Why Google is rebranding itself as Alphabet

Google’s massive reorganisation to make it a subsidiary of a new company called Alphabet brings its focus on its ad business into sharp relief, as well as providing it with the means to innovate, take risks and keep investing in blue-sky technology.

Google

Why the rebrand?

Google started life as a search engine but in the intervening 17 years it has expanded to become much more. It has bought YouTube, launched Android, unveiled Maps – all now properties with more than one billion users.

It has also diversified into other areas. It designs driverless cars, flies drones, develops wearable technology and invests in start-ups.

In short it has become a vast and diverse company. Its mission statement – “To organise the world’s information and make it universally accessible and useful” – no longer makes sense for a Google that pours resources into anti-aging technology and balloon-powered internet access.

Michael Quirke, senior consultant at brand agency Brand Union, says: “Their ambitions in health, hardware and drones are too far from their search core to keep under the Google name, and that name was beginning to get tarnished for its world-eating ambitions.”

It is also an attempt to separate out its money-making business – basically the new Google – from all the other Alphabet businesses that require investment.

Rik Moore, head of creative strategy at Havas Media UK, says: “It allows the best of both worlds – to both protect Google from association with any future false starts, while giving new projects breathing space to find their own identity away from the Google mega-brand.”

Why Alphabet?

Larry Page, the Google co-founder who is now CEO of Alphabet, explains the decision behind the name.

“We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for!”

g is for google

However don’t expect Alphabet to become a big consumer brand. As Marketing Week columnist Mark Ritson points out, much like Diageo and LVMH most people won’t hear about Alphabet – it’s for employees and investors only.

Page adds: “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.”

The move means Alphabet’s individual brands – Google, Nest, XLabs – will have their own CEOs with their own strategies and marketing budgets. Google will no longer have to work out how to integrate new businesses or acquisitions into a bigger company, allowing them to operate as separate companies and succeed from there.

This is also about innovation. Google hopes autonomy for its separate businesses will make them more prone to try new ideas and technology. They’ll also be able to do so without impacting its main internet business.

“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes.

“In the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”

Larry Page, Alphabet CEO

What does this mean for Google?

For Google itself it looks much like business as normal although it will now have its own CEO in Pichai dedicated to getting the most out of its internet operations. He has risen up through the ranks at Google through his leadership of the Android operating system.

Google’s ad business should benefit from a renewed focus from Pichai. It is clearly already hugely successful – eMarketer estimates that $1 in every $10 spent on advertising globally goes to Google, equal to $53bn after it has paid back its ad partners.

However products such as YouTube could use some focus. eMarketer estimates that YouTube will earn Google $9.5bn this year, but analysts estimate that the video network still doesn’t turn a profit.

Lee Woodard, managing partner at Tribal Worldwide, says: “I would expect to see analysts now challenge Alphabet on Google’s strategy and performance and hit them harder for under performance. In light of a greater focus from Wall Street, I would expect to see Google push harder monetisation strategies across their platforms. So, it will be like Google, but just focused on making even more money.”

YouTube recently tightened access to its ad inventory, putting it on a collision course with ad tech companies that have built their businesses around helping brands buy ads on the video network. The new Google faces the same old problems – how to keep antitrust authorities at bay and ensure the goodwill of the advertising industry.

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