There comes a time when every home reaches the point of full capacity. Maybe it is a new baby, a few pets, family comes to live with you, start working from home, your hobby gets out of control. These are all facts of life and when these issues arise, the normal thing is to move to a bigger place. Nothing too fancy but enough to accommodate your growing family, hobby or working from home life. Well, not if you’re Google. Over the last few years, their family has grown exponentially and instead of simply buying a bigger house, Google decides to buy the entire street, give each family member a house of their own and call the street Alphabet.
The analogy may seem extreme, but does highlight the scale of what Google did this week when they announced the formation of Alphabet. Instead of admitting that Google is getting too big, too bloated, too many different things on the go, they simply opened an even bigger company who now overlooks all the smaller companies, including the once mighty Google.
To be fair, this is not a new practice. Whether Alphabet is simply a parent company or becomes a conglomerate, businesses have been doing this forever. In fact, this week alone saw comparisons between Larry Page And Sergey Brin with that of business magnate Warren Buffet. His conglomerate, Berkshire Hathaway, is the real deal. Unlike Alphabet, Berkshire Hathaway is made up of completely (financially) independent companies. This is not the case for Alphabet. At least not yet. While the many sectors (letters if you prefer) of Alphabet will now operate independently, the source of everything will come from Google. More specifically, ad money. In business talk, this is the bread and butter of operations and is unlikely to change anytime soon for Alphabet.
That said, although Alphabet is not the mega powerful and mighty Umbrella Corporation that we would like to believe, it is definitely worth taking note of what occurred this week. Alphabet, as of now, is a young parent company to everything that is Google and Google-related. What this does clearly point out is how Brin and Page are looking forward. It shows that the Google that we once knew has matured and left the kindergarten ranks. Alphabet, is not Google, it is a business which will in the future, show a much more adult-like version of Google. Gone is the Googley name, gone is the childlike logo and replaced by the more dominant and straight-shooting Alphabet logo. If you had always thought that the rumors of all the fun, games, easygoing and relaxed approach that goes on at Mountain View, were all a little immature for a business of this size, then you are now looking at the grown-up version of Google. Alphabet will not be adopting the same approach and is likely to be much more financially motivated. It will act as the go-between (or rather barrier) between Google’s ad revenues and all the newly appointed CEO’s of the children companies it now parents.
Not to mention, that Alphabet could still go down the conglomerate route if Page and Brin decide on this in the future. Although, this does seem unlikely. To do so, each independent company would have to effectively become financially stable in their own right. This is almost impossible due to the nature of the companies. Innovation comes at a cost and that means many of the innovative arms of Alphabet will likely be ones which consume significantly more money than they can raise. Or they could choose to become more of a holding company. This one seems more likely than the conglomerate as this would assume direct investment in the smaller subsidiaries and allow some to continue to be propped up by Google’s ad revenues.. Although, holding companies tend to be more investor-like and have less to no input on what’s going on. With the CEO’s being appointed, this could quite easily occur. Although, again, it seems unlikely Page and Brin would want such complete detachment between them and the subsidiaries.
Either way, does any of this necessarily mean it will be evil? Well, although the SPECTRE, Umbrella Corporation, OCP and Cyberdyne comparisons are fun to think of, the reality is probably going to be a lot more boring than one would like. More specifically, we will probably not hear so much about what Alphabet gets up to and not due to it being of a sinister nature. Just, its purpose will not hit the headlines as much as Google’s self-driving cars, internet providing balloons or wearable Glasses did. Alphabet will simply be the uneventful parent, overseeing all that is under its wings and occasionally handing out pocket money to the kids. If G is for Google, then you can be sure A is for Adult.