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The social media platform X seems to be in real trouble. Since billionaire Elon Musk acquired the site for $44 billion in 2022, it appears that X revenue streams have plummeted. The bottom line has gotten so bad that Musk has sued a global advertising alliance and several major companies, including Unilever, Mars, and CVS Health. He’s accusing them of unlawfully conspiring to shun his social network and to intentionally drive X revenue loss through a “massive advertiser boycott.”
The advertisers “collectively and maliciously” withheld billions of dollars in advertising revenue from X, according to the lawsuit, which was filed in federal court in Texas on Tuesday against the World Federation of Advertisers as well as the companies individually.
“We tried peace for 2 years, now it is war,” Musk tweeted. The lawsuit concedes that X had become a “less effective competitor” in the sale of digital advertising since the companies pulled out.
But did the Global Alliance for Responsible Media, as X claims, actually act against their own economic self-interests? Are they part of a conspiracy against Musk’s platform? Does their decision not to advertise with X violate US antitrust law?
For now, those may be irrelevant questions, for the Alliance has disbanded in reaction to Musk’s allegations. The group states that, as a nonprofit, they do not have the financial resources to continue operating while it fights X in court. Musk, as the richest person in the world with a net worth of $252 billion, has nearly unlimited resources to litigate those whom he perceives have offended him.
Musk’s Focus on X Revenue: Do as I Say, Not as I Do
As CEO of Tesla, Musk mocked legacy automakers who spent profits on paid advertising. He swore off traditional advertising early on, insisting that word-of-mouth — from personal referrals and on social media — would have enough chutzpah to promote the company. Tesla’s advertising veered off in new directions, focusing on company-sponsored media events, free media opportunities, and internally constructed blog posts and videos. These allowed the all-electric carmaker to position itself as the sole auto industry representative looking for solutions to real planetary problems.
Of all the technological advances in advertising, none are perhaps more radical than the advent of artificial intelligence (AI). AI has changed the very nature of advertising, introducing to automakers and other corporations a new understanding of customer value creation. AI is affecting all aspects of the advertising process and resulting consumer interpretation of commodities. AI has been very good to Tesla in its approach to advertising, as it has been able to target large numbers of potential specific consumers through its extensive data sets.
AI’s capacity for generating referrals means that Musk hasn’t joined other automakers in advertising at the Super Bowl. It is the biggest advertising event in the US, viewed by approximately 100 million individuals every year. The big audience has a big price tag, too — companies pay roughly $5.5 million for each 30-second slot, an expensive marketing gamble that is higher than the average annual advertising expenditure on TV every 30 minutes. Usually, about 14 publicly traded companies in the S&P 500 Index pay this very expensive rate, airing one or multiple ads.
In 2023, automakers created pricey Super Bowl that publicized their new catalog of electric vehicles (EVs). In doing so, the companies began the long process of reimagining their brand identities. Of course, Tesla wasn’t one of those Super Bowl advertisers. Instead, Musk mocked legacy automakers who spent their profits on such paid advertising.
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Tesla’s marketing methods eventually faced weakened efficacy, as the initial batch of early EV adopters dissipated. So paid ads for Tesla have started popping up across new media social platforms, including on Facebook, YouTube, and others. Tesla’s spending exceeded $6.4 million in advertising during 2023. Digital channels such as internet search and display ads, mobile, online video, and paid social comprised the bulk of that sum.
This snippet of Tesla advertising history shows that Musk eschewed traditional advertising venues like television, newspapers, magazines, and radio. Certainly, they would’ve appreciated the revenue from the all-electric startup, but they didn’t sue Tesla for choosing other routes. Unlike Musk’s X, traditional media outlets proved that they could produce sales for advertisers across a wide swath of consumers. Were these outlets a bit too milquetoast? Sure. Were they pitched to a primarily white male audience? Yup, and we could and should critique those perspectives that Othered certain demographic groups.
However, the Alliance of brands has been wary of rapid changes initiated under Musk’s X ownership. Antisemitic content and ads running beside posts expressing pro-Nazi sentiments have unnerved not only the Alliance but many other companies. Anyone in an introductory Media Literacy course knows that media messages are constructed for particular purposes.
Brands cannot take the chance that their ad positioning on X confers endorsement of Musk’s permissiveness for right-wing hatred. So, they’re increasingly wary of Musk. The Alliance launched its initiative in 2019 to “help the industry address the challenge of illegal or harmful content on digital media platforms and its monetization via advertising.”
Since then, a suit filed by X against an organization that analyzes social media ideology, Media Matters, has been scheduled for trial in April 2025.
Musk’s Trajectory from Twitter to X
Musk explained he didn’t buy X “to make more money. I did it to try to help humanity,” he said, “whom I love.”
His initial goals for the company were to recreate the social media platform so that it would be “warm and welcoming for all.” At the time he cast himself as a flag carrier for free speech — which he believed had become diluted under the company’s previous ownership.
In the early days of Musk’s tenure at the social media company, the former head of trust and safety was initially instructed to stop all content moderation on the platform. Advertisers hesitated to invest in X after trolls posted racist posts. As a documentary of the Musk takeover explains, Musk’s “impulsive and erratic questions and decisions” then were only a beginning of how he remade X in his own image.
Fast forward to this month’s lawsuit. In a statement on Tuesday, X’s chief executive, Linda Yaccarino, rationalized why advertisers have hurt X revenue.
“People are hurt when the marketplace of ideas is constricted. No small group of people should monopolize what gets monetized. The consequence — perhaps the intent — of this boycott was to seek to deprive X’s users, be they sports fans, gamers, journalists, activists, parents or political and corporate leaders, of the Global Town Square.”
Herrish Patel, president of Unilever USA, testified at last month’s congressional hearing, defending the British consumer goods company’s practice of choosing to put ads on platforms that won’t harm its brand. “Unilever, and Unilever alone, controls our advertising spending. No platform has a right to our advertising dollar.”
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