harmful content.
• Develop independent auditing measures to assess whether ad-targeting systems contribute to misinformation and harmful behavioural patterns.

3. ASA to Create Stronger Protections for Children Against Harmful Engagement Loops

• Work with Ofcom and the ICO to introduce mandatory risk assessments for child-directed advertising.
• Implement stricter controls on high-risk ad categories, such as cosmetic procedures, gambling, and unhealthy diets.

4. Holding Platforms Accountable for Algorithmic Harm

• Move towards a co-regulatory model where platforms share responsibility with advertisers for preventing harmful exposure.
• A co-regulatory model could involve the ASA, Ofcom (Online Safety Act), ICO (data protection), CMA (competition in ad-tech), FCA (advertising finances), and possibly a new digital regulator to oversee algorithmic transparency. 
• This approach would hold platforms and advertisers jointly responsible for preventing harmful exposure, with enforcement measures such as financial penalties or ad restrictions for platforms that fail to mitigate algorithm-driven harms.

Conclusion

The digital advertising ecosystem requires urgent regulatory intervention to address its role in threatening information integrity, fraud, and harmful content. Strengthening the ASA’s remit, increasing transparency, and holding platforms accountable through co-regulation will create a safer and more responsible digital advertising environment. Policymakers must act swiftly to mitigate these risks and ensure greater accountability in the sector.

28 March 2025

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