Mark Ritson: Why Google’s new corporate brand Alphabet is a huge strategic move

It doesn’t matter that Alphabet sounds generic, the brand will be visible only to employees and investors and give Google’s many sub-brands the freedom of their own organisational cultures.

Ritson award winner

The shock announcement last night that Google is about to rename itself Alphabet sent business titles and marketing magazines into tailspins of confusion. It’s entirely typical of the marketing cognoscenti to have no fucking clue what the move means. A tiny company changes its font or updates a logo and an army of so-called opinion leaders climb over themselves to offer half-arsed commentary and dodgy analysis, but when the fifth-largest company in the world embarks on the biggest brand change in its history, the move is met with stunned silence and the odd question mark.

So let’s break it all down step by step.

This is a brand architecture play. That’s huge because when a company the size of Google alters its architecture its always big news – on a par with the announcements of HSBC (1998), Unilever (2004), Procter & Gamble (2011) and Coca-Cola (2015), all of which also introduced new architectures for their organisations. What makes this particular move so fascinating is that unlike all the brands mentioned above, Google is moving in the opposite architectural direction. The theme of the past decade has been brand consolidation and the move towards a single ‘branded house’ approach to brand architecture. Google is doing the exact opposite by creating a pure ‘house of brands’ with Alphabet as the silent holding company.

Ignore the marketing morons claiming that the name is too generic or snorting about not owning the web rights or Twitter handles. The whole point of a house of brands structure is that the corporate brand becomes essentially invisible to the outside world, only relevant to senior employees and investors.

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The move makes strategic sense on a number of levels. First there is the simple issue of scale. When you start a business (and usually until you pass £100m in revenues) the advantages of a single brand far outweigh the impediments: a single marketing budget, one organisational culture, one employer brand and one senior leadership team all make the branded house the de facto approach for brand consultants like me when we advise clients. But with success comes growth and with growth comes complexity and scale. As Google has grown and diversified the sheer size and scope of its mission demands a more efficient and structured approach.

Aside from simple organic growth, there is also the added complexity of mergers and acquisitions. Google has reached deep to buy big brands like YouTube, Motorola (since offloaded to Lenovo) and DoubleClick – to name but three of more than 180 acquisitions. Google’s new house of brands architecture is a much more suitable structure to buy and sell companies. It’s one of the reasons the likes of Diageo and luxury conglomerate LVMH operate similar approaches – both often buy and sell brands and don’t want the parent brand to shadow the consumer perception of the newly acquired entity or suffer the internal headaches of integration and immersion into a branded house.

The house of brands has another huge advantage for Google in that it encourages and facilitates innovation – something that is vital to the company’s future success. Having one dominant brand, like Google, tends to stifle different approaches and organisational sub-cultures. Alphabet’s new structure will allow Google to do things in a Google way and the other hyper-innovative brands like Nest to do it their way.

That independence confers an additional advantage of reducing risk. With many eggs in the house of brands basket, Alphabet will be much less vulnerable to major scandal or impropriety. There have been ​negative brand ​associations with Google and its​ approaches to ​tax, data protection​ and international secrecy for many years. The days of Google standing for freedom and ‘not being evil’ – to paraphrase its corporate motto – are long gone, and founders Sergey Brin and Larry Page must surely be aware of it. By creating a house of brands ​and the Alphabet holding company ​they ​distance corporate risk from brand equity and reduce ​any potential impact of ​corporate misdeeds on its ​consumer  brands.

Finally, the move sets up succession planning. Brin and Page now move upstairs to a holding company that allows them all the control they have become used to with none of the day-to-day responsibility that most billionaires abhor. It also creates a set of CEOs beneath them from which they can select their eventual replacements. Alphabet is a very smart move. But to understand it you have to know a little bit about Google and a lot about real brand strategy. Not emojis or Instagram. Real brand strategy.

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Comments
  • Michael 12 Aug 2015 at 9:57 am

    Good analysis. The move is totally logical and probably well overdue. Google’s diversification over recent years has verged on the schizophrenic. They have shown none of the clarity of purpose of their rivals at Cupertino. At least now they can ‘go play’ without the backlash.

  • Chris Ellis 12 Aug 2015 at 2:15 pm

    Why oh why does the Media Week sub-editor still write a headline about “Google rebrands to Alphabet” and thereby misses the point entirely?

  • Jonathan Cahill 13 Aug 2015 at 1:35 pm

    Not sure why previous comment not posted.

    Forming different divisions with specific areas of responsibility seems a sensible and constructive organisational move. However l fail to see how the names of these different organisational silos become brands. To talk of a “house of brands” seems misguided. l appreciate that there is often a rather cavalier use of the term ‘brand’, but would expect a little more rigour from this quarter.

    The only items which might be deemed ‘brands’ in this galaxy of names appear to be: Google, Android and YouTube. They are the only ones which have a direct interface with the consumer. Otherwise l guess we’ll be calling the HRM division of a company a brand. Absurd!

    • mark ritson 13 Aug 2015 at 2:04 pm

      Fair comment but mistaken.

      I’m not making up this concept of a “house of brands” in an anecdotal sense. Its part of the Brand Relationship Spectrum published in the CMR over a decade ago by Aaker and Joachimsthaler – one of the great publications in the history of brand management. By your definition P&G was not a brand for the first 80 years of its history which is clearly bogus. You don’t need end user brand equity to be a brand, that’s the point. Anyway read the article and then re-comment if you still aren’t buying it. Which you will be. After you read the article. And understand the concept.

      • Jonathan Cahill 13 Aug 2015 at 3:02 pm

        l note you talk about what you need to be a brand, which you say is “the point”. l agree. So l’d be interested to know what your definition of a brand is? It appears to be a rather barren field as most statements l have come across which purport to be definitions are merely descriptions.

        l have worked with P&G for many years, both in the UK and abroad and not once was there any indication that it was considered to be a brand, either by the company or the consumer. The decision to treat it as such is only a recent development. So l don’t quite see what is the basis for the “clearly bogus” opinion. By whose criterion? Not P&G’s nor the consumer’s. Who else is there?

        l am still unclear how the “house of brands” can apply to different organisational divisions. l am not aware of the reference you quote but, however august, l fail to see what relevance it has to common sense and basic English. But then that is a shortcoming of much academic work. l suggest you read the article by Scott Armstrong of the Wharton Business School on this subject.

        Still, l see you think l am mistaken, which is naturally your right. Unfortunately l don’t see how.

        • mark ritson 13 Aug 2015 at 7:24 pm

          Its a good debate ! And Scott Armstrong is a fine scholar and expert on advertising effect – though what his relevance is on this topic is a little lost on me.

          The P&G example is a perfect illustration of a “house of brands” architecture. You are 100% right, it was not considered a consumer ‘brand’ until around 2011 when the company began to use it with consumers for the first time. In the brand relationship spectrum that move would be defined as a shift from “house of brands” to “endorsement”. I think the whole point of this debate is whether P&G was and Alphabet now is a brand and the point of a house of brands is that there is a holding company at the head of the company that operates as a holding company only.

          But it is a brand – yes – its the corporate brand name that is used for employee brand equity (P&G employees referred to them as such long before 2011) and investors, and several other external stakeholder groups.

          And sorry I do not why my original point beneath yours has now disappeared but I do think dismissing a great article like the Brand Relationship Spectrum as failing the laws of English and Common Sense is still a bit bogus.

          • Jonathan Cahill 14 Aug 2015 at 4:17 pm

            Thanks for this. l suspect that the root of the problem is the definition of a brand, hence my asking for your take on it. l feel ‘brand’ has become a term like ‘art’, for which no-one has a clear definition and therefore the goalposts can be moved around at will. Unfortunately this does not give a very solid foundation for debate.

            The article by Scott Armstrong was ‘Evidence-based Advertising: An Application to Persuasion’ in the International Journal of Advertising. Of particular relevance was his appraisal of the usefulness of most academic work.

            l did not dismiss the article you quoted – this would have been rather too cavalier. l stated that l was not familiar with it. Therefore it was not possible for me to judge its relevance without any understanding of its context – as l wrote. So l was only left with the perspective of common sense and English, which are two useful companions to whom it is usually sensible to refer.

            l am sure that when l have a clear understanding of what you define as a brand, then much of my evident confusion will be assuaged.

          • Neil Anderson 16 Aug 2015 at 11:57 pm

            I lived in Japan in 1994, and I’m pretty sure I recall P&G being overtly promoted as sponsors of specific TV programming, and also their P&G branding as a tag on the end of their TVCs, plus the usual minor branding on the back of products.

  • sag129 18 Sep 2015 at 5:19 am

    “Brin and Page now move upstairs to a holding company that allows them
    all the control they have become used to with none of the day-to-day
    responsibility that most billionaires abhor.”
    > How do you claim this?

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