Elon Musk’s endeavor to monetize verification checks on the platform X has encountered a significant obstacle. The European Commission, which oversees the enforcement of EU laws, has inflicted a hefty fine of €120 million (approximately $140 million) on X for failing to meet transparency standards outlined in its Digital Services Act.
This fine primarily stems from concerns over the platform’s “deceptive design” surrounding its blue checkmark verification system, along with insufficient transparency regarding its advertising practices. Henna Virkkunen, the Commission’s executive vice president for technology sovereignty, security, and democracy, emphasized, “Deceiving users with blue checkmarks, obscuring information on ads, and shutting out researchers have no place online in the EU.”
This latest fine adds to a series of challenges X has faced since Musk acquired the platform for $44 billion in 2022. In a short time, Musk’s management decisions have led to a dramatic exodus of advertisers and a notable decline in users, ultimately slashing revenue.
The investigation into X began in 2023 as the Commission sought to determine whether the platform had violated the Digital Services Act, aimed at regulating harmful online content. A key issue has been the blue checkmark feature. Previously, Twitter reserved these verification badges for notable figures and organizations, ensuring a layer of authenticity that helped protect against impersonations.
However, in 2022, under Musk’s leadership, X started offering blue checkmarks to anyone willing to pay a monthly fee without a thorough verification process. This shift raises questions about the credibility of accounts on the platform.
The Commission noted, “On X, anyone can pay to obtain the ‘verified’ status without the company meaningfully verifying who is behind the account, making it difficult for users to judge the authenticity of accounts and content they engage with.” This paid verification approach has the potential to expose users to scams and fraudulent activity.
Additionally, the Commission criticized X for lacking transparency in its advertising data repository, which is critical for researchers attempting to detect scams and coordinated influence activities. The site also failed to comply with DSA requirements for researcher access to public data.
X now faces a deadline: it has 60 days to provide a plan to rectify the blue checkmark issue and 90 days to tackle other concerns. If these matters are not addressed, further penalties could follow.
While this fine may seem small in the grand scheme of Musk’s financial empire—his other company, Tesla, has proposed a staggering $1 trillion pay package for him—it represents another blow to a social media platform that’s struggling to maintain its footing.
Since X is a private entity, it isn’t required to disclose financial specifics. Nevertheless, previous reports indicated that Twitter generated over $5 billion in revenue in 2021. In stark contrast, industry analysts estimate that X’s revenue plummeted to approximately €2.5 billion ($2.5 billion) in 2024.
Most of X’s revenue still stems from advertising. However, paid subscriptions generated around €200 million ($200 million) between 2021 and 2024, according to reports from credible sources. Notably, this figure reflects only subscriptions made via its mobile app on Android and iOS. Even accounting for app store commissions, X’s minimum earnings from subscriptions hover around €140 million ($140 million)—which is essentially the amount it has just been fined.
Can bad design lead to regulatory scrutiny? Absolutely. X’s deceptive marketing practices and poor transparency have not only drawn the ire of regulators but might also alienate users, hurting the platform in the long run.
How can social media platforms like X rebuild trust with users? Effective communication, re-establishing clear verification processes, and enhancing transparency in advertising can play pivotal roles in restoring user confidence.
What are the potential implications of this fine for Musk’s other ventures? While the fine may not significantly impact Musk’s wealth, it reflects potential risks for his portfolio and could affect investor perceptions of his leadership.
How do European regulations affect global tech companies? The European Union’s stringent regulations can impose serious consequences on tech giants, shaping how they operate worldwide and pushing for better user protection practices.
In light of these developments, it becomes apparent that the regulatory environment is evolving rapidly, and companies must adapt to maintain user trust and compliance. For more insights and updates on trending topics in technology and social media, continue exploring related content at Moyens I/O.