Google is reorganising itself as Alphabet, but why? How will it work, and what difference will it make to us? David Crookes looks at what comes next
In 2001, the Royal Mail made a risky decision that would prove to be a short-lived disaster. In a bid to show that it did more than just deliver the post, the company ditched a well-recognised name, which perfectly described what the firm ultimately did, and rebranded as ‘Consignia’, a name that the bosses admitted did not mean anything. After much eyebrow raising, and a refusal by many workers to comply, the firm changed to the more reasonable Royal Mail Group. Consignia barely lasted a year, and ultimately went down as one of the biggest – and most expensive – corporate mistakes of all time.
The Royal Mail has not been the only company to rip up tradition and recognisability in favour of reinvention, though. Coke became New Coke for a spell, and the taste went down like a lead balloon, while Play.com became Rakuten and stripped itself of any connotations about what the company sells in the process. Indeed, removing reference to the core of a business is popular: Logitech is now just Logi, Kentucky Fried Chicken is KFC. The Sci-Fi Channel has abstracted to become SyFy, and Pizza Hut wanted to switch to The Hut, before wisely reconsidering the decision.
So what should we make of the most recent move by Google? After 16 years of building the most recognisable web brand on the planet, the company is going to be renamed Alphabet and it is set to be majorly restructured. These changes seem to indicate the intention to move away from being known as simply a company that is about search, towards being an organisation that is widely perceived to have its fingers in a multitude of pies.
Co-founder Larry Page and Sergey Brin say they want to make the company “cleaner and more accountable” and they profess to being excited about what opportunities the changes may bring up. What does it actually mean for the company and consumers, though? Is Google about to do a Consignia?
The simple answer to that last question – at least for now – is ‘no’: the name Google is not actually going anywhere near the trashcan. It will continue to be a much-loved and wellused brand, and any talk of people suddenly ceasing to “google” the internet in favour of “alphabeting” their queries is premature. Google will remain the name of Alphabet’s search engine. We will still have the likes of Google Maps, Google Mail, Google Chrome, Google Drive too. There will be a Google business that will also incorporate Android and Google Play and it will be headed up by Sundar Pichai who will become the new CEO of Google.
It is Google Inc. – the name of the firm comprised of a large portfolio of divisions – that is being replaced. Alphabet will instead become the name of the holding company that controls a range of sub-businesses. Why? Well, the name Google Inc. immediately brings to mind the consumer products that have created the foundations on which the company was built. That, quite simply, does not suit the various other directions the firm wants to go in.
In this sense, unlike some of the other rebranding exercises that have affected companies over the years, Google’s switch to Alphabet is not as radical as it first appears. Page and Brin are canny people, and would have realised the folly in killing off a name that has quickly become an eponym. What Alphabet will do is allow the company to stretch itself even more without causing confusion over what the company as a whole is actually all about.
Google will be separated from the other parts of the company and become one of numerous, independent and separate businesses under the Alphabet umbrella. Others like Fiber, Life Sciences, Nest and X Lab will also form their own companies. Each of them will have its own CEO, who will potentially be allowed to take their own risks and develop firms in their own ways. Overseeing all of this will be Page and Brin in their roles as, respectively, the CEO and president of Alphabet.
Page says each of the businesses will report its own financial results; meaning Google, as Alphabet, will be more transparent. It is also hope the changes will allow it to react more swiftly to a changing technological landscape and allow it to be ever-more influential.
The Rise Of Pichai
Google’s restructuring has been coming for some time, even if the name change was unexpected (that said, a year ago Reddit poster Ojus Naravene listed all of the various brands Google owns and placed each one next to a letter of the alphabet, but that was most likely coincidence). Business Insider claims Google has been considering this kind of restructure for four years, but certainly last October we saw signs that Google was seeking to shake things up a bit.
At the time, CEO Larry Page sent out a memo that explained how he was going to transfer leadership of the core Google products to Sundar Pichai, who was then the head of Chrome, Android and Google Apps. He said Pichai was also going to be responsible for maps, search, Google+, commerce and ad products, research and infrastructure. Crucially, six executives – including those responsible for search, social media and research – who had all previously reported to Page, would now be directly under Pichai. It was a sign that Page and Brin were letting go of the established Google business areas, and it pointed to a major change in the thinking.
This was a major promotion for Pichai and it effectively made him the boss of Google’s products, answering only to Page. That put him a very powerful position, one which has only become stronger now that he is CEO of Google. The past few months can therefore be seen as some sort of extended test that he has passed with flying colours. Having demonstrated that he could ably assume the reigns once tightly held by Page, it is he who everyone will now turn to in order to see the future direction of the Google suite of consumer products. It is a lot of power to have gained in a relatively short time.
At the same time, this will have a profound impact on Page’s involvement. Last year, Micro Mart believed Pichai’s rise was also going to give Page the opportunity to freshen up his own work within Google Inc. Having stated that he would concentrate on NEST, Calico, Google X, corporate development and the legal, financial and business side of the company, it was clear that Page was finding it more interesting and motivational to focus on the future and on areas of innovation.
The change was needed, then, but it was still surprising; Page is a self-confessed control freak who has always wanted to have a final say in everything that Google is doing. Indeed, Business Insider’s ‘Larry Page: The Untold Story’ article claims he detests management layers, believing them to be an impediment. Yet with the restructure, he has just installed a whole new set of management layers beneath him.
It would seem that he and Brin have found that, if they can trust Pichai, they can also trust others to oversee other parts of the company. It is also likely that Page and Brin have come round to thinking that the new way of working is not only viable but necessary. Google Inc. – now Alphabet – was simply becoming too diverse for any kind of tight control to be viable. Instead, Page’s role will be one of the overseer. Pichai and the other CEOs will report directly to him and it will mean he can have a greater overview and get as involved or as hands on in the different businesses as is needed.
ABC Of Alphabet
So what companies will Alphabet be split into? We’ve already very briefly mentioned some – Fiber, Life Sciences, Nest and X Lab – but a closer look at what these divisions do reveals just how diverse Google Inc./Alphabet has become. Life Sciences, for example, is working on health and biotech projects; among them, a contact lens which monitors the wearer’s tears and measures the glucose level within them. It is working on this with the pharmaceutical giant Novartis and it is aimed at monitoring people with diabetes.
Another division, Calico Labs, is seeking to tackle ageing. Hundreds of millions of pounds are being pumped into this research and development biotech company and it couldn’t be further removed from what people imagine Google to be. With a focus on research rather than search, Calico has been studying molecular biology, genetics, medicine and drug development for the past two years in a bid to help people live longer, healthier lives. Calico has top scientists on board and it is expected to be a key part of the overall company. With that company being Alphabet it appears makes it easier to include Calico under the umbrella while, as part of Google, the vast difference to the perceived core product could cause confustion. The hope appears to be that such companies can flourish and grow as businesses, away from any such preconceptions.
What it also means is that other sub-businesses within Alphabet such as the investment arms Ventures and Capital will be able to acquire and pump cash into up-andcoming ideas and companies without people wondering how it will fit in with the Google remit. Alphabet will become even more diverse as a result, and it could even move into areas that would perhaps be deemed unsuitable for Google (such as military advancements). It is entirely feasible that Google X, or X as Page refers to it, will continue working on drone delivery services and driverless cars that, in the future, form the hub of an entirely new Alphabet business.
At the same time, any failures or risks made by one company will not have a direct impact on the others. It will allow the individual components to build their own reputations and brands, and flourish in their own right. Thermostat maker Nest, for instance, will be able to concentrate on providing connected smart home products without worrying about fitting in with the global network of high-altitude balloons referred to as Project Loon. The CEOs of each of these companies can steer their ships and be fully accountable for their individual firm’s successes and mistakes. They will also be able to make more moonshots.
The term ‘moonshot’ was created by Google and the concept of it has been much discussed and debated. It refers to the risky and ambitious projects that have been embarked upon in the hope that, by aiming high and going out on a limb, something amazing and useful will be developed. Loon is a moonshot; an idea that sounds crazy on paper, and which has been in development for ages. There is a potential for these products to change the world but they could also equally prove unviable and be dropped. This doesn’t matter because at least they’ve been tried and, by separating the companies under CEOs and making them independent businesses, investors will at last be able to see the financial impact of them.
Page is certainly interested in moonshots and is a strong believer in their usefulness. His dedication to pushing forward in new areas also gives the sense of a man who wants to be seen as someone more than the CEO of a company that sells advertisements on the back of searches. While there is acknowledgement that the foundation built by Google and it’s successful suite of products is important, by allowing Pichai to control them, Page can seek ways of making a difference.
Just as Bill Gates has become the world’s biggest charitable donor and is working towards an end to polio, Page and Brin have the potential to leave a lasting legacy, whether that is in robotics – Google bought Schaft.inc., Redwood Robotics, Meka Robotics, Holomni, Bot & Dolly and Boston Dynamics and they are likely to form a robotics company – or in building model airports and cities. It may well be that the area they make most impact in is yet to be realised.
What About Us?
What will the impact be for us, then? At first, the public will not see much difference. We’ll still be predominantly using Google for searches (there are three billion queries each day) and for alerts, news, maps, storage and emailing. We’ll also be using it for social networking, for now at least. Google Hangouts has been given its own website, which is one less reason to bother with Google+ and it could well spell the end of a service that has never really been adopted. In the medium term, though, the Google suite of products will evolve, with some dropping away.
Pichai has enough experience of what the division is about and what needs to alter. According to the filing for Alphabet, Google’s business will definitely include search, ads, maps, apps and Android as well as the related technical infrastructure, which it calls the “Google business”. Search and adverts will still be the breadwinner, and the money that flows from them may well be invested in the other businesses that are created – otherwise they may well sink under mountains of debt. Pichai may well be tasked with making his product range more lucrative, and looking for new ways of monetising them. He will also have a bigger influence than before: with YouTube coming directly under Pichai (the YouTube CEO Susan Wokcicki will now report to Pichai rather than Page), it would appear the video service is seen as part of Google’s core business.
By not having the moonshot companies closely affiliated with the money-making ones, though, the Google products will be seen as ideal for investors. The more money pumped into Pichai’s company, the greater the incentive to continue taking the battle to Microsoft and Apple in order to stay ahead of the game. Innovation as a whole is where we will eventually see a difference emerging, though.
Each of the CEOs will look to make their mark on their companies and the wider world. Since some of those companies won’t make money because they are moonshot-based, the impact they have will become a measurement. Those who work within them will also strive to work even harder and more creatively because there will a greater chance to impress and thus to take lucrative and important positions. There are more CEO positions and extra management structures mean promotions will be easier to come by than before. Google will be able to attract the best talent as a result.
It will also see Alphabet follow in the footsteps of other companies. More and more big internet concerns have been diversifying away from their core and reconsidering what and who they are. Amazon is not just a seller of books, but of technology and entertainment services. Facebook is reaching into virtual reality. Apple is as much a music company as it is a maker of computers and phones. They are avoiding the problems of the past when the major tech firms would stick to their traditional core business and fall behind. By breaking up Google with an Alphabet rebrand and numerous smaller businesses within it (albeit smaller businesses that are still large), Google can be more flexible and innovative. Page and Brin can make quicker decisions and make some new bets. So can the CEOs beneath them.
Indeed, last year, Page said that the idea was to build Google’s core business while also getting the next generation of big bets off the ground. “As you ‘age’ – even when you’re still a teenager like Google– you have to work hard to stay innovative,” Page wrote in the memo, which was obtained by The New York Times.
So far, the market has reacted well to all of this. The value of the overall company rose 5% on the announcement of the changes, which means Wall Street feels this will be a good financial move if nothing else. By freeing up the different business components to work independently and grow in their own way, though, we should also see internal competition as well as external. That will, in turn, make Alphabet richer and should convert into a wider range of potential services and developments for us all to enjoy too.
What’s In A Name?
Alphabet is an unusual name, and even Larry Page admits it will take some getting used to. It has also led to speculation that the company will seek to eventually create 26 companies identifiable by each letter just as Android ties food into each letter of the alphabet for its various releases (the latest is M for marshmallow).
While Alphabet may well seek to go down that path at some point, Page says the company chose Alphabet because it “means a collection of letters that represent language, one of humanity’s most important innovations”. He also says it allows Alphabet to refer to its Google roots, something it appears the company does not want to lose sight of, explaining the alphabet as “the core of how we index with Google search”.
If that’s not enough, Page adds (perhaps over-thinking things): “We also like that it means alpha-bet [Alpha is investment return above benchmark], which we strive for!” At least there’s an idea (or three) behind the name.
And, just in case you were wondering, Google is a play on “googol” which is a mathematical term for the numeral 1 followed by 100 zeroes, which is said to reflect Page and Brin’s mission to organise an infinite amount of information on the web.
ABC Is Easy As XYZ
The Daily Mail – the newspaper that does no wrong and is never, ever branded The Daily Fail, of course – decided that Google had made a whopping error during its rebrand by failing to do the most basic of checks to see if “alphabet” was already taken as a domain name. As it turns out, BMW owns alphabet.com and uses it for the running of its fleet services company, a fact which the newspaper reported with some glee, filling up a bit of online space to tell everyone about it.
It also stated that the Twitter handle @alphabet has also been taken by a chap called Chris Andrikanich, who was rather bemused by the number of extra followers this little quirk of fate managed to gain him.
Was this really remiss of Google Inc.? Of course not. Alphabet would not have formed without some research, and to suggest otherwise is plain daft.
Rather than be put off by BMW’s use of the domain name, it went for an altogether more creative and memorable address: abc.xyz. This eschews the use of .com, the gold standard generic top-level domain (gTLD) and, as you’d expect, it has led to a rush of people and organisations to attempt snapping up their own .xyz domains, which is now being seen as cutting edge and cool. It can cost $185,000 to grab one though, and that has made Daniel Negari who owns the .xyz gTLD a very happy man. “Obviously, Google believes in it if they’re rebranding on .xyz,” he said. “This is the ultimate validation.”
Incidentally, the announcement on abc.xyz contains a little Easter Egg pointing to another .xyz domain. By clicking the full stop in the middle of the seventh paragraph, visitors can view the website of hooli.xyz: the name of the fictional company featured in the HBO comedy Silicon Valley, which can be watched on Sky Atlantic in the UK.
Who Is Sundar Pichai?
Born Pichai Sundararajan in 1972 in Chennai, Tamilnadu, India, Pichai joined Google in 2004. He rose from his role as a middle-manager to effectively become CEO Larry Page’s number two. With a Bachelor of Engineering degree from IIT-Kharagpur, an MS from Stanford and an MBA from the Wharton School of the University of Pennsylvania, he is certainly capable – and now he is CEO of Google, replacing Page who becomes CEO of the parent company Alphabet.
He was initially responsible for Chrome and Chrome OS as well as Google Drive and in 2013, he began to oversee Android. One of his biggest, earliest innovations was a toolbar that enabled Google to make its search engine the default option on Internet Explorer and Firefox. Fear that Microsoft would make it difficult to install this toolbar lead to the development of Chrome.
“Sundar has been saying the things I would have said (and sometimes better!) for quite some time now, and I’ve been tremendously enjoying our work together,” says Page. “He has really stepped up since October of last year, when he took on product and engineering responsibility for our internet businesses. I feel very fortunate to have someone as talented as he is to run the slightly slimmed down Google and this frees up time for me to continue to scale our aspirations.”