X sues media watchdog as brands including Apple, IBM, pull ad spend: the drama, explained

The lawsuit, filed in a federal court in Texas Monday evening, alleges that claims made by Media Matters – namely, that advertisements on X sometimes run alongside hateful posts including antisemitic and white nationalist content – are inaccurate.

The context: a controversy already brewing

In a report published Friday, Media Matters detailed research that found ads for major brands, like Amazon, NBA Mexico and NBCUniversal Catalyst, running adjacent to posts with hashtags like “KeepEuropeWhite” and “white pride.”

The report was published just two days after Musk came under fire for publicly agreeing with an antisemitic rant by an X user claiming that “Jewish communities have been pushing … hatred against whites.” Musk’s reply to the post – “You have said the actual truth” – served as an algorithmic boost, bringing the bigoted post to the top of many users’ feeds.

Users and brands responded with instantaneous backlash. Major advertisers, including Apple, Disney, IBM, Paramount Global and Comcast have since paused all ad spend on X.

It was the latest hit to the platform’s advertising business, which has suffered significant losses in the year since Musk acquired the platform for $44bn. Monthly US ad revenue has dropped at least 55% year-over-year each month since the acquisition in late October 2022, according to data provided to Reuters.

Inside the new allegations

Musk’s team is crying foul. In its new lawsuit, X alleges: “Media Matters knowingly and maliciously manufactured side-by-side images depicting advertisers’ posts on X Corp.’s social media platform beside Neo-Nazi and white-nationalist fringe content and then portrayed these manufactured images as if they were what typical X users experience on the platform. Media Matters designed both these images and its resulting media strategy to drive advertisers from the platform and destroy X Corp.”

But Media Matters says it isn’t afraid of a challenge. “Far from the free speech advocate he claims to be, Musk is a bully who threatens meritless lawsuits in an attempt to silence reporting that he even confirmed is accurate,” said the organization’s president, Angelo Carusone, on Monday. “Musk admitted the ads at issue ran alongside the pro-Nazi content we identified. If he does sue us, we will win.”

In the meantime, Musk has continued to hurl insults at the nonprofit organization, which has, since 2004, monitored and called out conservative misinformation in media.

Media Matters is pure evil https://t.co/gIV1rHO9d7

— Elon Musk (@elonmusk) November 20, 2023

It’s not the first time Musk has gone after a media watchdog. Last summer, X brought defamation charges against another nonprofit, the Center for Countering Digital Hate (CCDH) for its reports on the platform’s poor content moderation practices. And, in September, Musk threatened a similar suit against the Anti-Defamation League, saying the nonprofit was “trying to kill” X and “falsely accusing it & [him] of being anti-Semitic.” The billionaire never followed through with charges. (The CCDH, for its part, clapped back earlier this month with a motion to dismiss X’s suit, writing, “Apparently unhappy with how it is faring in the marketplace of ideas, X Corp. asks this court to shut that marketplace down—to punish the CCDH Defendants for their speech and to silence others who might speak up about X Corp. in the future.”

Media Matters’ research methods in question

Part of the issue at the heart of the Media Matters debacle, in Musk’s and X’s eyes, is the organization’s research methodology – which has produced what Musk views as skewed results. The lawsuit alleges that the group “manipulated the algorithms governing the user experience on X to bypass safeguards and create images of X’s largest advertisers’ paid posts adjacent to racist, incendiary content, leaving the false impression that these pairings are anything by what they actually are: manufactured, inorganic, and extraordinarily rare.” X asserts in the complaint that 99% of its “measured ad placement” this year has run adjacent to content ranking above the Global Alliance for Responsible Media (GARM)’s brand safety floor, a standardized measure for assessing the quality of a media environment for advertisers. Musk isn’t alone in his skepticism of Media Matters’ methods. Michael Shellenberger, an environmental and political writer, took to X Monday with the claim that he attempted, to no avail, to replicate Media Matters’ research. “The media say X is placing Apple, IBM, and other ads near pro-Nazi content, but it’s not,” he wrote in a post. “We tried various ways to replicate Media Matters’ research and couldn’t. The real goal of Media Matters isn’t to fight antisemitism. It’s to destroy X as a free speech platform.”

The media say X is placing Apple, IBM, and other ads near pro-Nazi content, but it's not. We tried various ways to replicate Media Matters' research and couldn't. The real goal of Media Matters isn't to fight antisemitism. It's to destroy X as a free speech platform. pic.twitter.com/rpxANwkMDx — Michael Shellenberger (@shellenberger) November 20, 2023

However, X’s lawsuit itself confirms that ads on X are sometimes served next to the content that Media Matters claims it is. “Media Matters … resorted to endlessly scrolling and refreshing its unrepresentative, hand-selected feed, generating between 13 and 15 times more advertisements per hour than viewed by the average X user repeating this inauthentic activity until it finally received pages containing the result it wanted: controversial content next to X’s largest advertisers’ paid posts.”

Nonetheless, users are noticing the problem in their everyday experience on the platform. Chris Harihar, executive vice-president at Crenshaw Communications, a Mod Op-owned PR firm, posted screenshots Monday of advertisements on X appearing directly adjacent to antisemitic posts.

A problem, regardless of scope

X’s battle against Media Matters isn’t one that media industry leaders believe he’s likely to win. “I don't think there's any [legal] basis [for X’s charges] unless there is some absolute corruption in what Media Matters has done, which I don't have any reason to think that there is. I can't see where he would actually win,” says Neal Thurman, co-founder and chief executive of research and accreditation organization the Brand Safety Institute.

Thurman acknowledges that he’s not a legal expert, but says, “It doesn’t seem like there’s a [legal] basis [to win damages over] a nonprofit saying, ‘Hey, we have a concern,’ and businesses making independent business decisions based on that.”

Regardless of how the legal battle ensues, experts contend that the phenomenon of ads appearing on X next to controversial content – however common or uncommon – is a problem for X users and advertisers. “You can see how Elon Musk and X would say that [Media Matters’ methods] doesn't replicate typical behavior – the average X user might not, in theory, come up against so many examples of ads appearing next to this sort of content,” says Matt Navarra, a leading social media consultant and industry analyst. “But regardless, it shows that this can and does happen. Millions of users will see these ads placed amongst some of this content, regardless of whether the frequency is as much as might be suggested from [Media Matters’] reporting. [This fact] would give any brand a lot of concerns. It shows that the platform hasn’t got a hold on this problem.”

Beyond data about the media environment on X, Musk himself may already prove a bigger deterrent to advertisers, experts say. After all, he has publicly endorsed hateful and controversial content on the platform – both in recent days and over the course of the last year (can any among us forget his decision to welcome Ye and Donald Trump back onto the platform last November?).

“X’s owner and lead character, Elon Musk, is in many ways … endorsing some of these sorts of behaviors and is creating an environment that allows this to occur – and is often amplifying some of these pieces of content,” says Navarra. “I don’t think [dispute over Media Matters’ claims] massively change the main concern that brands and users rightfully have, regardless of whether the frequency from the reporting [is wholly] accurate.

The sentiment that Musk himself is at the heart of the problem is echoed by other industry leaders. “Advertisers don’t need a research report to see how Musk responded in support of anti-semitic post. The evidence is on X,” says Jasmine Enberg, a principal analyst at Insider Intelligence specializing in social media. “At this point, the issue for advertisers is less about content adjacency or lack of moderation, and almost entirely whether or not to do business on a platform whose leader amplifies misinformation, hate speech and conspiracy theories.”

In Navarra’s estimation, the drama over Media Matters’ research won’t do Musk or X any good. He predicts that the site will continue to lose top advertisers – many of which returned to the platform this year after a previous exodus, according to X’s chief executive officer Linda Yaccarino in a September appearance at Vox Media’s Code conference.

“Whether they will come back in due course is too hard to say at this point,” Navarra says. “It would be very hard for many of them to come back when we know that Elon Musk isn't going to change and the problems are going to continue.”

Of course, there’s inherent risk in buying media in any environment with user-generated content. And there are at least two important levels of risk to assess, according to the Brand Safety Institute’s Thurman: “direct adjacency” – the actual placement of ads next to other kinds of content; and “property adjacency” – how the platform at large is moderating content and protecting brands’ interests. These are separate but related considerations for marketers on platforms like X.

For many marketers, Thurman says, the broader concerns of property adjacency may be enough to inspire a pause in ad spend – regardless of whether the brand has been directly affected at the ad unit level.

At base, Thurman says, brands need to determine how much risk they’re willing to take on. “What you have to figure out as a brand is, are you comfortable that the platforms you're doing work with are making its best efforts to moderate [content] so that you're comfortable putting your brand next to theirs?”

X faces the fire

For X, this may be a make-or-break moment.

“This does feel like a pivotal moment in the history of X under the ownership of Elon Musk,” says Navarra. “This is going to make things extremely tricky, certainly from a financial point of view.”

The company’s finances are indeed at risk. Musk has publicly decried advertisers’ departures and blamed lost ad revenue for growing debts. Efforts to push paid subscriptions and other products have not made up the deficit. Meanwhile, the company’s valuation is estimated to be around $19bn – less than half of what Musk paid for it last October.

Controversy surrounding the Media Matters findings – as well as Musk’s own controversial comments and behavior on X – will only create a “greater dropoff” in ad spend, Navarra says. “This could be more than a crisis for the company.”

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