The Freedom on the Net 2019 report, published by the Freedom House non-profit think tank, described the situation as a "crisis".
Global internet freedom declined for the ninth consecutive year as a result of these trends, it says.
It adds that cross-border influence operations, such as those conducted by Russia during the 2016 US presidential elections, have become increasingly common, with the report pointing to state-backed operations in China, Iran and Saudi Arabia.
"In addition to facilitating the dissemination of propaganda and disinformation during election periods, social media platforms have enabled the collection and analysis of vast amounts of data on entire populations," the report states. "More repressive governments are acquiring social media surveillance tools that employ artificial intelligence to identify perceived threats and silence undesirable expression."
Compiled by more than 70 analysts around the world, the report comes as the US heads to the ballot for Gubernatorial and House elections on 5 November. It also comes just over a month before a general election in the UK and amid calls for a second referendum concerning Brexit.
"The future of internet freedom rests on our ability to fix social media," said Adrian Shahbaz, Freedom House's research director for technology and democracy. "Since these are mainly American platforms, the United States must be a leader in promoting transparency and accountability in the digital age. This is the only way to stop the internet from becoming a Trojan horse for tyranny and oppression."
Facebook has so far refused to take such action, but Twitter recently banned political advertising on its platform amid fears of voter manipulation.
The company's founder and chief executive Jack Dorsey said he believed political messages "should be earned, not bought" but warned that more needed to be done to combat the issue.
Facebook has consistently claimed that it is addressing the problem through a combination of human review and AI-based technology to root out malicious or misleading ad campaigns.
Chief executive Mark Zuckerberg stood by the policy in a recent earnings call, claiming "ads on Facebook are already more transparent than anywhere else".
Freedom House warns that social media will remain the "battleground for democracy" for as long as political advertising and campaigns are allowed to continue.
"Many governments are finding that on social media, propaganda works better than censorship,” said Mike Abramowitz, president of Freedom House. “Authoritarians and populists around the globe are exploiting both human nature and computer algorithms to conquer the ballot box, running roughshod over rules designed to ensure free and fair elections.”
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