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

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.

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.