Alphabet- The Parent Company of Google
When someone mentions the company Google, we think of a massive conglomerate with numerous subdivisions, including Youtube, Google Maps, etc. However, with a recent reorganization, Google is now a subsidiary of a new company called Alphabet.
On August 10th, the CEO of Google, Larry Page, announced the creation of Google’s parent company.
Alphabet will consist of many subdivisions, with Google generating 90% of its revenue. Former departments of Google will now be individual companies running under the Alphabet umbrella. These include Calico, Google X, Fiber, Nest, and others. Most of the internet-based applications like Maps will still be part of Google.
At this point the big question is, “Why is Google splitting up?”
The reason is transparency. For a long time, Google has been cluttered with numerous side projects that aren’t very profitable. The company uses billions of dollars from search engine profits to fund projects like Google Glass and self-driving cars.
Now the departments are separate and headed by their own CEO’s. Alphabet’s investors will be able to have a better example of the different companies and see where their money is being used. The change also showcases innovative projects to the public.
Another reason is that each company will have its own CEO to lead it. Larry Page will become CEO of Alphabet, with co-founder Sergey Brin as president. They are appointing Sundar Pichai to be the new CEO of the slimmed down Google.
According to Page’s statement, “Alphabet is about businesses prospering through strong leaders and independence”. These businesses can now run more independently, and will hopefully prosper. Alphabet will be able to manage the subsidiaries from a higher up position. Instead of micro-managing day-to-day issues, they can focus on a grander scheme to improve the company’s direction.
On a side note, a common word such as alphabet is already used by numerous companies. In fact, the domain name Alphabet.com is already registered, and its owners have no intention of selling. For now, the Alphabet website is abc.xyz, a clever enough domain name.
Considering everything, Alphabet is a smart move for Google. By clearly differentiating their commercial and experimental departments, the world can better understand them as a company. Alphabet provides a good long-term structure for a company as large and diverse as Google.