X takes legal action against advertisers to challenge media status quo

This federal lawsuit, filed Tuesday August 6, is arguably the wildest twist in the ongoing standoff between the controversial billionaire and advertisers since Elon Musk acquired X (formerly Twitter) nearly two years ago. Musk’s response to this impasse? Sue the advertisers for not buying ads, hoping to force their hand. Because nothing says “please advertise with us” quite like a hefty lawsuit.

Translation: this is bound to backfire spectacularly, as advertisers will now be even less likely to return, not wanting to be seen as Musk’s obedient puppets.

“That’s even more politically loaded for advertisers than standing down and not returning to X,” said Ruben Schreurs, chief strategy officer at media management business Ebiquity. “This [lawsuit] isn’t going to work.”

X’s lawyers didn’t immediately respond to Digiday’s requests for comment.

But what if this isn’t as absurd as it seems? Maybe Musk truly has no interest in traditional ad revenue. He’s practically shouted that from the rooftops since buying the platform. Perhaps this is really about how he sees himself as an ideologue, pushing the world into a new economic era. 

Suddenly, his antics start to make a twisted kind of sense.

By challenging the Global Alliance of Responsible Media and its overseers at the World Federation of Advertisers with a lawsuit they’ll find hard to fund, Musk is shaking the financial foundation of these ad watchdogs. This could dismantle the old guard’s influence, allowing Musk to pursue his agenda unchecked and reshape the playing field to his advantage. GARM didn’t immediately respond to Digiday’s requests for comment.

There are already signs that this is exactly what’s going to happen. 

WFA advertisers are sweating bullets over this. And who can blame them? They’ve seen the carnage when a brand gets swept up in a divisive issue — like when Bud Light faced a conservative backlash over its support of a transgender influencer last year, tanking sales and even knocking its share price. The last thing these CMOs want is to be at the center of their own partisan firestorm. 

“They don’t want to get caught in a crosshairs of something that is has such a high-partisan tension attached to it, especially when so many of their customers in the U.S. are Republicans,” said an exec, who exchanged anonymity for candor on what they know about the WFA’s response. “They really don’t want to alienate that audience right now.” 

What they’re getting at is that it’s now become a corporate, legal and financial risk for CMOs to even make public statements these days. They don’t want their brand on the front page of a major news article about Musk suing GARM.

Musk’s lawsuit may be a lightning rod for those fears, but they’ve been simmering since last year. That’s when a Republican-led House Judiciary Committee started looking into whether members of GARM had been illegally colluding to defund conservative platforms and voices. Their findings were shared in a report last month, with a title that leaves little to the imagination: “GARM’s Harm: How the World’s Biggest Brands Seek to Control Online Speech”. 

“This attack is unfair, but from a political standpoint it’s also a victimless crime,” said Lou Paskalis, CEO and founder of AJL Advisory. The Judiciary Committee can say ‘we’re calling out a trade association that no one outside the advertising industry has ever heard of, for collusion, and for impairing freedom of speech’. Well, when I hear this as an American citizen, I support those things. So this organization must be bad. And I think the worst thing about this is they’re [those politicians in the committee] testing the waters.”

Unsurprisingly, ad execs have dismissed these allegations as baseless. They’ve argued that advertisers are free to choose where they advertise, and pointed to the fact that there’s no law that compels them to spend with any particular media owner. Musk clearly doesn’t care, which is the only way to rationalize why this lawsuit is even happening. It’s definitely not because he thinks he has a legal case. 

He’s played this game too many times unsuccessfully to believe that. His attempts to sue both Media Matters for America (a left-leaning media watchdog group) and the Center for Countering Digital Hate (a non-profit organization) last year have gone nowhere legally so far. On the reputation front, though, it was a different story. Media Matters for America had to lay off dozens of staff members, including veteran researchers and writers, just to stay financially afloat amid the legal battle with X and other threats from Republican attorneys general.

“This is bullying by legal action,” said Schreurs.

And there are clear signs that GARM could struggle. It was already in hot water with the Republican-led House Judiciary Committee breathing down its neck. Ever since those plans were revealed, GARM has been keeping a low profile. But on the rare occasion it did pop up, it was to discuss sustainability, not brand safety. Advertisers have definitely noticed the shift.

“There’s definitely been a reduction in activity,” said a media buyer who requested anonymity, when asked how GARM has been operating over the last year given the GOP investigation; the reduction in activity has been in the form of fewer email communications (from a few times a month to roughly once a month) and meetings. “They’re getting very tight lipped.”

And that’s unlikely to change anytime soon. According to LinkedIn, there are only two people working on GARM full-time at the WFA: Rob Rakowtiz, who oversees GARM’s operations, and initiative manager Delaney Goodwin. They can only do so much, especially when they’re juggling the Judiciary Committee and now Musk’s legal antics.

With all this going on, GARM’s raison d’être becomes harder to fulfill.

And therein lies the crux of the matter. Its mission — content moderation, hate speech prevention and brand safety — is highly politicized in the U.S. So much so that the right side of the body politic has accused advertisers and initiatives like GARM of using those issues as proxies for censorship and bias against conservative viewpoints. This drama has put a damper on efforts and funding for moderating content and curbing the spread of misinformation — things that are, let’s be real, pretty beneficial for society.

That was the whole point of GARM in the first place. It wasn’t a directive on where to buy ads or a cabal of left-leaning advertisers. It was just a voluntary committee setting definitions and standards.

As one agency exec said: “They [GARM] don’t have a budget. They don’t allocate anything. They don’t influence any agencies or clients to make any decisions. What they provide is a forum for a lot of us to come together and share information … There’s just simply is not a mechanism for direct influence.”

Needless to say, marketers can’t quite believe this is actually happening. Especially when the whole thing is riddled with contradictions: First, the lawsuit came just over a month after X rejoined GARM, having drifted away post-takeover. Then there’s the fact that X’s brand safety lead, Yale Cohen, is also the co-chair of the 4A’s Advertiser Protection Bureau. And let’s not forget Musk trying to use the federal court (aka the government) to force businesses to promote views they don’t agree with. None of it makes sense.