Google has created a new company, “Alphabet.” However, the new entity will technically be above Google.
Google has once again challenged business practices and created a new path by establishing Alphabet (there’s a quirky website too!), which will encompass the search engine unit and other subsidiaries. While companies that are created at a later junction usually fall below the parent company, Alphabet Inc. will technically replace Google as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights, reported the company.
The completely unorthodox and downright unusual structure has been created to establish more accountability, while at the same time allowing Google to spread its wings further into its projects, hinted Google’s co-founder Larry Page,
“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google”
It’s no secret, Google has far outgrown beyond its original business of internet search and advertising. There are multiple arms doing quite diverse work that seemingly have no relation to the core interest of the company. Subsidiary companies like Google Fiber, which aims to deliver high-speed internet; Nest, which is a home automation company; Calico, which is developing a glucose-sensing contact lens; and Google X, which is developing self-driving cars, are just some of the ventures that Google has become deeply involved in.
While these companies have been created with ambition, more than profitability, in mind, they do need to be allocated significant resources with no returns in sight. Page said Alphabet will provide more independence for such divisions, while Google will essentially encompass those companies that are churning out good profit and are basically accountable, reported Fox News.
Google reported more than $14 billion in profit on $66 billion in sales last year, reported ABC News. Needless to say, the majority of this income came in through online advertising from platforms like Google Search, YouTube and a few other platforms working on similar revenue generation model.
It seems Google will oversee core business platforms like Search and YouTube, while the more experimental platforms that require large investments with no chance of showing immediate returns, will come under Alphabet. Additionally, Alphabet will also oversee Google Ventures and Google Capital, the two corporate investment companies that support and promote startups.
Apart from the logic, could Google be pulling the same trick Apple once pulled? Steve Jobs named his company Apple so that it could be ahead of Atari in the phonebook. Though phonebooks are obsolete, Alphabet still comes before Apple.
[Image Credit | Justin Sullivan / Getty Images]