Controversial digital ad placement leaves tech companies scrambling

Screenshot by Eric Feinberg/Screenshot by Eric Feinberg - This screenshot, provided by Fans Against Kounterfeit Advertising (FAKE) founder Eric Feinberg, shows an ad for a counterfeit Louis Vuitton bag — as well as counterfeit sunglasses — on the company's official Facebook page.

Ads for knockoff Louis Vuitton bags pop up on the luxury retailer’s official Facebook page. A Toyota ad shows up on a news article about a car crash. Or an ad for Dove promoting women’s “Real Beauty” shows up on a Facebook page glorifying domestic violence.

Over and over again, the perils of digital advertising have left tech giants such as Facebook, Yahoo and Google torn between the needs of advertisers and their obligations to their users.

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Striking the right balance between advertisers and users is increasingly important for tech companies that depend on digital-advertising revenue. After Facebook reported a 61 percent increase in digital ads during the past quarter, the company’s stock climbed 31 percent in one day. The digital-advertising industry drew in $37 billion last year and is projected to reach nearly $60.5 billion by 2017, according to eMarketer.

In May, a handful of advertisers, including the British division of Nissan, threatened to stop advertising on Facebook after their ads appeared on pages promoting rape and violence against women. Facebook should have “stringent processes and guidelines in place to ensure that brands are able to protect themselves from appearing alongside inappropriate content,” Nationwide U.K., a building society, said at the time.

After a temporary boycott by some advertisers, the social network said it would review its users’ pages to determine whether they are “ad safe” for advertisers. Those identified as not “ad safe” will no longer receive advertising, the company said.  

In 2011, Google settled with the Federal Trade Commission after hosting ads for fraudulent pharmacies. Now it is facing similar questions from several state attorneys general about ads for illegal prescription drugs on YouTube, which it owns. The company has said it reviews and removes questionable ads that appear on the video service.

When Yahoo bought the blogging site Tumblr for more than $1 billion in May, Yahoo chief executive Marissa Mayer was immediately inundated with questions about how she would bring advertising to the site, which has a reputation for hosting adult content. “In terms of how to address advertisers’ concerns around brand safety, we need to have good tools for targeting,” Mayer told analysts in a conference call at the time.

These conflicts are an outgrowth of the evolving advertising industry, said Catherine Tucker, a marketing professor at the Massachusetts Institute of Technology’s Sloan School of Management. As companies adapt to advertising on the Web, they must grapple with losing some control, she said. A single ad might appear on dozens or hundreds of sites based on audience algorithms developed by an advertising network, she said.

“In the past, it was a relationship between the firm and the advertiser,” she said. “Now it’s done by ad networks.”

It is a tricky process because content on many Web sites is difficult to predict, said Scott Knoll, chief executive of the ad consulting firm Integral Ad Science, which focuses on matching ads with brand-safe content. Anyone can make and update a Facebook page with controversial content, he said, so it is difficult to predict when red-flag topics, such as sex or drug use, might crop up on a page and make it unsuitable for a brand.

And as more companies turn to social networks for marketing, they might find that the ads that appear on their social-networking page are unsuitable.

In dozens of cases, ads for counterfeit goods have appeared on a company’s Facebook page, said Eric Feinberg, a former marketer who founded the advocacy group Fans Against Kounterfeit Enterprise years ago.

There has been a dramatic increase in these types of ads, which are often placed by “zombie sites” that might take consumers’ information and money without offering a product or service in return, he said.

Many of those ads are tied to companies in China or Russia, according to a report by Feinberg and the cybersecurity firm Malloy Labs. Some have financial links to larger networks, such as the Russian Business Network, which has been tied to malware, child pornography and other illegal activity, security researcher Ian Malloy said.

Facebook declined to comment specifically on the paper’s findings but said it has policies to let users report ads for counterfeit goods. The company has said that it reviews the ads and, when necessary, removes them.

But Feinberg said that even when he has managed to get fake pages and ads removed from the network, the companies promote their products under a different name. To protect legitimate advertisers and consumers, lawmakers and law enforcement agencies should compel social networks to set up a more stringent review processes for their ads, he said.

“I had to protect myself because no one is protecting me,” Feinberg said. “There must be oversight on these networks.”

(The Washington Post Co. chairman and chief executive Donald E. Graham is a member of Facebook’s board of directors.)

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