On August 6, Twitter/X owner Elon Musk filed a frivolous lawsuit against an obscure advertising trade group; the timing is suspicious.
As longtime readers know, I’ve written an intermittent series about Elon Musk’s acquisition of Twitter. You don’t have to read those older pieces, nor must you care about advertising or know anything about GARM (the Global Alliance for Responsible Media) to understand this week’s piece.
Throughout the Musk/Twitter series, my theses have been stable:
- Elon Musk has no politics; he is amoral; he loves only money; Tesla is the foundation of his immense wealth.
- His apparent political swing to the right was to sell electric cars to conservatives.
- He never really wanted to buy Twitter.
- But when the Delaware court forced him to do so, he decided to make the most of it as Twitter’s owner and absolute dictator.
- He enjoys media attention and influence, but his goal is to sell more Teslas.
The Present Story in Brief…
On August 6, X (the absurd new name for Twitter) filed a lawsuit against the Global Alliance for Responsible Media (GARM) alleging that the trade association (part of the World Federation of Advertising or WFA) coordinated a boycott of X. The suit also mentioned dozens of advertisers (brands) that are members of GARM.
That day, X CEO and Musk apologist Linda Yaccarino put out a bizarre video attempting to explain the lawsuit, calling X a “global town square” (as if it were either the only such platform or a safe place for discourse), and using much-mocked, Kabuki-theater-like hand gestures. On The Daily Show, Desi Lydic’s parody of this video was laugh out loud funny.
On August 8, GARM shut down all activities because it doesn’t have the money to fight a SLAPP suit from Musk.
On August 12, Musk welcomed the GOP presidential candidate onto X for a rambling two-hour interview beset by technical glitches.
Analysis
The lawsuit has zero merit. You can’t sue customers into buying your products or services.
Advertising is a form of free speech: advertisers and their agencies decide when and where to speak on behalf of products and services. Musk styles himself a free speech absolutist when convenient, but he uses X and sues people to stifle free speech whenever he likes.
In the words of The Verge:
GARM was an initiative formed in 2019 by the World Federation of Advertisers (WFA); the idea was to stop advertising on social media platforms that don’t meet certain safety standards.
Sounds simple enough? The important background for people who don’t follow the ad biz is that when Musk acquired Twitter he promptly fired all the “brand safety” employees (for a lot of reasons but mostly to suck up to conservatives so that they would buy Teslas). X didn’t get a new brand safety head until Yale Cohen (former agency guy) joined in early April; the media has not heard from Cohen since.
Once again from The Verge:
In its lawsuit, X said that GARM “organized an advertiser boycott of Twitter.”
There was no boycott. Moreover, ad boycotts don’t work. When a bunch of advertisers tried to boycott Facebook (Meta) in the summer 2020 “Stop Hate for Profit” movement, the company’s next earnings report was improved, in part because Facebook gets most of its revenue from millions of small, dry cleaner type advertisers, not the likes of Verizon or JanSport.
The reason advertisers are unafraid to stop buying ads on X is that X does not present a compelling audience or advertising product for brands of any size.
Brief aside: don’t confuse “brand safety” with civic safety. Advertisers are not interested in whether or the media they buy promotes a fair or just society: the safety in question is only for their products and services. If a toxic environment increased consumer engagement with their products, they would advertise there if they didn’t think they’d get any blowback. There’s an elegant dance in which brands hide behind their agencies (“we don’t decide where the ads go”) and agencies hide behind their clients (“we just do what the client wants”) to dodge questions about whether companies should be accountable for where their ads run. End of aside.
The Timing of the Lawsuit, Video, and Trump Interview…
… starts to make sense when you take into account Tesla’s disappointing July 23 Q2 earnings report. Here’s a screenshot from Yahoo! Finance to which I’ve added red arrows and captions:
Tesla’s stock plunged nearly 30 points after the earnings report, started to rally a few days later, and then plunged again alongside a more general July 31st stock market freakout (in CNN’s non-technical description). Tesla’s stock kept going down (dropping from just over 255 to just over 190 in three weeks) until, on August 6, the anti GARM lawsuit and Yaccarino video hit and the stock started trending up.
Note, please, that I am not saying that the lawsuit and video caused Tesla’s stock to go up. If you look at the S&P 500, Dow, and NASDAQ from those days, the markets as a whole started to go up up up on August 7.
What I am saying is that Tesla had no substantive reply to its poor Q2 earnings report ($): profits fell for a second straight quarter; there’s a price war among EV manufacturers, cooling demand for EVs in general, and Musk is in hot water with some of his Tesla investors for using Tesla engineers and resources to help his new xAI business ($).
The lawsuit, video, and Trump interview are an elaborate three-part head fake to get Musk a lot of media attention about X and the election that distracts attention from Tesla’s performance, which, as I said earlier, is the reason that he is the wealthiest individual on the planet.
In The Picture of Dorian Gray, Oscar Wilde’s Lord Henry quipped, “There is only one thing in the world worse than being talked about, and that is not being talked about.” Musk’s antics keep him—and by extension Tesla—in the eye of the world without paying for ads.
That sells more cars.
* Image Prompt: “An image of an electric sedan plunging over a cliff to its destruction on a sunny, cloudless day.”
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