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By Oren Laurent
President, Banc De Binary
A bombshell was dropped on the tech world last week with Google executives announcing that the company we all know and depend on will undergo a massive reorganisation and rebranding. Google, as we all know it, will now be a company operating under a new umbrella company called Alphabet.
In recent years, Google has grown to develop many tentacles, experimental endeavour and "moonshot" projects that will now have the opportunity to stand on their own feet, as they make up the rest of Alphabet's structure. Calico, Nest, Fiber, Google’s Capital and Venture programs and Google X will all operate under Alphabet while Google in its current from is expected to remain the same.
To put it in simpler terms, the new conglomerate's "money-maker" was made into a separate section, and "everything else" will now be classified as separate divisions. Larry Page will be Alphabet's CEO and Sergey Brin its president. Google executive Sundar Pinchai will serve as the company's new CEO.
Google stock will now be Alphabet stock and while this should not impact the stock's core valuating, one cannot help but wonder what this new conglomerate means for the markets in particular, and for the world in general. Page views Alphabet as a hub for products that can, potentially, change the world: “We are not intending for this to be a big consumer brand with related products — the whole point is that Alphabet companies should have independence and develop their own brands.”
On the upside, there is no denying that breaking down the Google monolith into separate entities gives the company's research endeavours a chance to be more focused and flourish under a designated management team with a clear and unique strategy. Allowing projects to now become companies in their own right, will allow for advancements that, if fruitful, will make the world an infinitely better place. From urban planning, self-driving car, early disease detection, hunger prevention and life extension, Google has had its hand in so many research endeavours in recent years, having them now operate independently is an exciting thought and opens some truly incredible opportunities. The blog post in which Alphabet was announced clearly alluded to the founders' original vision: "From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have."
Indeed, in order to survive a business needs to grow, change and be open to movements and shifts such as these. Moreover, the new structure will enable Brin and Page to focus on innovation while designated CEO's take care of their empire's many divisions.
So, is there a downside to this move? There might be. Firstly, Google's brand name is now officially downgraded. Like it or not, Google will now be just another company under the Alphabet umbrella. While consumers might not feel the difference, services like YouTube and Gmail – that are part of Google – are ostensibly also demoted in importance. It is no secret the founders are far more excited about their new, more adventurous, projects, and the fact that Google will operationally stay the same does not mean it will not suffer from some form of neglect. Furthermore, the funds for these more exciting endeavours are not falling from the sky, they are coming from the cash cow called Google, so one cannot help but wonder if this reorganisation is just another way to take money from Google and throw it into more risky – and sometimes outlandish – projects. If this be the case, what will the new Google CEO have to say about it? Will he have a say at all? Let us keep in mind that Brin and Page will be the ones allocating funds for the different companies. So, while independence seems to be on the table for these different divisions, each CEO will still have to fight funding. Larry Page will be the man handing out the checks, and this could potentially lead to favouritism, which, in turn, will lead to animosity and power struggles within the Alphabet family.
Only time will tell whether the restructuring works or not, but whatever the outcome, Google continues to keep the tech market and the world at the edge of their seats. All that is left to do is enjoy the ride.
Please note that this column does not constitute financial advice.
