Yesterday, Google made a pretty big announcement that took a lot of people by surprise – they’re breaking up. (Kind of) Twitter, naturally, reacted accordingly.
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!
Alphabet is meant to be a collaboration of companies, including the Google brand. But it won’t be the Google we’re used to – they’ll possibly ditch the “Don’t Be Evil” slogan, because, honestly, Evil pays $$. They have a new CEO – Sundar Pichai. And, it seems Google is slimming down.
What does that mean?
Google has had its share of successes, such as Android, Chrome, YouTube and Google Maps. It’s also had its share of failures – Google Glass, G+ and The Internship. But what I’ve noticed about Google is that they seem to be all over the place with their strategy. They operate the business like a science project. Most of the time, they find the right experiments, but it’s a risky proposition for a company that’s gone from “how will Google ever be profitable” to “holy cow, Google is profitable!” over the last ten years or so.
I don’t have any insight into why Google made this move outside of what is publicly available, but I can use my common sense powers and assume it’s because they want to keep innovating and making things, whether colossal successes or failures, but also protect the valuable Google brand, as well as the profitable entities like YouTube.
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.
So, it seems Page/Brin believe Google was perhaps getting a bit to bloated and needed to be more agile to continue being effective. After all, it’s hard to turn a bus around.
What will also be interesting is what will happen to the stock of these subsidiary companies of Alphabet. Page has already stated that the existing Google (GOOG and GOOGL) shares essentially become Alphabet shares:
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.
But what about YouTube? Or ambitious ventures, such as space exploration, driverless cars or other future facing stuff? Do they become their own publicly traded entities? Or do they all fall under the existing stock? This, as well as some other valid questions, were posed by Forbes as well.
It’s an interesting time for Google (er, Alphabet) for sure. Hopefully, it turns into more innovation.