X doesn’t mark the spot for advertisers these days. Since Elon Musk gained control of the social media platform formerly known as Twitter in late 2022, it has seen an exodus of high-profile advertisers. Last December, Musk fired back at the advertising boycott telling the brands taking part to “(expletive) yourself,” and added, “Is that clear? I hope it is.”
That certainly didn’t bring the major brands back, and last week, X filed a lawsuit in the U.S. District Court for the Northern District of Texas against the Global Alliance for Responsible Media, a voluntary trade group created by members of the World Federation of Advertisers in 2019 to set standards for brand safety.
The lawsuit alleges that GARM triggered “a massive advertiser boycott” of X and that the “actions were all against the unilateral self-interest of the advertisers; they made economic sense only in furtherance of a conspiracy performed in the confidence that competing advertisers were doing the same.”
As a result of the lawsuit GARM shut down last week, although it is still planning to defend itself in court.
“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 group said in a statement Friday. “GARM therefore is making the difficult decision to discontinue its activities.”
A Victory That Will Cost X The War
Even before GARM announced it was shutting down, X CEO Linda Yaccarino seemed to be taking a victory lap.
“No small group should be able to monopolize what gets monetized. This is an important acknowledgment and a necessary step in the right direction. I am hopeful that it means ecosystem-wide reform is coming,” Yaccarino posted on X last Thursday.
It would seem that X has won a major battle—but it might just cost X the war, and possibly its own survival. If the hope was that it might entice some advertisers to return to the social media platform, it likely misread the proverbial tea leaves.
“Imagine you’re a CPG brand, and you were previously worried about your ads showing up next to hateful content on X. Now that same site you were worried about is attacking previous advertisers? It’s simply safer to spend that ad money on Facebook and Google,” explained Dr. Dustin York, associate professor of communication at Maryville University.
X’s lawsuit is likely to prompt advertisers to reconsider advertising on the platform, but not how Musk or Yaccarino may have hoped.
“Elon Musk’s actions may signal that X is either unwilling or unable to address the underlying issues raised by GARM, such as brand safety and content moderation. Advertisers typically prefer environments where they have more control over ad placement, favoring stable and brand-friendly contexts,” added Colin Campbell, associate professor of marketing at the University of San Diego’s Knauss School of Business, and editor-in-chief of The Journal of Advertising Research.
“X’s aggressive legal stance could also amplify concerns that partnering with the platform might expose them to legal risks, further eroding advertiser interest,” Campbell suggested.
Can X Survive Without Advertisers?
Under Musk’s stewardship, X has been reinvented as a platform that—at least according to Musk—will replace legacy media. Revenue is still an issue, however. It has introduced a subscription model, but that is unlikely to recoup the $44 billion that Musk paid for the service, let alone sustain it.
“Without advertisers, X will have a difficult time surviving since the main revenue source for social media outlets is advertising,” warned Campbell. “While temporary measures like cost-cutting or cash injections might offer short-term relief, they won’t secure the platform’s long-term survival. As revenue declines, investments in content moderation and app development will likely decrease, creating a negative feedback loop that erodes the user base and further reduces ad revenue. X has already tried diversifying its revenue through consumer subscriptions, but these efforts have been largely unsuccessful.”
Further reinvention may be necessary for X’s long-term, and perhaps even short-term, survival.
“There’s no choice but to pivot X’s business model,” said York. “Whether it’s taking a new holistic approach to a subscription offering, or looking at more of an international advertising strategy, change is coming.”
