What the Tech is going on with Elon Musk’s X lawsuit against the WFA?

There are a number of different sales tactics tech platforms can employ to appeal to brands and try to earn advertising revenue. They can play up their large audiences and help brands hit their reach goals. They can tout their data capabilities and how they can execute precisely targeted performance. They can provide measurement tools that illustrate how their ads contribute to sales.

X, the platform formerly known as Twitter, has employed a curious new stratagem, however. It is trying to sue marketers to penalize them for withholding ad spend on the platform.

Earlier this year, Musk, the eccentric billionaire owner of X, filed a lawsuit against an advertising industry trade group, alleging the organization has engaged in an illegal plot to discourage brands from advertising on the platform.

One of the world’s richest men facing off against the advertising industry’s top trade group. Aside from the outsize personalities and intrigue, the case touches upon several salient issues facing the media industry, such as free speech, brand safety, the value of brand advertising on the web and whether brands should interject themselves into political conversations — all of which we lay out below.

Who is Musk suing?

In August, Musk filed an antitrust lawsuit against the World Federation of Advertisers (WFA), an industry trade group of 150 global brands that account for $900 billion in annual ad spend. The suit accuses the WFA of conspiring to withhold advertising spend from X. X also filed suit against WFA members Unilever, Mars and CVS Health.

The lawsuit is partially aimed at the Global Alliance for Responsible Media (GARM), a WFA subgroup that works to support brand safety on digital platforms. GARM was created in 2019 following the deadly shooting at a mosque in Christchurch, New Zealand, which was livestreamed on Facebook. Brands were already wary about their ads appearing near controversial content, and the horrific shooting spurred the WFA into launching the GARM initiative and creating tools for brands to avoid any such occurrences in the future.

What’s the basis of the lawsuit?

The suit followed a July 2024 report from the House Judiciary Committee, which found that GARM had staged a coordinated, potentially illegal boycott of politically conservative media companies, including Breitbart News, Joe Rogan and X. 

GARM used “brand safety” as a guise to “demonetize” media companies for partisan political reasons, according to the House Judiciary Committee report. The report also claimed that GARM specifically instructed its members to cease advertising on X following Musk’s acquisition of the platform in October 2022. One member of GARM even told the committee that GARM bragged about “taking on Elon Musk” and reveled in the fact the platform has lost a majority of its advertising revenue with Musk at the helm.

Has X lost advertising revenue?

Oh boy, has it.

Advertising revenue on the platform has plummeted since Musk took Twitter and renamed it X. Its critics say it’s become a haven for conspiracy theories and misinformation, “a once-vibrant place on the internet that Musk utterly destroyed,” according to Vox. This change stems in part from Musk’s belief that the old guard at Twitter was overly censorious, especially when it came to politically conservative content. Musk has vowed to make X a free-speech platform, but with unfettered speech comes with what some have described as inflammatory — and in some cases, quite frankly horrific — content that advertisers don’t want to be anywhere near, regardless of the guidance they receive from the WFA.

In spring 2023, X’s advertising revenue was down 59% from the year before. Market research firm Emarketer projects X’s revenue will be $1.1 billion in 2024, down from $2.36 billion in 2022, the year Musk took over. Losing half your business is not good. However, since the reelection of Musk’s ally, President Donald Trump, Emarketer noted that some brands are returning to the platform to demonstrate “goodwill.”

How has X responded to losing advertisers?

Musk’s reaction to the steep drop in ad revenue has been…let’s call it “mixed.” During an onstage interview in November 2023, Musk addressed advertisers pulling away from the platform after he published a series of tweets some people deemed antisemitic. “If somebody is going to try to blackmail me with advertising, blackmail me with money, go f--- yourself,” Musk said. Musk even went so far as to single out Bob Iger, CEO of Disney, for not advertising on X.

Yet, in the same conversation, Musk complained that an advertising boycott could crush the X platform for good. Meanwhile, X CEO Linda Yaccarino was on a charm offensive to bring brands and content partners to the platform. Fair to say Musk’s and X’s relationship with advertising is love-hate.

What’s the status of the suit?

At least one company sued by X has settled.

The WFA, meanwhile, dissolved GARM as a direct result of X’s lawsuit. “GARM is a small, not-for-profit initiative, and recent allegations that unfortunately misconstrue its purpose and activities have caused a distraction and significantly drained its resources and finances,” the WFA wrote on its website.

X’s legal actions have inspired other companies to go after the WFA. Rumble, the conservative video platform, joined X in August in filing an antitrust suit against WFA. News Corp, publisher of conservative newspapers The Wall Street Journal and the New York Post, said it was considering a similar action, but hasn’t filed suit yet. The WFA is a so-called advertising cartel, according to its critics.

What are the larger implications?

X is fascinating in that even during its Twitter days, the platform’s cultural relevance has always far exceeded its moneymaking potential. A single tweet can dominate the news cycle for days, but X has always struggled to monetize that attention, especially relative to other major social media platforms. Emarketer projects that X is the only major social media platform that will lose ad revenue in 2024. Meanwhile, WARC projects that Instagram is on target to hit $71 billion in revenue this year.

It could be that X’s advertising woes are merely a function of its deficiencies as a consumer platform. X lacks both the mainstream appeal of an Instagram or Facebook and the niche, youth appeal of Snapchat. It’s caught somewhere in between, variously as a place for the most internet-addicted power users, for breaking news, and for those curious about celebrity news, including tweets from Musk himself As an advertising platform, it lacks many of the targeting and attribution capabilities that have made Meta and Google into advertising powerhouses.

The X–WFA spat also raises more philosophical questions about what role brands should play in the public discourse. For a while, following the events of the summer of 2020, it was fashionable for brands to make public statements on controversial social and political topics. Those days seem like a distant memory in these fraught political times of ours. Brands are actively avoiding controversy; many argue that X actively courts it. That’s the true essence of the conflict.