The views expressed in this publication are those of the author and do not necessarily reflect the official stance of the European Digital Media Observatory.

Author: Carlos Diaz Ruiz, Associate Professor of Marketing at Hanken School of Economics and author of the book “Market-Oriented Disinformation Research: Digital Advertising, Disinformation and Fake News on Social Media”.

Once viewed as political propaganda or military deception, disinformation has become a lucrative industrial complex. Driven by the engagement-focused business models of social media and the algorithmic allocation of advertising funds, multiple online actors—from content creators to digital platforms—have the financial incentives to promote and amplify incendiary content.

The fundamental principle of the Internet’s business model is simple: engagement equals revenue. Each view, click, comment, and repost is called an engagement, potentially translating to money. Consequently, content creators have learned to circulate precisely the type of content that generates clicks, which, as we know from existing research in marketing, is likely shocking, highly emotional, and tribalizing. The last one means that the controversial content that forces self-classification into us vs. them groups will likely generate interactions. In turn, the social media algorithm picks up engaging content and distributes it further.

Advertisers Unknowingly Fund Fake News

Thinking about disinformation as part of a market system helps identify its supply chain. At the production level, the actors that seed disinformation—from state actors to politicians and influencers—create narrative campaigns designed to mislead the public for harm or profit. The intermediaries are the platform’s algorithms and recommender systems that pick up and amplify the content. Alongside, entire grey industries, such as “bot farms,” use fake social media accounts and other automated scripts for a dual purpose: to commit ad fraud and to amplify disinformation on demand. Finally, advertisers, knowingly or unknowingly, fund this economy by trusting their ad spending to the advertising technology ecosystem (AdTech), which operates without oversight or accountability.

The financial incentives of the disinformation economy are staggering; fake news websites rake in revenue through programmatic advertising, earning money each time a user clicks on an article. A report by the Carter Center and the McCain Institute suggests that  “81.47% of estimated traffic to known sources of disinformation have direct access to online programmatic advertising” (Scholtens et al., 2024, p. 3). Their estimate is based on a NewsGuard report calculating that 1.68% of digital advertising budgets are redirected to fake news websites; US$2.4 billion in the US alone and close to US$6 billion worldwide. Journalists have documented that ads from well-known companies often fund websites hosting misleading content, and that tech platforms get to keep the advertising money even if it funds disinformation. Moreover, reactionary and provocative influencers leverage incendiary content to build an audience and then cash in through the podcast circuit, which can result in lucrative personal brands and even positions of political influence.

My research on the overlap between digital advertising and fake news suggests that digital marketers can be part of the solution by regaining control over placing and reporting ads.

The Role of Big Tech

Tech companies are beneficiaries of the disinformation economy because they are, at the core, AdTech businesses that dominate a certain aspect of this economy. For example, Google dominates the search, video, and display advertising markets, Meta leads the social media advertising ecosystem, and Amazon leads e-commerce and display advertising.

While platforms claim to combat misinformation, their business models depend on user engagement, which results in a conflict of interest. Meta’s dismissal of fact-checking cooperation in the US is an example. The economic incentives to spread disinformation will persist if AdTech firms continue distributing ad spending without accountability and democratic oversight.

Countering the Disinformation Economy

Examining disinformation from the perspective of its business models opens opportunities for interventions beyond messaging and media literacy. Rather than viewing disinformation and misinformation as accidental byproducts, a market-oriented perspective proposes that they thrive in the current markets designed for digital advertising and influencer marketing.

An emerging stream of research on Market-Oriented Disinformation Research proposes that addressing the issue necessitates systemic changes in revenue generation. It suggests three specific mechanisms already utilized in financial markets to prevent their use in terrorism and money laundering: Know Your Customer (KYC), Duty to Care, and Due Diligence.

KYC rules mandate that financial institutions verify the identities of their clients and monitor transactions to identify suspicious activities. Digital advertising shares several characteristics of the financial market, but today, it is possible to use dark money to fund influence campaigns. Knowing who sends funds to the digital advertising market, just like banks do with financial investments, can help limit the flow of dark money in digital advertising, where undisclosed sources funnel money into AdTech without oversight.

Due to the opacity of AdTech platforms, digital marketers do not always know where exactly their ads are displayed and what they fund. Ultimately, marketers should have a duty to care—a legal responsibility to ensure their spending does not inadvertently fuel disinformation and hate speech, and protect their clients from wasting money on ad fraud. This would mean verifying that AdTech intermediaries distribute their ad spending as intended and taking responsibility for what ads are funding.

Organizations calling for accountability in digital marketing argue it can reduce the spread of disinformation and the circulation of harmful content for profit.  Ultimately, advertising agencies and AdTech intermediaries should be held responsible for performing due diligence to prevent the waste of their client’s advertising budgets on ad fraud and the funding of harmful content.