In a what we can call a surprising move, Google co-founders announced a new business entity called Alphabet. Google will now be a subsidiary of the parent company Alphabet. “This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google. A key part of this is Sundar Pichai.” said Larry in the announcement.
We have been bombarded with the Google and Alphabet news and it has come as a shocker! However, relax and take a moment as we dig deep on what this restructuring is all about.
What is Alphabet?
Alphabet is mostly a collection of companies, the largest of which is Google. In other words, Alphabet is a holding company that will be run by founders Larry Page and Sergey Brin. This newer Google is a bit slimmed down, with the companies that are pretty far afield of company’s main internet products contained in Alphabet instead. This restructuring will allow more management scale, as the company as whole can run things independently that aren’t very related. This means that each company’s vision will be different, their corporate structures will be different and the way they operate will also be different.
Larry, in his post said
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.
What it means to Google’s Identity?
Google has always been known for its Search and advertisement. The new Google also, will be focussed around the same area. Sundar Pichai takes control of this Google as the CEO. Sergey and Larry will indirectly head Google through the Parent company Alphabet.
This slimmed down Google will primarily have the company’s main internet products. Our assumption at this point is that this “smaller” Google may comprise most of the products that consumers associate with the search giant, including Search, Ads, Maps, Android, and Apps. YouTube is also going to be a part of this new Google irrespective of the fact that it has its own CEO.
What it means to Google’s consumers?
Nothing much has changed for Google’s Consumers actually. One will still navigate to Google’s website and perform a search or use the Google Mobile. In addition, the other services like Ads, Maps, Android and Youtube will function as they used to. So, for the internet consumers, nothing has really changed.
What it means to Google’s Investors and Shareholders?
With this new structure the company plan’s to implement segment reporting for their Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.
Furthermore, Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. The company’s two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.
What it means to Google itself?
This new model will have a CEO for each business. Sergey and Larry will rigorously handle capital allocation and work to make sure each business is executing well. This will also make sure that there is a great CEO for each business which in-turn will determine their compensation.
This humongous restructuring has paved way for Google X Labs, well now known as Alphabet’s X Labs. This will incubate what Google calls as “moon-shot” projects like Wing, the drone delivery effort, the self-driving cars or Project Loon,the high-altitude hot-air balloons for Internet connectivity, Google Glass and so on.
Google Capital and Google Ventures the company’s investment arm and venture capital investment vehicle respectively will also be part of this new structure as Alphabet’s subsidiaries.
And as far as we know, the other subsidiaries within Alphabet will be Nest, a home devices company acquired by Google last year. Calico, an initiative to increase human longevity. Sidewalk Labs, an initiative to improve modern cities and finally, Fiber, that most of us know as the company’s project to build high-speed internet connections.
The Final Inference…
“Google is not a conventional company. We do not intend to become one.”
11 years ago, Sergey and Larry quoted the above lines in the original founders letter and to this day it stands true.
The formation of Alphabet has given the company more flexibility in expanding to unexplored territories. While Sundar Pichai will continue to make big strides on Google’s core mission to organize the world’s information, the other arms of Alphabet will now be more focussed on innovation and continue to stretch boundaries.
Larry Page also hinted us about the future stating in his announcement letter, that
“the whole point is that Alphabet companies should have independence and develop their own brands.”
With their own brands comes their own products. Its just a matter of time now that we see some more incredibly awesome products by Google… and by Google we mean Alphabet
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