You're missing the GP's point. They're claiming that scam ads pollute the ad marketplace and drive away engagement. Why click on an ad, or even pay attention to it, if there's a good chance it's a scam? And why would advertisers pay for ads if consumers are not engaging with them?

Thus, Google has an incentive to keep the ad space free of scams - it makes Google users more valuable to advertisers.

Maybe the fact Google doesn't police Ads is a signal that advertising isn't as lucrative as it once was...

GPs argument is the opposite of this: it's not about the scammers, but about the legit brands. The same way Pepsi doesn't want to get their ads shown over somebody discussing STDs or something of the sort, they probably also don't want to get their ads shown next to scams, since it makes the product kinda seem like a scam by association.

It also increases the cost of the ad, though, by introducing more buyer competition for the available slot. And a higher cost per available slot is good for the seller AND for the middlemen involved in the transaction.

Does it increase the cost of the ad? Or does it decrease the cost of ads because the larger number of legitimate products don't want to be there and so are not buying ads at all.

It increases the cost in the short term, and potentially decreases the cost in the longer term.

Well, I guess it might change. I witnessed an exchange between two women, one was saying she would consider buying something after she saw an ad on Instagram, the other one laughed, "but you know ads on Instagram are scams, don't you"?

So my guess is that even though scammers are still finding victims, the side effect is that more and more people are mentally equating ads with scams and the whole "industry" loses - both big brands ("is someone impersonating them, just like they usually do with famous people?") and small ones ("I've never heard of them, it's probably scam like the rest").