X lawsuit against advertisers not likely to go well for platform

In a surprising legal maneuver, X (formerly Twitter) has filed a federal antitrust lawsuit in Texas against several major advertisers, including Unilever, CBS, Mars, and Orsted, alleging that these companies conspired to withhold billions in advertising revenue following Elon Musk’s acquisition of the platform in October 2022. The lawsuit, which also targets the Global Alliance for Responsible Media (GARM), claims that these entities led a massive boycott against X, significantly impacting the platform’s ad revenue.

A desperate move?

There is much to be skeptical about, regarding the effectiveness of this legal strategy. Is suing advertisers a realistic win back business or improve X’s bottom line? It’s unlikely. What’s more likely is that this will exacerbate the tense situation between advertisers and X – potentially causing even more people to flee the platform.

While X’s advertising rates are great for performance marketing, due in part to the lower amount of advertisers on the platform, one does get the feeling that the overall health of the platform is in jeopardy. This new lawsuit is more likely than not to simply worsen X’s revenue problems.

Free speech and brand safety

This lawsuit also runs counter to the free speech ethos that Elon Musk has championed for the platform. While we at Games Growth with Upptic think concerns about brand safety tend to be overblown, it is also understandable that many companies are concerned about their ads appearing alongside controversial content.

And while advertisers might actually be missing out on strong ROI opportunities by avoiding X, at the end of the day, it’s their right to put their ad dollars on whatever platforms they feel are best for them and their brand.

The real issue is that X has failed to deliver a compelling advertising product that can attract and retain advertisers on its own merits.

Looking ahead

As X navigates this tumultuous period, it remains to be seen how the lawsuit will play out and what impact it will have on the platform’s advertising ecosystem. For now, the move appears to be a high-stakes gamble with uncertain outcomes, leaving one to question the wisdom of X’s legal strategy.

For those in the gaming and tech sectors, the situation serves as a reminder of the importance of maintaining strong relationships with ecosystem stakeholders and the potential pitfalls of letting controversy overshadow business fundamentals.