Meet Alphabet: Google’s New Parent Company

Google made a monumental surprise announcement that it’s rebranding itself as Alphabet. Alphabet will be the new parent company for the tech giant. Google founder Larry Page posted a blog titled, “G is for Google” which explains the reasons for the announcement.

So what is Alphabet? Alphabet is a collection of companies with the largest one being Google. Page explained, “We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search!” They understand it might sound crazy and referred to previous crazy things that now have over a billion users like Google Maps, YouTube, Chrome, and Android.

What you thought of as Google like Search, Ads, Chrome and Android will just be one division inside of Alphabet. The different science experiments and other projects from Google will each become their own company with their own CEOs. This includes Nest, Google Ventures, Google X which does self driving cars and many more.

On the surface, the Alphabet change emphasises that they are taking all their exciting breakthrough side projects seriously. It will also allow the founders to focus on the future, Google can focus on more ambitious projects, and help the company retain top talent.

But if you look deeper it could be that they are being forced to engage in empty, legal schemes to satisfy Wall Street that don’t fundamentally change how the company works. Something to be concerned about is if the CEOs get frustrated relying on the founders for resources. This news would be troubling to anyone working at Google. Between the deeply embarrassing failures of Google Glass and Google Plus their dependency on their established ventures are more apparent than ever.

When it comes to stockholders Alphabet Inc. will be replacing Google Inc as the publicly traded entity. All Google shares will automatically be converted into the same number of shares of Alphabet, with the same rights. Google will then become a wholly-owned subsidiary of Alphabet. The two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG. After this change Wall Street immediately rewarded them by boosting Google’s stock value by $20 billion.

Its hard to believe the founders would have made the shift if they believed it would hurt the side projects. With the transition the side projects no longer have to justify themselves as adding value to Google’s advertising business. On the downside to that they will be stand alones to rise and fall on their own.

At the end of the announcement, Page  posted:

We are excited about:

• Getting more ambitious things done.
• Taking the long-term view.
• Empowering great entrepreneurs and companies to flourish.
• Investing at the scale of the opportunities and resources we see.
• Improving the transparency and oversight of what we’re doing.
• Making Google even better through greater focus.
• And hopefully… as a result of all this, improving the lives of as many people as we can.