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How Meta Is Making Billions From Scam Advertising - Question Everything | Wave AI Podcast Notes

How Meta Is Making Billions From Scam Advertising

Thu Nov 20 2025

Meta is making billions from ads they know are scams. Section 230 is one reason why it doesn’t have to stop running them.

Summary

Podcast Summary: "How Meta Is Making Billions From Scam Advertising"

Podcast: Question Everything
Host: Brian Reed
Guest: Jeff Horwitz (Investigative Reporter, Reuters)
Release Date: November 20, 2025

Overview: Main Theme & Purpose

This episode explores how Meta (Facebook’s parent company) is knowingly earning billions of dollars in advertising revenue from fraudulent ads and scam operations on its platforms. Investigative reporter Jeff Horwitz, who broke the recent story based on internal Meta leaks, sheds light on alarming internal data, the real-world impact of scam advertising, and the legal loopholes—primarily Section 230—that enable Meta to avoid accountability. The episode examines the moral and systemic dilemmas posed by the current structure of internet regulation.

Key Discussion Points and Insights

1. Section 230: The Law Behind Internet Platforms

Brian Reed introduces Section 230 as the 1996 law making internet platforms largely immune from liability for user-generated content, safeguarding vibrant online debate — but also facilitating neglect and exploitation.
Section 230 has protected platforms even when harrowing consequences result from user activity (examples: harassment via fake Grindr profiles, recruitment by extremist groups on Facebook, spread of illegal sexual images on Reddit).
- Quote:
  
  “For better and for worse, Section 230 has made it so that companies are largely not responsible for what happens on their online platforms, even if they're making huge profits from that activity.”
  — Brian Reed [04:44]

2. The Meta Leak: Inside Knowledge of Fraud

Jeff Horwitz obtained a large leak of Meta’s internal documents, revealing how fraud and scam ads are rampant on Facebook, Instagram, and WhatsApp.
- These include policy docs, engineering info, and screenshots of internal management discussions.
- Jeff explains:
  
  “They believe they do not owe any user a duty to remove fraudulent ads from the platform. Like that's just not a thing that they are responsible for.”
  — Jeff Horwitz [05:26]
Scale of Problem:
- Meta made ~$160B in advertising revenue in the last year; Meta’s own estimate is that ~10% ($16B) came from scam or banned ads.
- 15 billion scam ad impressions served daily.
- Meta’s platforms implicated in about a third of all successful scams in the US.
- Quote:
  
  “Meta's own research suggests its products have become a pillar of the global fraud economy.”
  — Brian Reed [09:24]

3. Scam Ad Examples and Victims

Real ad example: Fake "McCormick spices" ad scam; hundreds reported getting duped.
- Meta only removed ads after being publicly alerted; systemic solutions lag behind.
- “If I fell for the McCormick spices and I gave my money, like, who can I go after?”
  – Brian Reed [12:00]
- Jeff: “Functionally, no one.” [12:07]
Victim story: Canadian Air Force recruiter’s Facebook account hijacked for weeks; her contacts lost thousands of dollars to crypto scams carried out in her name. Meta only responded after massive escalation.
- Quote:
  
  "...the recruiter just kind of, like, broke down in tears because people were being defrauded, quite literally because they trusted her."
  — Jeff Horwitz [14:43]

4. Organized Crime & Human Trafficking

Behind many scam operations: syndicates engaging in human trafficking, forcing victims into “scam farms” on the Myanmar border.
- Quote:
  
  “These are like basically prison camps where people who've been mostly human trafficked are forced to work in what are essentially scam call centers. This is an industry that is like a few hundred thousand people working in it.”
  — Jeff Horwitz [16:15]

5. Meta’s Approach: Profits Over Enforcement

Meta knows about the scams but dismisses or ignores 96% of valid user complaints about scam ads ([20:05]).
In 2023, company targets for improvement still aimed to dismiss 75% of scam ad complaints.
Even billionaire victims (like Andrew “Twiggy” Forrest) have little recourse.
- Forrest sued Meta over AI-enabled scam ads using his likeness. For once, a court allowed his case to go forward, threatening Meta’s reliance on Section 230 ([22:10]).

6. How Meta “Fights” Fraud

Limited mitigation: High-risk advertisers subjected to extra verification – but with a hard limit on financial impact (only up to 0.15% of Meta’s total revenue, about $100M).
- When financial cost exceeded that, they'd stop enforcement ([23:49]).
Perverse incentives: Meta sometimes charges suspected scammers extra fees (“penalty bid”) instead of banning them, making scam ads more lucrative.
- Quote:
  
  “The more likely an ad buyer is to defraud Meta’s users, the more money Meta makes off them.”
  — Brian Reed [25:58]
Meta only blocks an advertiser if its system has at least 95% confidence they’re a scammer; less than that and their ads stay ([29:10]).
- Quote:
  
  “For an advertiser that Meta's automated system thinks is dirty... the level of certainty that Meta's prediction system needs to have to cut that advertiser off is at least 95%.”
  — Jeff Horwitz [29:12]

7. Wider Implications & Accountability

Other countries with stricter regulations see better enforcement; in the US, Meta only acts when forced by law.
Leaks from whistleblowers (not public oversight) remain the primary way the world learns about these practices.
- Quote:
  
  “Leaks are a primary source of information about, like, how the hell products that are so deeply ingrained in our lives actually work... This is a broken system.”
  — Jeff Horwitz [33:41]
Systemic failures are not inevitable: platform design choices could prioritize safety and integrity, but profit wins under the current system.
- Quote:
  
  “Social media platforms… how people behave on them is heavily influenced by the design choices of the owners of those platforms.”
  — Jeff Horwitz [35:02]

Notable Quotes & Memorable Moments

“Meta did $160 billion worth of revenue last year from advertising... around 10% of that was coming from banned ads.”
— Jeff Horwitz [08:46]
“If a fellow billionaire can’t appeal to Mark Zuckerberg personally and get a scam ad taken down, what hope do any of us have?”
— Brian Reed [21:59]
“Imagine if Section 230 were changed so users could easily sue Meta for serving them scam ads. ...Meta prioritized cleaning up its platforms of fraud in countries where there are regulations about it.”
— Brian Reed [33:15]

Important Timestamps

[01:20] – Brian introduces Section 230 and its impact on free speech and platform accountability
[06:28] – Jeff Horwitz joins; description of what the leaked Meta files contain
[08:46] – Scale & impact: 10% of Meta’s ad revenue from banned/scam ads
[12:00] – Who’s legally responsible when you fall for a scam ad? (Answer: No one, due to Section 230)
[14:03] – Victim’s ordeal fighting to take down a scam; Meta’s inaction despite law enforcement involvement
[16:15] – Organized crime and human trafficking behind scam operations
[20:02] – Meta's own stats: dismissing 96% of scam/fraud complaints
[23:49] – Revenue-first approach: fraud enforcement capped to protect Meta’s bottom line
[25:58] – Meta profits more from likely scam ads (“penalty bids”)
[29:12] – Meta’s threshold for banning scam advertisers: at least 95% certainty
[33:41] – The broken system: whistleblower leaks as only window into internal workings
[35:02] – Design choices impact online behavior; accountability is possible

Conclusions & Final Thoughts

Meta’s business model, protected by Section 230, allows it to profit massively from scam activity while evading responsibility.
Current US regulatory frameworks only incentivize change under external pressure; platform self-policing is both minimal and financially constrained.
Real-world harms from scam ads are enormous, touching victims and enabling global criminal enterprises including human trafficking.
Transparency is achieved not through regulation but dangerous whistleblowing and leaks.
Design decisions, not inevitability, shape the internet’s moral landscape—change is possible if priorities shift.

For More:
Read Jeff Horwitz’s full reporting at Reuters.
Join ongoing debate about Section 230 on the Question Everything Substack.

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Transcript

Brian Reed (0:00)

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Brian Reed (1:20)

There's a conflict I'm grappling with at the heart of Section 230, the law from 1996 that's responsible for the Internet as we know it.

Brian Reed (1:30)

On the one hand, section 230, lots of people argue, is the reason we have free speech on the Internet, which that is something I definitely want. Free speech on the Internet. The law is so fundamental to online life, like the foundation of your house, it's easy to take for granted. But ever since I started paying attention to it, I haven't been able to stop seeing section 230 everywhere. Like last week, when the new dump of Jeffrey Epstein documents came out with Donald Trump's name littered all over them. Millions of us could go onto X and TikTok and Substack and Blue sky and talk about them. We could theorize about what Epstein meant when he wrote that Trump was the dog that hasn't barked. Or whether we thought Epstein was telling the truth when he claimed that he had photos of Trump with scantily clad young women in his kitchen. And we could do that, arguably thanks to section 230, because it makes it so that Internet sites and providers can't get sued for what users post on their platforms. And the same for users who repost something from someone else. And that means when people share damning information about the President, X and TikTok and Substack and BlueSky don't have to worry about Trump suing them the way he sued news organizations for many billions of dollars because of section 230. Platforms are comfortable providing a space for the public to debate this important information quickly, raucously. I don't want to lose that. And if Section 230 were repealed or reformed, it is possible that we could. But at the same time, in the last year or so especially, I find myself more and more noticing the negative effects of section 230. Because this same law, this same legal foundation that the modern Internet rests on, it's also propping up some pretty gnarly, rotting, and extremely unsafe structures. If you look at a list of cases where Section 230 has helped Internet companies escape accountability, it's like a carnival of horrors. There's a guy who begged Grindr to get rid of a fake profile made by an ex that said he was looking for violent sex and led to him getting harassed. In real Life, Grindr used Section 230 to get that case dismissed. There's the family members of victims of an attack by Hamas who sued Facebook saying the platform not only allowed known Hamas members to have accounts, but helped them recruit by recommending their content to people. Facebook used section230 to get that case dismissed. Minors who sued Reddit for letting illegal sexual images of them spread. Reddit got the case dismissed with section 230. There are so many cases like this over the years. For better and for worse, Section 230 has made it so that companies are largely not responsible for what happens on their online platforms, even if they're making huge profits from that activity. As a journalist for a long time, my reflex has been to say, you know what? This is a necessary evil. We need to have a hands off approach to the Internet in order to protect free speech. And I get that point of view. I know many of you hold it too. I've been hearing from some of you. I don't deny that there are risks to changing section 230, but also I think it's important that as journalists especially, we fairly acknowledge the costs of this law. I know for a while I was reluctant to do that. And once we do, maybe we can imagine more productive, fairer ways to approach the Internet. There's a story that just broke that is yet another revelation of how Section 230 is invisibly shaping our world. How it allows big tech companies to do really shitty things with impunity. A new leak of sensitive files in just the last few weeks from inside Facebook's parent company, Meta. That's what our show's about. Today on a week when you may have heard Meta just had a big win in court, defeating the federal government's attempt to break it up as a monopoly. The company emerges even stronger and it makes what's revealed in these recently leaked files even more maddening.