We have some big news for you.
In case you haven’t heard, Google just announced a massive corporate restructuring which will mean that, Google and assumptively, every company within, now belongs to a bigger Google named Alphabet.
Huge news, right?
As stated on Google’s official blog post, titled G is for Google, The new Alphabet umbrella and holding company will include all of Google’s current properties, with the largest of course being Google itself. Sundar Pichai will step up as CEO of Google, while Larry Page and Sergey will reposition themselves in the new company, as CEO and President of Alphabet.
Larry Page described the new company on the official Google blog as collective about businesses prospering through strong leaders and independence. Thanks to that, Google will present itself as a more web oriented business, focusing solely on search, ads and maps, Android and Youtube.
“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. Sundar has been saying the things I would have said (and sometimes better!) for quite some time now, and I’ve been tremendously enjoying our work together. He has really stepped up since October of last year, when he took on product and engineering responsibility for our Internet businesses. “ – He wrote.
“Google itself is also making all sorts of new products, and I know Sundar will always be focused on innovation — continuing to stretch boundaries. I know he deeply cares that we can continue to make big strides on our core mission to organize the world’s information. Recent launches like Google Photos and Google Now using machine learning are amazing progress. Google also has some services that are run with their own identity, like YouTube. Susan is doing a great job as CEO, running a strong brand and driving incredible growth.
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. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.” – Larry added on the blog.
Alphabet Inc has a lot of parallels with how Berkshire Hathaway is structured, and just like Warren Buffet, we now have to think of Larry and Sergey as investors, not entrepreneurs per se.
So, what is their goal with this? Freedom of capital allotment? Taxation benefits? Risk mitigation?
Although I’ve read a lot of theories about this move, some more ludicrous than others, they all tend to boil down to these two views: One group thinks that Google is adopting a strategy out of P&G’s playbook: Make the brands the stars; those that can’t hack it don’t survive; while others think that Alphabet isn’t a company as much as it is a state of mind and therefore not subject to corporate tax laws.
Basically, I mostly agree with what Isabelle Roughol wrote in her Daily Digest post on LinkedIn. She said that what Alphabet brings is visibility for investors and flexibility for all. As she cleverly put: “Alphabet’s safe umbrella brand – “bland conglomerate with just a touch of SIlicon Valley pizzazz” – can grow in any direction. Say Google Car or Glass become commercially viable; they can be spun out of GoogleX to become another Alphabet property. Each venture can pivot with one or two fewer levels of hierarchy.”
Next to this, if you want my two cents on this matter, I think that this move is also very much about the perception of Google with the external stakeholders.
I think that in the minds of people who work for this company, Google means search and to a lesser extent advertising. The more products and services they tie to the name “Google” the more the perception gets watered down.
Investors and customers and consumers are getting more and more confused and that’s not a good thing. Remember what I wrote about niching down your business?
With Alphabet, Google can once again stand for something very clear and unique in the mind of customers. Or at least that’s what I think.
What are your thoughts about this decision?
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