Google has created a new corporate structure under a holding company called Alphabet. Alphabet houses all Google companies, the biggest of which is a “slimmed down” Google proper (containing Google core services like Search and AdWords, Maps, Chrome, YouTube and Android) with Sundar Pichai as the new CEO. Beyond Google proper, Alphabet contains Google’s other adjacent companies, subsidiaries, projects and moonshots; although not yet defined, these could include companies like Nest or DoubleClick.
WHY IS THIS HAPPENING?
Alphabet enables Google to—at the same time—focus on (1) the core (Google proper) and (2) the adjacent businesses. Alphabet companies can now move separately, in parallel, without concern that one project’s failure could bring down the whole. However, investors may now have more transparency into individual Alphabet companies, which could actually bring up more questions if one company is struggling.
Alphabet becomes the first multinational conglomerate built on digital. Google is already the leader in search, display, mobile, video and maps. Alphabet can now power the rest, including filling big gaps in social, as well as accelerating the Internet of Everything (e.g. Nest, driverless cars, drones).
CONSIDERATIONS FOR ADVERTISERS
It’s business as usual for Google search and display advertisers. But, going forward, we can expect that Alphabet will transform our space.
Sundar Pichai can entrench in the established (and continually profitable) businesses of search, video, analytics and operating systems, ensuring that Google Proper doesn’t get spread too thin. Advertisers can expect more opportunities, betas and innovation in Google core search, display and video. However, as the more innovative, entrepreneurial and altruistic companies move out of Google Proper, Google becomes more focused on bottom line profit/Wall Street, possibly jeopardizing its former altruistic information mission.
Beyond Google Proper
Alphabet enables innovation without fear. Oftentimes, a “moonshot” product (like Google Wing delivery drones or Google Calico life extension) can change the world, but may be too risky to go all-in. Other times, government regulation or potential litigation can hold back innovation (to illustrate, the YouTube/Viacom copyright infringement lawsuit created uncertainty for Google and its stock price, shortly after Google acquired YouTube). Alphabet enables agility; its companies can act like start-ups laser-focused on the next big thing. But, as mentioned, investor transparency into individual Alphabet companies could actually work against Alphabet.
Alphabet will continue to acquire companies to fill/accelerate gaps outside of Google core. Furthermore, Alphabet may now be more attractive to these acquisition targets as the new companies would be able to operate at arm’s length (perhaps with their current CEOs and culture).
Separate, but Connected?
It remains to be seen whether—as Alphabet grows organically or via acquisition—its companies will still be connected. On the one hand, Alphabet could enable sharing between arms (e.g. capability sharing, data-sharing). This sharing makes Google core more powerful for advertisers. To illustrate, Alphabet could enable Google to fill its social media gap via acquisition, and that social media data could better inform search marketing. Or, Alphabet could accelerate an Internet of Things arm like Nest, and that acceleration could connect back to Google Proper’s advertising or technology (e.g. search or display ads within Things, or data from Things informing search or display ads). Similarly, Google Fiber could help Google provide better measurement/insights around users.
At Performics, we’re excited about the opportunities that Alphabet may create for performance marketers, in both Google core and beyond. However, uncertainty remains, likely even with Alphabet employees (which could have implications from a talent perspective). As old Google companies find their places within Alphabet, we’ll keep you up to date on changes and implications.
For more info on Alphabet, please contact your performance account team today.