X, formerly Twitter, was caught running unlabeled ads on its platform in September. Now that issue, which has been ongoing, has been brought to the FTC's attention. An independent nonprofit Check My Ads has filed a formal complaint with the U.S. Federal Trade Commission urging an investigation over the advertising practices at X, including the lack of disclosure about which posts are ads, broken links that explain why ads are targeted and more.
The complaint cites X's lack of disclosure around ads, saying it misleads consumers that the content and the information they're consuming on the platform is not paid for.
"This misrepresentation tricks users into trusting content as organic and exacerbates the opportunity for scams to occur," the complaint states. "Furthermore, by failing to adequately disclose advertisements, X Corp. misrepresents the methods employed to target users or facilitate third-party ad targeting."
It also points out that X's promotional materials for advertisers indicate that advertisements are distinguished from non-paid, organic content with a "Promoted" label, but no such label appears for consumers. As Mashable earlier reported, X appeared to be switching between the "Promoted" and "Ad" labeling format for some time. Most of the ads on X are now simply labeled "Ad" but some are surfacing in users' feeds without any ad label attached at all.
TechCrunch encountered this issue ourselves in September. In tests, we came across a good handful of unlabeled ads from accounts we didn't follow. The only indication they were an ad was by clicking on the three-dot menu at the top right of the post. When the post is an ad, you're presented with menu options like "Why this ad?" and others. Check My Ads says it found that these ad-targeting explainer links didn't even work in some cases.
At the time, it wasn't clear if the issue was a glitch or a deliberate attempt to deceive X users into thinking ads were organic content.
Image Credits: X screenshot 9/8/23
Image Credits: X screenshot 9/8/23
Since the original reports came out, Check My Ads says it has received "hundreds" of examples from X users who encountered the issues with the unlabeled ads.
"It seems to be a really widespread problem," said Sarah Kay Wiley, director of Policy and Partnerships at Check My Ads. We had people submitting examples every day of stuff that they were seeing," she noted. "It's impacting both mobile, as well as web, and then also the 'For You' timeline and the 'Following' timeline."
The latter is particularly egregious because the Following timeline is meant to only include posts from people and accounts you've specifically chosen to follow. To have unlabeled ads appearing in this timeline is particularly deceptive and a "huge problem," Wiley said.
The organization notes they were still getting submissions about the problem as recently as last week, which indicates X has yet to address the problem, despite the media reports on the matter from TechCrunch, Mashable and others. Mashable had also flagged that X had implemented a new ad format that couldn't be blocked or reported, in addition to failing to disclose some posts were ads.
Other nonprofit consumer watchdogs were also aware of the problem with X's ads. The Center for Digital Democracy told TechCrunch it believed the FTC should investigate X's use of stealth ads and impose fines and sanctions. (The organization says it's not working on filing a similar FTC complaint for now, however.)
Check My Ads' complaint claims that X is in violation of Section 5 of the Federal Trade Commission Act. This section gives the FTC broad authority to regulate unfair and deceptive business practices. As a result, it can issue injunctions or fines to penalize companies for bad behavior, which the nonprofit would like to see happen.
The complaint also points out that X may be in violation of an existing 2022 Stipulated Order with the FTC, prohibiting misrepresentation of its advertising practices. X paid a $150 million fine as part of its settlement with regulators related to an issue dating back to May 2013 and running through September 2019, which saw X, then Twitter, using personal information -- like the email addresses and phone numbers collected from users when they established their accounts -- to then target those users with ads.
"X entered into this consent decree with the FTC basically saying they weren't going to misrepresent how they were targeting ads to users," says Wiley. "We make the argument in the complaint that this is a violation of not only Section 5 of the FTC Act, but also of that previous consent decree."
It's not clear how much X today makes from advertising, but its last earnings as a public company in Q2 2022 saw it pulling in the majority of its revenue -- then $1.08 billion out of $1.18 in total revenue -- from ads. Musk confirmed publicly in September 2023 that X's U.S. advertising revenue was down by 60%. The company is now valued at $19 billion as of October 2023, a 56% decrease in value over the last 12 months, Fortune reported, citing internal documents.
Our US advertising revenue is still down 60%, primarily due to pressure on advertisers by @ADL (that’s what advertisers tell us), so they almost succeeded in killing X/Twitter!
— Elon Musk (@elonmusk) September 4, 2023
Although Check My Ads tends to focus on ads that are displayed on the open web, the deceptive ads issue came to the organization's attention because of X's announcement that it would begin sharing ad revenue with creators. X CEO Linda Yaccarino has now said those payouts have totaled nearly $20 million. But if ads are unlabeled, it's not clear creators are getting their proper cut.
Though typically, Check My Ads reaches out to companies when it finds issues like these; the ongoing nature of the problem (and lack of a point of contact after Twitter gutted 80% of its workforce, including compliance and engineering), led the organization to believe this could be more than a glitch. That prompted the organization to file the complaint directly with the FTC without going to X first.
"We hope they do take this matter seriously, especially considering that Twitter is going to be allowing political ads to be running on the platform again ahead of 2024. [elections]," said Wiley.
She added that it may be months before an investigation starts, if the FTC even chooses to take action.
X did not return requests for comment.
The full FTC complaint is below.