Like many, I've spent the past 24 hours trying to figure out Google's latest out-of-left-field move, the decision to create a new holding company called Alphabet. If you've been only half-paying attention to tech news, the gist of it is this:
- Google will form a new holding company called Alphabet, which will be Google's parent company. Alphabet will be the publicly traded stock that will replace Google.
- Core Google businesses (i.e. the businesses that make most of the money) will remain under Google. This includes search, ads, YouTube, maps, Android.
- The other businesses that are more unproven but with high upside will be separate, independent lines of business that report up to Larry Page (CEO) and Sergey (President). These include Calico (health/longevity), Nest (smart home), Fiber (broadband) as well as Google X and the investment arms.
Of course, there's been lots of takes on this, and there have been some that have highlighted various reasons for the move. Kara Swisher of ReCode says that things won't be all that different, other than some accounting transparency:
In fact, in my opinion, it is in the numbers where you can find the real reason for the move, imposing on the company a new transparency with regard to its far-flung and very different divisions — from the money-making search unit to the more unusual ones like its money-sucking efforts with drones and prolonging human life.
Will Oremus of Slate says the move was to basically show the world that the new Alphabet - and Google before the restructure - is company with some extremely profitable cash cows that are, in large part, about funding the company's moonshots.
My initial thought as to the impetus for the move: Page and Brin, who are big-thinking inventors and entrepreneurs by nature and choice, have grown tired of having to justify their moonshots to Google investors who think the company should stay focused on profitable fields like search and video. They'll still have to do that now that the company is named Alphabet, of course. But changing the company's name and structure may be their way of signaling that it is fundamentally a moonshot factory, and always will be.
I think they're both right. In part, Larry and Sergey are interested in changing the world, and they want to focus on that. This new structure allows them to. The new structure also creates some - although to what extent is uknown - additional transparency around both the core Google businesses and the moonshot business units now reporting directly to Page.
All that aside, it's interesting to ponder what all this means to Nest and the company's other smart home and IoT initiatives. On one hand, the move makes clear that Nest is still firmly categorized under moonshots. But beyond that, I have to wonder how the various distributed efforts will be impacted.
First off, the company's smart home hardware group will be separate from Google and, as a result, Android. Not that the two were intimately intertwined to begin with, but it's clear that there had been a distributed effort across the company to seed the IoT and smart home space with a variety of foundational technology platforms, from Nest's Works with Nest program, the Thread effort, and more recently the Android-centric Brillo and Weave efforts.
If my understanding of the new structure is correct, the foundational platform-centric efforts in Brillo and Weave that center around Android will continue to be pushed through Google. Thread has never been as clearly defined from an ownership perspective, but that's often the case when a company tries to create a new technology standard, which is what Thread essentially is.
Long term, it's probably a plus that the newer, more experimental businesses are not a part of old-Google in that they'll be freed of the operational and financial inertia that money-making divisions within a company so often demand. Instead, they'll be a part of the moonshot group, where they'll be encouraged to take risks and more focused on building markets rather than meeting financial targets (at least initially).
Brillo and Weave staying under Google makes sense, even if the path to monetization is not as clear with the company's IoT efforts as compared to mobile Android. What is clear, however, is that having them stay with Android assures they'll continue to get care and feeding as part of the large developer ecosystem Google has built around the mobile OS.
How will all of these play together and come together in a cohesive strategy? I'm not sure they will, but that's probably ok because they didn't exactly fit into a nice and neat cohesive whole before the move. Post move under a new structure that, like Junko from EE Times writes is somewhat reminiscent of a Japanese Zaibatsu, there's just as good a chance that the various distributed efforts around smart home will work together when and where it makes sense.