Larry Page – Alphabet CEO and Google cofounder is pictured above.
“Google is not a conventional company. We do not intend to become one.”
I found this news last night as I was browsing Reddit, and after seeing the headline, I was caught up in a moment of exasperated disbelief thinking surely someone was trolling the Internet community. I clicked in to read that, yes indeed the execs at Google have created a parent company, named Alphabet. This new company will not only control the search giant but the assortment of other innovative endeavors they’re pursuing as well.
Now, when people (or investors) ask, “Why are you – a search engine – investing in self-driving cars, and healthcare research when your main goal as a business is to drive revenue through search-based tactics?” Alphabet will be a more logical answer. In fact, it’s already started working, GOOGL/GOOG shares surged 6% after the announcement.
Of course, while their marketing department says they’re being ‘unconventional’, they’re really not. Take a look at this quote from their blog post that explains the decision further:
“What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related. Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well. We’ll also make sure we have a great CEO for each business, and we’ll determine their compensation. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.”
So essentially, they’re restructuring to better conform to a conglomerate-type business structure. While yes, this will continue their ‘unconventional’ product developments (autonomous cars, robot contact lenses), the restructuring will maximize productivity and thus increase revenue–purely a business decision.
But, we’re not here to debate conventional from unconventional. We need to know what implications this carries for digital marketing. Here’s what we know so far.
The search engine giant, which serves billions of people all around the world will remain a subsidiary of Alphabet with YouTube and other entities remaining with Google. Sundar Pichai, a rising star in Silicon Valley, will be promoted from product chief to CEO (Unfortunately, no – Grover from Sesame Street will not be taking over as some Twitter users have suggested). Under Pichai’s guidance, Google developed and launched many popular apps like Gmail, Drive and Maps, as well as the popular browser Chrome. While the search engine will remain the same, the business will be slimmed down and more zoned in to the needs of searchers.
Google will retain control of at least these business units:
The new conglomerate Alphabet, headed by Google cofounder Larry Page, will now be made up of a number of different business ventures. According to filings and blog posts, these entities include:
- Calico (the folks who want to increase the human lifespan)
- Fiber (high speed, in-the-ground Internet)
- Google (Search, Maps, YouTube, Android, Ads, Apps)
- Google Ventures (venture capital business)
- Google Capital (investment fund)
- Google X (autonomous cars, Google Glass, high-atmosphere balloon Internet, moonshots)
- Life Sciences (the glucose-sensing contact lens endeavor)
- Nest (connected home devices, including smoke alarms, cameras and thermostats)
A number of entities, such as mobile service Project Fi remain in limbo, unclear where they’ll be placed.
The morphing of Google into Alphabet hasn’t yet taken place, they’ll wait for a later date in the year to absorb Google’s stock (will remain GOOG/GOOGL, even after the merger). Until then, we’ll be waiting and watching, keeping you updated on the implications this huge change will bring upon search and digital marketing altogether.