Hey everybody. Welcome back to the Elon Musk. Podcast this. Is a show where we discuss. The Critical. Crossroads that shape SpaceX Tesla X. The Boring Company and Neurolink. I'm your host, Will. Walden. The Global Alliance for Responsible Media or GARM, which is an influential group within the advertising sector, has reportedly suspended its
operations now. This happened in the wake of an antitrust lawsuit filed by Elon Musk's social media company X, formerly known as Twitter, and the decision to halt Garms activities was communicated to members by the World Federation of Advertisers on Thursday, which is the WFA.
An internal e-mail reported by Business Insider reveals that the WFACEO emphasized the difficulty of the decision, sending Garms status as a not-for-profit organization with very limited resources in his communication. They expressed that the WFA and Garm's intent to challenge the allegations made by X in court, asserting confidence that the legal process would confirm their adherence to competition
rules. However, despite this confidence, the resource constrains faced by GARM have necessitated the suspension of its operations for now, and the lawsuit in question was filed by X in the US District Court for the Northern District of Texas, accusing GARM of conspiring to withhold advertising revenue from the platform.
Rumble Inc, a video sharing platform similar to YouTube, also joined X in the legal action, alleging that a coalition of advertisers and agencies orchestrated by GARM had conspired to block ad revenue from flowing to certain platforms, including X. Now. The lawsuit specifically targets the WFA, advertising giant WPP and its subsidiary Group M Worldwide, among others.
Now, Rumble's official account on X shared a post stating Rumble has joined X to sue a cartel of advertisers and AD agencies who conspire to block ad revenue from going to certain platforms and content creators. Now, this legal action has escalated tensions within the advertising industry, particularly regarding how ad revenues are distributed and who controls their decisions. Now, Garms suspension marks a temporary victory for Musk and X, even though no court filing
has been made yet. Now the CEO of X, Linda Yacarino, expressed on X that the suspension of Garms activities is a crucial step towards what she hopes will be a broader reform across the advertising ecosystem. She said no small group should be able to monopolize what gets monetized. This is an important acknowledgement and necessary step in the right direction. But despite this, the lawsuit may have unintended consequences
for X's advertising business. The founders of a watchdog group called Check My Ads Institute, or CMAI, warned in an op-ed that the lawsuit could further alienate advertisers from X. They argued that everyone can see that advertising on X is a treacherous business relationship for advertisers. Now, this could cause some unease.
And the core of X's complaint lies in the allegation that GARM organized a collective effort to withhold billions of dollars in advertising from Twitter, particularly after Musk's acquisition in late 2022. This action, according to X, was motivated by concerns within GARM that the platform had strayed from established brand safety standards under Musk's
leadership. Now, GARM, which was established in 2019, was originally created in response to incidents like the Christchurch mosque shootings in New Zealand, where the perpetrator live streamed the attack on Facebook. The group was designed to help advertisers avoid having their content up here alongside illegal and harmful material, and over the years, GARM claimed to successfully reduce the prevalence of such problematic ads from six point 1% to just one point .7% between 2020 and 2023.
Now, concerns about brand safety resurfaced when Musk took over Twitter, as his more relaxed approach to content moderation led to fears among advertisers that their ads could be placed next to misinformation. Hate. Speech and other objectable content. These concerns have led to a significant drop in advertising revenue for the platform, which remains heavily reliant on ads
as its primary source of income. Now, Musk's approach to handling advertisers has been contentious, to say the least. He has openly clashed with brands that have pulled their spending from X, sometimes using aggressive rhetoric. For instance, last year he responded to advertisers leaving the platform with a very blunt message. He said go F yourselves. Now. This confidential stance has not only strained relationships with advertisers, but also further stabilized X's ad revenue
stream. Now, despite occasional claims from X's leadership that the platform's ad business is improving, the lawsuit against GARM suggests ongoing difficulties. Linda Yacarino from X acknowledged in a video release Monday that the alleged conspiracy to boycott X posed a severe threat to the company's future, saying that the loss of advertising dollars has placed the platform quote at long term risk.
Now, the shutdown of Garam may have broader implications for the advertising industry, though, particularly for other watchdog groups. Now, the case echoes previous legal actions taken by X under Musk's leadership, where the company has targeted organizations that it perceives as adversarial to its business interests.
Now X has also filed lawsuits against the Center for Countering Digital Hate, or CCDH, and Media Matters for America, both of which have raised concerns about the content on the platform and its impact on advertisers. The CCDH lawsuit was dismissed by a federal judge who criticized the suit as an attempt to penalize the nonprofit for exercising its right to free speech.
However, the ongoing legal battles, including the one with Media Matters which highlighted the presence of anti-Semitic and pro Nazi content on X, have already caused significant damage to X's relationships with major advertisers, some of whom pulled their ads following those reports but garms closure. While a short term victory for Musk NX raises questions about the future of advertising self regulation.
This coalition, which was formed with the intent to create and enforce standards around brand safety, has not been sidelined, has now been sidelined by the very forces it sought to regulate. And as a result, there may be a chilling effect on similar initiatives within the industry, as other organizations may fear similar legal reprisals. Now, the broader impact on X's business remains uncertain.
It hasn't been that long, and the platform's advertising revenue has already suffered a nearly 50% decline since Elon Musk acquired it. That's a downturn that's driven in a large part by concerns over content safety and the suitability of the platform for major brands. Musk's direct involvement in promoting content that many advertisers find objectable has only exacerbated those concerns, leading to further erosion of trust between X and its advertisers. Hey, thank you so much for
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