It is happening again in the Silicon Valley. A recent announcement by Larry Page to restructure Google and form a new holding company, Alphabet, has led to discussions and speculations on various sites on the internet. A multitude of opinions are being expressed with regards to the justification of such a move.
Google, the Search Engine Giant has been a frontrunner in delving into innovative ideas and Research from the day it created Google. Google is still the undisputed King of Search Engines with an unparalleled technology in terms of efficiency and effectiveness of Search results.
However, its founders, Larry Page and Sergei Brin never had the idea to rest on their laurels and therefore the company has always risked its money behind numerous ventures – be it the Android Operating System, which today is the backbone of cell phones, Adwords or Adsense, which are Google’s Advertisement related ventures, Blogger, the blogging site, Google Maps or Earth, which are Geographic tools, or Chrome, the Browser, Google Watch, Self-Driving Cars and many more.
Possibly, this intent of being novel always has catapulted Page and Brin to “look young”, just like the beautiful lady wanting to hide her age. Google as a company, though has been very innovative and nimble as compared to its competitors, but has aged over the years as compared to the startup companies which are a phenomena by themselves. Therefore, Google needs a new look, a new visage to stave of challenges from the start up brigade, who by name and their recent forays, do portray an image of youthfulness, freshness and agility. There comes ALPHABET, a novel face for the perceptually old lady. Alphabet, by its name covers A to Z, all the letters of the language, signifying that Google is looking at an entire gamut of opportunities and just not a range of search products.
As CEO Larry Page noted, “We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for!” The last statement of Larry Page is significant. It is addressed to the investors and seems to be a clever positioning by Page. The investors were not very clear about their recent investments into Google, whether their investments were being pumped into Cash Cow Google, or were being frittered out to various new initiatives, which were not profitable as yet? Wall Street was not happy with Google’s moonshots, and the investors had shown displeasure over the amount of their money “wasted” in these programs.
So, creation of Alphabet makes sense and would help in improving transparency in the accounting process and allow Alphabet to clearly show amount of investment getting into each business. Now, the question arises whether investors would be that prolific or interested to invest money into the newbie companies under Alphabet. These companies now have to show the deftness of startup companies to sell their ideas, raise investment and Alphabet should ensure that the CFOs and CEOs in each company are adequately equipped to do so.
Projects like Fiber which are of intermediate nature between the wild moonshots and the reliable money makers seem to be the only losers in this process. Laying cables of fiber optic is a costly process, far more expensive than developing prototypes for balloons or contact lens. This activity was justified earlier by its effect on Google’s bottom line, i.e cheaper access of high speed internet would mean more eyeballs of Google Search and more usage of High Definition and High-bandwidth services like YouTube.
Forming Alphabet however has helped Google to retain creative talent. Co-founders Larry Page and Sergei Brin, executive chairman Eric Schmidt and CFO Ruth Porat are now associated with this holding company. Page’s confidant, Sundar Pichai has been promoted as CEO of Google, and Google also owns Youtube with its CEO Susan Wojcicki. Arthur Levinson, who was responsible for building Genentech as the world’s most awed bio-pharma Company, heads Calico, an independent bio-tech company researching on aging. Astro Teller is CEO of Google X, a house of innovation of such technologies as driverless cars, Google Glass and innovative contact lens. Sidewalk Labs, led by recent recruit, Dan Doctoroff, former CEO of Bloomberg is focused on innovating urban life. Tony Fadell led Nest is in automated home controls technologies. The 2 billion $ venture capital arm of Google is led by Bill Maris while David Lawee leads Google Capital. All of them are excellent innovators with a number of exceptional breakthroughs to their credits, and with the new structure in place, they would be able to pursue their radical ideas, and build those without day to day pressures or targets of revenue and profitability. This is because, Alphabet is envisaged as a holding company of profitable businesses and other not so profitable ones, but with the potential to bear fruits in the future.
To take words from the commentary of Plato, “nothing is real, because everything is always changing or becoming something else.” Forming Alphabet is one major Change and symbolizes that the only constant for the future is change.