X Media™ Company

X Continues to Face Regulatory Scrutiny and Legal Challenges, Which Could Slow Progress

Elon Musk has big ambitions for what his X app could be, a vision that he’s held onto for many years, and is just now bringing to fruition. But I doubt he could have imagined the amount of regulatory and legal challenges that he’d be facing, as he goes about reforming the platform into his preferred image.

Over the past week, X has been hit with a range of new challenges, in various regions, amid ongoing concerns about its new “Freedom of Speech, Not Reach” approach, which puts more emphasis on de-amplification of rule-breaking posts, as opposed to removals and bans.

Conceptually, that approach makes some sense, in that it still allows people to share their opinions, without what many viewed as the heavy-handed moderation of the platform’s former management.

But in practice, it is proving more challenging, as more investigations find problems with X’s systems.

Just this week, X has:

  • Come under increased scrutiny after the Center for Countering Digital Hate (CCDH) published a new report which it claims shows that X is failing to adequately police hate speech, including racism and antisemitism in posts. The Anti-Defamation League recently published similar findings, though X has both refuted the claims and threatened legal action in each instance thus far.
  • Been criticized by the Indian Government for failing to comply with government orders to remove content. The Indian Government has a history of seeking to silence dissent, which both the previous Twitter, and current X teams have challenged.
  • Had a subpoena filed against it in Amsterdam over the illegal collection and usage of user data between 2013 and 2021. This is obviously before Elon’s time at the company, but X, as an entity, could still be hit with any penalties that result from the case.

The last note, of course, is not a result of Musk’s changes, but it’s another legal challenge for Musk and Co. to deal with, while also operating a much leaner operation, with fewer resources to respond to every request being thrown its way.

At the same time, there are also potential conflicts with Musk’s other businesses to consider. Tesla, for example, has been looking to expand sales into India for some time, and it’ll be interesting to see if X is able to maintain its challenge to the Indian regime, without causing issues for that push.

Interestingly, in Walter Isaacson’s new Elon Musk biography, which was released this week, Isaacson shared this insight into an interaction that Musk had with journalist Bari Weiss early on in the Twitter takeover:

At one point during their two-hour conversation, she asked how Tesla’s business interests in China might affect the way he managed Twitter. Musk got annoyed. That was not what the conversation was supposed to be about. Weiss persisted. Musk said that Twitter would indeed have to be careful about the words it used regarding China, because Tesla’s business could be threatened.”

Tesla has significant business interests in China, and while X is not available to Chinese users, due to regional restrictions implemented by the CCP, this is seemingly a fairly direct acknowledgment that Musk does have to maintain some balance in moderating X content, in consideration of his other interests.

Of course, Elon would have been well aware of these conflicts before he offered to buy Twitter for $44 billion, but the added regulatory scrutiny and legal explorations are no doubt taking some toll on the new X team.

It’s a lot for anyone to manage, and it’ll be interesting to see how X is able to maintain its current approach and systems, while also appeasing the relevant governments and authorities, and ideally, winning back more ad spend.

Last week, Musk noted that U.S. ad spend is still down by 60% year-over-year, due, in Musk’s view, to pressure from activist groups, who continue to report that X is allowing highly offensive content to remain viewable in the app. But at the same time, Musk also noted that ad spend in Asian markets is rising, while its other bets on subscriptions and increased API pricing have made it less reliant, overall, on U.S. ad intake.

How true that is remains to be seen, given that the U.S. has traditionally contributed around 50% of the platform’s overall revenue income. But if Elon can indeed figure out a way to reduce the company’s reliance on ads, that would be a big step towards facilitating his broader vision.

But the challenges look set to keep coming for the app, especially as it looks to move into payments, and facilitating banking-type services in-stream. No platform has been able to meet all of the regulatory requirements for such thus far, and you can expect that X is going to come under intense scrutiny, especially in the wake of the recent crypto crash.

In other words, building X is going to be a very uphill battle, and you have to wonder whether Elon is still as happy as he was that day he first walked into Twitter HQ, carrying a sink and giggling at his own jokes.

Maybe, as Musk says, his principles on free speech are enough to keep powering him forward. But with new EU regulations also coming into effect, there’s a lot of pressure on the much smaller X team.

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