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Happy Wednesday!

This week, the digital advertising world was rocked by a surprising development: X (formerly Twitter) filed a federal antitrust lawsuit against the Global Alliance for Responsible Media (GARM) and several major advertisers. As reported by Axios, this legal action targets companies including CVS Health, Mars, Orsted, and Unilever, alleging unfair discrimination leading to an ad boycott.

Let's unpack this situation and examine why this lawsuit might be more of a misstep than a masterstroke.

How We Got Here:

1. October 2022: Elon Musk acquires Twitter for $44 billion, rebranding it as X.

2. Post-acquisition: Significant changes in content moderation policies and platform features.

3. 2022-2023: Many advertisers pause or reduce spending on the platform, citing brand safety concerns.

4. 2023-2024: X's ad revenue reportedly drops from $4.5 billion (2021) to an expected $2 billion (2024).

5. March 2024: X files lawsuit against GARM and advertisers.

The lawsuit alleges that GARM "conspired" to withhold billions in ad revenue from X, triggering a "massive advertiser boycott" after Musk's acquisition.

Why This Lawsuit Seems Misguided:

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1. Advertisers Have Rights: It's crucial to understand that advertisers have the right to choose where their ads appear. Characterizing brand safety standards as a "conspiracy" misrepresents how the advertising industry operates. GARM was created in 2019 to set industry-wide standards, long before Musk's acquisition of Twitter.

2. Revenue Decline Has Multiple Factors: X's significant drop in ad revenue is likely due to a complex mix of factors, including platform changes, content moderation shifts, and broader market trends. Attributing this entirely to a coordinated boycott oversimplifies the issue.

3. Suing Potential Customers is Risky: Filing a lawsuit against the very companies you're trying to win back as advertisers is a bold and potentially damaging move. It could further strain relationships in an industry where trust and collaboration are paramount.

4. Individual Decisions vs. Coordinated Action: The lawsuit seems to overlook the fact that many advertisers made independent decisions based on their own brand values and risk assessments. What X sees as a conspiracy might simply be a collective response to perceived platform changes.

5. Addressing Root Causes: By focusing on legal action, X may be diverting resources and attention from addressing the underlying issues that led to advertiser exodus in the first place. Improving content moderation, enhancing brand safety features, and rebuilding trust might be more effective long-term strategies.

Additional Context:

• This lawsuit is part of a broader pushback against GARM, with some conservative lawmakers and media companies alleging bias in digital advertising practices.

• X has filed similar lawsuits against other organizations, including Media Matters and the Center for Countering Digital Hate (the latter was dismissed).

• Rumble, another platform, has announced it will join X in suing the World Federation of Advertisers (GARM's parent organization) and ad agency WPP.

What's Next?

It's unlikely that Congress would intervene in what is essentially an intra-industry dispute. The court could choose to hear the case or potentially dismiss it. Regardless of the legal outcome, this move by X highlights the ongoing tensions in the digital advertising ecosystem.

As industry observers, we'll be watching closely to see how this unfolds and what implications it might have for the future of platform-advertiser relationships.

X (fka Twitter) Article Roundup

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