Instagram's crisis highlights the bigger issues the entire ad industry is facing

Hi! The Golden Arches are getting a makeover! (Sort of.) McDonald's has been tight-lipped with details about its new restaurant concept, CosMc's. Here's what we know so far.

In today's big story, we're looking at why Instagram is having a tough go of it after a series of damning reports.

What's on deck:

• Markets: US states' economies aren't looking promising for people betting against a recession.
• Tech: Inside the employee infighting at Microsoft over the war in Gaza.
• Business: A recruiting manager shares when it actually pays to lie during a job interview.

But first, Reels is reeling.

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The big story

Insta algo issues

The past few days have not been kind to Instagram.

First came newly unsealed documents alleging Meta, the app's parent company, knowingly has millions of users under the age of 13 on Instagram.

The complaint, filed by 33 states and first reported by The New York Times, also claims Meta protected the information from being disclosed to the public.

Things only got worse when a Wall Street Journal report detailed how Instagram's Reels, its short-form video platform, pushed "risqué footage of children as well as overtly sexual adult videos" to accounts following children influencers on Instagram. The content also appeared alongside ads from major brands, according to tests conducted by WSJ.

Business Insider's Katie Notopoulos has a rundown on how a relatively scandal-free summer for Meta has erupted into a full-blown crisis at Instagram.

The concerns raised over Reels couldn't come at a worse time. Executives highlighted successful monetization efforts for Reels during Meta's most recent earnings report. UBS also noted Reels was even outperforming TikTok.

And the fix for Instagram's Reels might not be simple or one Meta's willing to make.

Trying to stop Instagram from recommending harmful content to people interested in it requires "significant changes to the recommendation algorithms that also drive engagement for normal users," the WSJ reported, citing conversations with current and former Meta employees.

Meanwhile, company documents indicated Instagram's safety staffers "are broadly barred from making changes to the platform that might reduce daily active users by any measurable amount," WSJ also reported.

The WSJ's report illustrates a broader issue the ad industry is grappling with.

On the one hand, much attention has been given to ensuring ads appear with the right content.

The problem has gotten so big that two companies focusing specifically on brand safety — Integral Ad Science and DoubleVerify — have grown in prominence, Lauren Johnson, Business Insider's senior advertising reporter, told me.

But at the same time, advertising agencies are under incredible pressure these days, Lauren added. Ad spend has never fully recovered since the onset of the pandemic, meaning companies have to do more with less.

That's why generative AI tools are considered significant for the industry. (Here's a rundown of 12 interesting startups in the space.)

But, handing control over to AI comes with risks.

Meta and Google are both investing heavily in AI tools. Google's Performance Max, which uses AI to place ads, has frustrated some agencies because they can't control where Google's AI decides to place ads, making it hard to track and measure, Lauren previously reported.

All of that puts the ad industry in a juxtaposition. Be as efficient as possible with a limited budget while not handing over the reins to technology it doesn't fully understand or control.

3 things in markets

• The markets are betting against a recession. US states' economies tell a different story. Over the past three months, 27 states have seen their economies shrink compared to only 16 states exhibiting growth, according to data from the Philadelphia Federal Reserve. Here's who is up and down.

• These charts show why defaults are on the rise. Economists at Apollo Management said a default cycle has started. These charts outlining the bankruptcy filings and the share of high-yield bonds maturing show how severe the situation is.

• Bank of America says rate cuts are coming. The bank predicts the Fed will cut interest rates in the middle of 2024. It's also bullish on the Fed's plan to nail a soft landing, avoiding a recession entirely.

3 things in tech

• Inside Microsoft's war over the war in Gaza. Internal Microsoft posts and emails reviewed by BI offer a window into the anger and vitriol that workplaces across America grapple with as the war escalates. Microsoft has actively attempted to regulate the internal debate. But its moves have only further inflamed tensions.

• Meet the Climate Action 30. These are 30 of the top global leaders working toward climate solutions in 2023. The list includes academics, scientists, activists, influencers, corporate executives, entrepreneurs, and other industry leaders.

• Broadcom lays off VMware employees after closing its $69 billion acquisition. Some employees learned on Monday that their positions would be eliminated. Before the deal closed, VMware had already started cutting jobs.

3 things in business

• The three things you should lie about during your job interview. A recruiting manager warned candidates to think carefully before answering these three questions: Why did you leave your last job? Why do you want the job? And where do you see yourself in the future?

• Think carefully before you relocate for a new job. An Amazon senior leader warns people that they might regret relocating. The company you're making the risky move for might not appreciate the sacrifice you made — especially during layoffs.

• Here are four things that set disruptive go-getters apart. A major takeaway is that there's no one path to success. But common threads include that who you hang around matters and that building something isn't glamorous.

In other news

• No worries, Gen Z! I hated the 9-to-5 work schedule, too. This simple mindset shift changed everything.

• Fast food isn't cheap anymore.

• Virginia's "Data Center Alley" residents say an eerie hum is keeping them up at night.

• He wanted to be a trombone player. Instead, he ended up as CEO of one of the world's biggest airlines.

• Ukraine turned a Soviet antiaircraft gun into a deadly ground weapon that can kill dozens of soldiers at a time, report says.

• I spent years working toward my dream job at JPMorgan in Singapore. But two years after I got it, I quit — here's why.

• From Nvidia to Meta, these nine companies are hiring the most generative AI talent.

• CHART OF THE DAY: Fear of missing out may heat up market rally even more after $240 billion fled stocks and $1 trillion flowed to safer bets.

What's happening today

• It's Giving Tuesday. The global observance is meant to celebrate generosity.

• Happy National French Toast Day. It's meant to honor the breakfast dish and encourages people to eat it whenever they want.

• Earnings today: Intuit, CrowdStrike, Hewlett Packard Enterprise, and other companies.

For your bookmarks

Costco holiday recs

Costco employee shares the 10 things they're buying from the wholesaler this holiday season. Her shopping list includes the Modern Gourmet cocoa caddy and Squishmallows ornaments.

The Insider Today team: Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.