Google to Alphabet: An analysis by Francesco Radicati

Francesco Radicati, Senior Analyst, Digital Services, Ovum presents his perspective on birth of Google’s parent company Alphabet:

Google is restructuring itself, with new parent company Alphabet created to oversee the Internet giant’s range of activities. The core Internet, search, and Android businesses will continue to operate under the Google name, managed by Sundar Pichai, who had previously managed a range of products including the Chrome browser and Android operating system. Google’s Capital and Venture businesses will be organized under their own CEOs, as will Google X, the “moonshot lab” responsible for new projects like the driverless car.

While the move is primarily intended to make the company’s operations more transparent, it has implications for each of the core businesses. First is the core Google brand, which will retain control of Android, YouTube, search, and maps, among other businesses. Removing the moonshots and connected home activities from Google’s portfolio should enable it to focus on increasing its penetration in key markets such as India and China – the latter is a large market for so-called “forked” versions of Android, which don’t connect to the wider universe of Google services, effectively putting the company in competition with itself.

What’s less clear is the implication for Google’s IoT-related businesses. Projects such as Thread and Nest weren’t mentioned in CEO Larry Page’s letter announcing the restructuring. However, these businesses, like Google X, will benefit from the tighter focus on their respective areas of interest by being separated from the search and YouTube businesses.

Another benefit is that less successful products won’t necessarily tarnish the main brand as severely – examples include the Google+ social network, which was recently decoupled from YouTube and other Google products, and Google Glass, which has been placed under the responsibility of Tony Fadell at Nest. Unsuccessful ventures won’t be associated with the Google name, while successful ones will be more easily tied into the overall brand once they’re established.