A is for Alphabet, B is for But-it's-still-Google (+video)
In an announcement that shook up the tech industry on Monday, Google revealed that it will be restructuring itself under a parent company called Alphabet, which, thanks to confusing logic, is also owned by Google.
Google is no longer “Google.” Or at least the Google that was “Google” has rebranded itself so that “Google” is now a new Google underneath old Google.
Let’s back up a bit.
Google Inc., the company that we know as the massive technology innovator – with projects ranging from balloon-carried Wi-Fi to Gmail to YouTube to self-driving cars – has now become a holding company called Alphabet. Alphabet will run the show for all of the wide-ranging projects presently under Google.
Google will be rebranded as a subsidiary of Alphabet and in charge of many of the consumer services that we associate with online-Google: Maps, YouTube, Google Apps, Android, Google Ads, and of course the Search that made Google a verb. These will all fall under “the ‘Google business’ ” according to the company’s filing with the US Securities and Exchange Commission on Monday.
Google co-founders Larry Page and Sergey Brin will take over the role of chief executive and president, respectively, at Alphabet, and Sundar Pichai, known for leading development on Chrome, Drive, and Android, will take over as chief executive of the new Google.
The reason for the restructuring, Mr. Page outlines in the company’s official blog post, is that Google has become more than just the search engine company it was when it started. This refinement, he says, is the best way to keep the ever-growing company organized.
“We think we can make it cleaner and more accountable,” he writes. “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.”
These “far afield” companies he talks about are the not-exactly-Internet products such as Nest Labs, Google’s Life Sciences research labs, and the Google X incubator for innovative projects.
Each of these will take on their own role under Alphabet. And though the full list of Alphabet letterings isn’t codified, the preliminary predictions are that Alphabet will consist of at least seven major companies, with Google as its largest subsidiary. Alphabet’s other subsidiaries will include Calico – Google’s longevity project – Google Ventures, and Google Fiber.
The main purpose for all of this, as The Verge reports, may be to appeal to shareholders and prepare for future economic growth. With multiple companies under one parent group, the company can break itself down into more compartmentalized organization, perhaps avoiding antitrust litigation, and potentially woo investors. In fact, just from the announcement of the restructuring, Google stock rose 6 percentage points on Monday.
The restructuring will attach semi-independent leadership to each of the Alphabet subsidiaries, with each operating as its own company, says Page in the blog post.
“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,” Page writes.
Essentially, each company underneath Alphabet will be its own company, with perhaps the potential to launch their own share offerings and investors. Alphabet will still trade under Google’s stock listings of GOOG and GOOGL.
In a lot of ways, this rebranding follows plans outlined by Page going back several years. Since 2011, Mr. Brin has also repositioned his role from president of technology to overseeing alternative and innovative ventures such as the Google X incubator (which developed products such as Google Glass, Auto, and Project Loon) and directing “special projects” at Google.
Google is no longer just an Internet company. With ventures into self-driving cars and Internet of Things, health research and venture capitalism, humanitarian development and disaster relief robotics, the company has needed to size itself to keep innovating. The board believes the creation of Alphabet does that.
And while some are unsure whether Alphabet needed to exist in its current iteration, or whether anything will actually change, this is something different. This is a technology giant drastically changing its administrative symbol, even if none of the operation changes.
And maybe that kind of “shaking things up” attitude is what they want.
“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Page writes. “But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”