Keeping the Black Box under wraps

Cade Metz explains why Google canceled its pending ad deal with Yahoo rather than disclose its secrets in court:

“We canceled the deal with about one hour to go before a lawsuit was going to be filed against our deal,” Schmidt said. “We concluded after a lot of soul-searching that it was not in our best interest to go through a lengthy and costly trial which we believe we ultimately would have won.”

But surely, when Schmidt speaks of costs, he’s not concerned with paying his lawyers. A monopoly-expanding ad pact with Jerry Yang and Yahoo! would bring Google hundreds of millions of dollars a year. If the company was convinced of an antitrust triumph, legal fees were a drop in the bucket.

As head Mountain View lawyer David Drummond tells it, a long legal battle could damage relationships with Google advertisers – many of whom opposed the Yahoo! marriage. But the costs are even greater: An antitrust trial would finally give the world a window into Google’s black box of an ad engine.

The genius of the Mountain View money machine is that no one knows how it works.

The auction that’s not an auction is the heart of Google’s business, and disclosing its secrets would only unleash a torrent of anti-trust activity. Everybody loves Google because its services are free to consumers, but at the end of the day it’s simply an advertising-supported version of the KGB.

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