It all started in 1996 when Larry Page and Sergey Bin were doing a research project at Stanford University. Google’s humble beginnings were a chapter in the company’s story as an entrepreneurial success. As the company responsible for consolidating and disrupting the entire search engine market, it has used its reputation to acquire and develop other disruptive technologies that both consumers and businesses use on a daily basis. Its growth has prompted its CEO, Larry Page, to form a new company called Alphabet. What will this mean for the future of Google?
Let’s Explain Alphabet
For many years, Google has been a suitable umbrella for over 100 startups it has acquired in hopes of using their technologies to either improve their current platforms (e.g. the acquisition of ZipDash for real time traffic analysis in Google Maps) or start entering a new market (e.g. the acquisition of YouTube). Alphabet is Google’s way of expanding this umbrella to cover much broader projects that may require a separate entity outside of Google itself to manage.
The creation of Alphabet was prompted by projects such as Calico, whose sole purpose is to engage in research on longevity and reversing the effects of diseases that prematurely age sufferers. While it could theoretically all be managed by Google, Page saw fit to put these projects under the administration of other individuals who have more experience in the particular areas they cover. To use Calico as an example, it wouldn’t be very productive for Google’s management – an otherwise talented group of individuals accustomed to catering to the consumer market – to see this project come to fruition. It is much better to have a management staff dedicated to research and advancing science to take the helm.
What Will Happen to Google?
Google is still going to be around as a company. It will, obviously, be “held” by Alphabet, but it will continue to be the largest company under this umbrella. The other projects will have their own client bases outside of the consumer market who may eventually provide their own services to end users. This helps keep Google focused on being Google, which is good for people who use its products every day!
Is There Anything Else?
Splitting a company’s assets into more bite-sized chunks is something often practiced with large industry players. In Alphabet’s case, we already mentioned that the split benefits project flow and focus, but there are also other possible reasons why Page may have considered this shift in administration and structure. This may all be just wild speculation, but experience tells me that such a split also has customers in mind. Not only will Google’s users enjoy being catered to more efficiently by a staff focused on them, but the ideal customers that the other businesses will serve will also have the same experience. The reputation that Google has does not help it enter market sectors such as healthcare, but re-branding the Calico project (as an example) as a separate company focused solely on biomedical research gives it some sway over healthcare organizations that could not be achieved if the invoices had Google’s brand on them.
In any case, the decision to compartmentalize assets is a common one with large companies like Google. The road ahead may actually be much easier for users, service providers, and the company itself as a whole!
So, what do you think? Was it a good decision for Alphabet to be formed? Tell us in a comment!