Dive Brief:

• Facebook's photo-sharing app Instagram is facing a flood of advertisements showing counterfeit products, with some featuring doctored brand logos, Digiday reported. 
• Many of the fake ads promote highly discounted products like clothes, electronics, real estate and shoes that lead users to scam sites. Digiday pointed to one sponsored post from an account called "Summer discount" that featured an Adidas logo above a photo claiming to sell the brand's Yeezy sneakers for 70% off. 
• "Instagram is essentially validating [the ads] by featuring [them] in consumers' feeds," Blake Ricciardi, CEO of retailer Popular Demand, told Digiday. "Just like Facebook has to get a better handle on fake news, Instagram needs to get a better handle on advertisement of fake products."

Dive Insight:

When the term ad fraud is tossed around, it's often related to high-tech, complex operations involving bots or other methods that trick platforms into recording ad views and clicks that never actually include actual consumers. The fraudulent ads on Instagram are far more straightforward but potentially more damaging to the platform's reputation as a safe place for brands to advertise. This is especially relevant to lifestyle and fashion brands and retailers that covet Instagram for its image- and aesthetic-focused and highly shareable content model.  

While tech-related ad fraud means someone in the chain pays for ads that never reach the target audience, the ads for counterfeit items mean that people buying the products are not getting what they think they are paying for, and brands might suffer when consumers are disappointed by low-quality bootleg items they believe are legitimate. These fake ads could also create confusion among consumers, on top of brand management problems when people buy the heavily discounted products.

Instagram ads are bought via a self-serve platform, which comes with both scale advantages and loss of control for the platform's one million-plus advertisers. Though Instagram doesn't allow counterfeit items to be sold on the platform, the flood of advertisements created each day can be difficult to police. An Instagram spokesperson told Digiday that the company reviews millions of ads each week to catch violators and remove their accounts.

The photo-sharing app isn't the only social media platform facing this issue. Bad ads appear on Facebook, Twitter and even Snapchat, whose recent rollout of self-serve ads could likely lead to a wave of new advertisements that cannot be properly vetted. Ad fraud has been among the most pervasive challenges facing the digital ad industry, harming publishers' bottom lines, keeping marketers' messages from reaching target audiences, wasting ad budgets and casting a shadow over digital advertising overall. The global economic loss as a result is expected to hit $6.5 billion this year, according to the Association of National Advertisers.