X is considering legal action against advertisers who withhold their spending on X advertising

X-owner Elon Musk plans Take legal action to counter what he sees as a coordinated effort to restrict free speech on the platform by forcing X to adhere to standards essentially set by a cartel of advertisers working together to control what is and isn’t allowed on social apps and other platforms.

At first glance, this sounds like a conspiracy theory, but the process is actually more logical than it seems.

The specific system Musk is referring to is the Global Alliance for Responsible Media (GARM), which, according to its online overview:

“A cross-industry initiative of the World Federation of Advertisers that addresses the challenge of harmful content on digital media platforms and its monetization through advertising.”

Launched in 2019, GARM aims to “create an industry-wide common framework of definitions to promote transparency, consistency and control in the placement of online advertising”. The main aim of the project is to create an agreed system that ensures that ads “are not placed alongside or inadvertently fund content that could be harmful to individuals or society”.

Platforms and advertisers, including X, contribute to the GARM guidelines, which then ensure that advertisers can safely place their ads in each app.

But according to online commentator Ben Shapiro, who appeared before the U.S. Congress last week, members of the GARM group are also involved in censoring certain speech by imposing restrictions on anything members don’t like, rather than simply managing risk.

According to Shapiro:

“GARM operates as a cartel. Its members account for 90% of advertising spending in the United States, nearly a trillion dollars. In other words, if you don’t get advertising dollars from GARM members, it’s almost impossible to run an advertising-based business. And if you don’t follow their preferred political narratives, you’re not considered brand safe.”

Shapiro claims that GARM’s decisions are aimed at suppressing certain narratives at the behest of its members, often specifically targeting conservative speech and limiting its monetization by keeping potential advertising partners away from platforms and publications.

“GARM draws no line between criminal, abusive and dangerous. Their standards also include restrictions on hate speech, harassment, misinformation or, my personal favorite, insensitive, irresponsible and harmful handling of controversial, sensitive social issues. These criteria are highly subjective in theory and purely partisan in practice.”

So the broader concept is that the GARM group can influence ad spend by preventing advertisers from running campaigns on platforms it deems “unsafe” according to its criteria. Shapiro and many others claim that this is biased in practice, and on this basis Elon Musk is now want to take legal action to mention that.

This will be difficult to prove in practice, but to be clear: Musk is not trying to sue individual brands that chose not to advertise on X, as some have claimed, nor is he trying to force brands to pay for ads in the app.

He is trying to find a legal approach to counter a perceived attempt at censorship of opinion.

This is conceptually more abstract and arguably harder to track, as it essentially aims to prevent organizations like GARM from coordinating and advising partners to avoid platforms like X.

I’m not sure how this would work into a legal defense, nor if it would even impact the actions of individual advertisers, since any brand can still advertise on X if they want to, regardless of whether they normally follow GARM’s recommendations or not. So it seems more likely that this threat of legal action won’t result in an actual lawsuit, but Musk has apparently tasked his legal team with building a case to help X win back more advertising dollars.

And the counterclaim will probably be that coordinated groups of this kind are destroying X’s business.

X’s advertising revenue is reportedly still 50% below what it was before Elon bought the app. And although Elon has significantly cut costs by laying off around 80% of the company’s employees, the loans he took to buy the app have also saddled the X project with debt. This means that the app will have a very difficult time breaking even, at least in 2024.

Musk had hoped that user subscriptions through X Premium would make up for this shortfall. However, so far this form of subscription usage has seen limited use, leaving X in a precarious financial position.

Musk has secured another $6 billion in funding for xAI, a side project tied to the app, but it’s unclear whether that will benefit X itself and what the benefit will be for the app, which could be in a significant financial hole by year’s end.

With that in mind, Musk’s motivations for this new lawsuit are pretty clear. However, again, I’m not sure it will change advertisers’ minds in any way and ultimately lead to a better outcome for X.

At least in the short term. In the long term, if Elon and Co. succeed in taking down organizations like GARM, it could lead to more advertisers looking at X ads differently.

However, I suspect that most of the concerns surrounding X stem from Musk himself and his tendency to offer his personal opinion on any sensitive issue, controversial or not.

Elon has long been convinced that he will say what he wants, “and if the consequence of that is a loss of money, then so be it.”

This may ultimately prove to be an epitaph for Project X, and I don’t think pursuing alleged collusion between potentially biased organizations will bring the success Musk hopes for.