Elon Musk's new ad policies for X may cost the company after an online advertising watchdog officially filed a complaint with the Federal Trade Commission (FTC).
Check My Ads, an independent organization that monitors adtech companies, announced on Wednesday that it submitted a formal complaint with the FTC, "urging" for an investigation into X and its ad practices.
Why is X getting slapped with an FTC complaint?
The heart of the complaint involves recent changes to the platform, formerly known as Twitter, which obscures whether a post that a user is viewing is an advertisement. Oftentimes, X doesn't even let users know they are viewing an advertisement at all. Check My Ads cites Mashable's reporting regarding lack of ad disclosure in its complaint to the FTC.
Musk's platform previously labeled advertisements clearly with a "Promoted" tag affixed to the bottom of a paid ad. However, as Mashable reported in July, many users started noticing that the "Promoted" label stopped appearing on paid posts.
A new "ad" label, placed on the upper-right corners of posts, replaced it — and it was much less noticeable than the previous "Promoted" disclosure.
Some ads had no disclosures at all
However, even worse than the new, less conspicuous ad disclosure were the ads without any label at all. In September, Mashable noticed some ads that weren't labeled with "Promoted" nor "Ad." The only way users could determine it was an ad was if they accessed a drop-down menu that provided them with an option to report the ad.
Even more concerning, as Mashable reported in October, a new clickbait-style ad-type started rolling out on X. These ads not only provided zero disclosure of being an advertisement, they also did not provide users with the advertiser behind the ad — nor did it provide users with an option to block or even report the ad.
"X Corp.’s lack of disclosures to consumers, misrepresentations to advertisers, and flawed access to explanations about targeted advertising constitute unfair and deceptive practices," said Check My Ads policy director Sarah Kay Wiley. "We urge the Commission to determine the extent of these violations and address them to the full extent of its authority."
Check My Ads points out that X is potentially "violating Section 5 of the Federal Trade Commission Act" by not clearly disclosing ads, which may then "misleads consumers into trusting content as organic, creating an environment ripe for scams." The organization also says that X's actions violates the 2022 Stipulated Order with the FTC, which saw then-Twitter pay a $150 million fine for deceptively using users' information for advertising purposes, months before Musk's acquisition.
As part of a call for an investigation, Check My Ads also wants the FTC to require the company to provide a public database with ad information regarding who pays for ads and how they are targeted, much like other platforms like Facebook provide. Check My Ads also says that the FTC should fine X for these violations and seek an injunction that requires X to clearly label all advertisements.
Since Musk's takeover of the company, X has struggled to keep some of its largest advertisers on board. The company reportedly lost 60 percent of its advertising revenue earlier this year.
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