Elon Musk’s X sues Media Matters over research on pro-Nazi content

The social media site formerly known as Twitter is suing Media Matters after the nonprofit published research that found ads on X appearing alongside antisemitic content.

Advertisements for major brands, including Amazon (AMZN) and IBM (IBM), had been placed alongside posts on X that supported white nationalism and Nazism, the progressive media watchdog revealed, inviting the ire of X owner Elon Musk.

The legal challenge comes amid a high-profile advertiser exodus.

Several major companies have paused their ads on X, including Apple (AAPL), IBM, and Disney (DIS), which strikes at the heart of X's business and highlights the ongoing challenges around brand safety and content moderation that have defined the platform under Musk's ownership.

Musk's recent endorsement of an antisemitic conspiracy theory on the site also ignited a firestorm of criticism and further exacerbated tensions over his control of a major communications platform.

Filed in the US District Court for the Northern District of Texas, the lawsuit alleges that Media Matters distorted how real users experience ads on the platform to ultimately damage X's reputation with advertisers.

A Donald Trump appointee, who has previously ruled on high-profile cases, including President Biden's student loan forgiveness plan, will oversee X's legal challenge. Several outside experts have pointed to X filing their suit in Texas as an opportunistic attempt to receive a more favorable court to rule over the matter.

At least one ally in the state has already taken up Musk's cause. Texas Attorney General Ken Paxton announced on Monday that he would investigate Media Matters over “potential fraudulent activity.” Missouri's Attorney General also posted on X that his office would look into the matter.

Musk responded online by saying "Great!"

"Media Matters has 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 but what they actually are: manufactured, inorganic and extraordinarily rare," X wrote in the complaint.​

X referred Yahoo Finance to CEO Linda Yaccarino's post on Monday, where she defended the company.

"If you know me, you know I'm committed to truth and fairness," Yaccarino wrote. She went on to criticize Media Matters' methodology.

Media Matters president Angelo Carusone rejected X's accusations and defended the group.

"This is a frivolous lawsuit meant to bully X’s critics into silence," he said in a statement to Yahoo Finance Tuesday. "Media Matters stands behind its reporting and looks forward to winning in court."

Other experts highlighted what they saw as weaknesses in X's arguments. Joan Donovan, a professor of journalism and emerging media studies at Boston University, said: "X does admit the ads were shown next to hateful content, but argues it was 'rare.'" She likened the legal complaint to a press release.

Lou Paskalis, the founder and chief executive of marketing consultancy AJL Advisory, said advertisers will see X's lawsuit largely as a smokescreen since their main concern is being associated with Musk and discriminatory views.

"If you've got deep pockets, you can be very litigious," he said. "If you are for free speech, you can't sue people who exercise it. And I think advertisers see this as a distraction. It's not going to change one advertiser's decision apparatus about going back to X."

X's latest advertiser squeeze has put Yaccarino, a former NBC ad executive, under the spotlight as she attempts to minimize the fallout from Musk's actions. Under his ownership, the value of the company has fallen from the $44 billion purchase price to $19 billion, according to recent stock grants for employees.

Paskalis, who considers Yaccarino a friend, said he and other ad industry leaders have urged her to step down.

"This isn't a failure," he said. "This is the right thing to do."

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