In a recent lawsuit, the owner of X, formerly known as Twitter, has accused the Center for Countering Digital Hate (CCDH) of causing significant financial losses by influencing advertisers to halt their spending on the social media platform. The legal filing alleges that the CCDH’s research into content on the forum led to 16 unidentified advertisers either stopping their spending, pausing their advertising plans, or choosing not to resume their campaigns.
The lawsuit claims eight organizations, including multinational corporations that had previously advertised on X, suspended their spending on the platform in June and July after reviewing CCDH reports. Additionally, five other companies, including large multinationals, reportedly paused their advertising spending plans around November of the previous year, shortly after Elon Musk acquired Twitter. Furthermore, as stated in the lawsuit, three more companies decided not to reactivate their ad campaigns due to CCDH’s findings.
This legal dispute underscores the growing impact of digital rights organizations on social media platforms’ revenue and advertising practices. The case outcome could have significant implications for X and other platforms as they grapple with issues related to hate speech, misinformation, and their advertising revenue models. According to the report, the expenses incurred due to the advertising postponements amounted to tens of millions of dollars.
Impact of Declining Ad Revenue on Twitter under Elon Musk’s Leadership
The lawsuit said, “Based on the historical spend of the companies and organizations that have paused paid advertising and/or paused plans for future paid advertising, X Corp estimates that it has lost at least tens of millions of dollars in lost revenues as of the date of this complaint, with those amounts subject to increasing as time goes on.”
In the most recently published annual results for Twitter, which covered 2021, advertising revenues constituted 90% of their overall earnings. However, the situation has taken a downturn since then, with ad revenue experiencing a drastic decline. Notably, renowned entrepreneur Elon Musk tweeted that the ad revenue had halved, raising concerns among investors and industry experts.
CCDH, a prominent group based in both the United States and the United Kingdom, has consistently conducted and released research on Twitter’s content since Elon Musk’s acquisition of the platform for a staggering $44 billion (£34.4 million) in October of the previous year. The purchase drew considerable attention and speculation, and CCDH’s research has shed light on various aspects of Twitter’s content under Musk’s ownership.
One significant consequence of the decline in ad revenue has been the decisions made by prominent advertisers to pause their spending on the platform. Notable companies such as Audi, the well-known carmaker, and Pfizer, the leading pharmaceutical company, have taken this step. Such actions indicate a sense of apprehension among advertisers, who might be concerned about the platform’s ability to deliver value to their marketing efforts in light of its current challenges.
CCDH Accused of Unlawful Data Scraping and Breach of Contract
On Monday, a lawsuit was filed in the US District Court for the Northern District of California, seeking unspecified damages on multiple grounds, including breach of contract, violation of the Computer Fraud and Abuse Act, intentional interference with contractual relations, and inducing breach of contract.
Among the allegations in the lawsuit, the accused, CCDH (an organization), is claimed to have unlawfully scraped data from Twitter for its flawed research. One of CCDH’s studies reported that 99% of hate speech posted by subscribers to Twitter Blue, a premium service of Twitter, was not acted upon by the platform. The lawsuit also accuses CCDH of gaining unauthorized access to data from Brandwatch, a consumer research company.
In response to this legal action, CCDH published a letter from Elon Musk’s legal representative, Alex Spiro, of Quinn Emanuel, a US law firm. The letter threatened legal action under the Lanham Act, a US legislation concerning trademark law. However, the California lawsuit is handled by a different law firm, White & Case, and relies on a separate piece of legislation.
CCDH’s CEO, Imran Ahmed, expressed that Musk’s actions attempt to intimidate and silence them. He stated, “Elon Musk’s latest legal threat is straight out of the authoritarian playbook – he is now showing he will stop at nothing to silence anyone who criticizes him for his own decisions and actions.” Ahmed added, “Musk is trying to ‘shoot the messenger’ who highlights the toxic content on his platform rather than deal with the toxic environment he’s created.”
