The move was announced in a surprise blogpost from Google co-founders Larry Page and Sergey Brin, as they aim to shake up the company’s corporate structure.
Alphabet will preside over a number of companies, including Google, with the control of the core search engine being handed over to Sundar Pichai. The technology executive who is Product Chief at Google Inc. will soon take over as the next CEO of Google, as announced in the blogpost.
Google will now exist as a subsidiary of Alphabet under the leadership Pichai, and will include Google’s most obvious internet outlets such as the search enginge, Maps, YouTube and Chrome.
The radical restructuring is in response to large amounts of pressure that the Google co-founders faced, following the launch of some riskier ventures. Projects launched from Google X, a subsidiary which develops self-driving cars and google glasses, will now report separately from the core group.
Separating the two groups will see Google step back from the more outlandish ventures, in an effort to ‘slim down’ the site.
Following the announcement, Google shares have risen by 4.1 per cent on the stock market. Analysts believe stocks will soon rise from $700 to at least $800.
Dr Aleksi Aaltonen, Assistant Professor at Warwick Business School, argues whether the re-organisation will change the basic problem Google is facing.
“Larry Page and Sergey Brin like to cherish an idea that Google is not a conventional company, yet turning Google into a holding company is a step to that direction.”
“Google announced on Monday that it will turn itself into a holding company and organize its diverse businesses as more or less independent subsidiaries. The re-organization pleased investors who rewarded the company with a jump in share price. The new structure is expected to increase the transparency of company operations, which allows investors to excerpt more influence on the company direction.”
“Whether the re-organization will change the basic problem Google is facing is another matter. Innumerable acquisition made by the company over the years and its bold ventures to new industries have so far failed to create commercial success at the scale of its search advertising business. Google is commercially still a one-trick pony, whereas, for instance, Apple has brought iPod, iPhone and iPad to the market since Google launched its search engine.”
Dr Aaltonen continues to say that the move may help Google become even more successful in the future.
“The holding company structure may help Google to create more successful products. This can happen, for instance, if increased investor pressure imposes a healthy short-term perspective to product development or by simply allowing separate business units to operate more independently towards commercial success. At the same time, the holding company structure raises the question would different businesses be better off as independent companies. The new structure makes it easier both to sell off assets that won’t start making profit in a foreseeable future and to spin off ventures that don’t belong to the family.”
Columnist and founder of Audere Capital Richard Alvin, has also written an opinion piece on the decision to create Alphabet and why growing small businesses should consider similar moves. Read it here
