Google has a new owner, but it was not sold or taken over – instead, the company’s co-founders, Larry Page and Sergey Brin, decided to demote Google’s importance in favour of a new parent company called ‘Alphabet’.
It is a rather bizarre move by a company as diversified as Google. It has come a long way since the launch of the search engine; it now has a huge stake in the home automation market, is rolling out broadband services across the US and even hopes to combat many diseases. So why the change?
Google was becoming too big and too complicated; it was not sustainable. Especially given that Larry Page and Sergey Brin are never satisfied with the status quo, always looking for new opportunities and markets to enter.
Making up Alphabet is seven distinct subsidiaries; Google, Google Ventures, Google X, Google Capital, Calico, Nest and Fiber.
The stripped down Google is of little relevance to the custom install industry; it consists of Android, Search, YouTube, Apps, Maps and Ads.
Instead, Google’s stake in the custom install industry comes from its other companies; most notably Nest.
Nest was always unshackled to some extent from Google’s leadership team. Like YouTube, it retained its own CEO and ran almost independently of the rest of the business. However, despite having its own leadership, the company still had to justify every move it made as to ensure that it did not affect Google’s money maker – the ad business.
Away from Google’s management team, Nest will now have the ability to make its own acquisitions, without having to justify the cost behind it. The company will also be able to invest heavily in expanding its reach in the home automation market – something that started with the company’s acquisition of Dropcam.
Industry analysts are hopeful that Alphabet’s CEO, Larry Page, will run the company much like Berkshire Hathaway – giving companies complete independence to make their own decisions.
If that is the case, Nest may one day be free to move away from Google products. That means if a partnership with a company outside the Alphabet umbrella makes more sense than one within, it will be free to make that decision without interference.
Alphabet has been created to allow companies to be autonomous; but it has also been done to make the companies more agile.
Many have criticised Microsoft over the years for being too slow to react to market conditions; the company had a mobile operating system long before Google and Apple created theirs, but when its market share began dwindling, the company did nothing about it. The reason for Microsoft’s slow reaction? Some say it is because the company is too big and too concerned with the markets it already dominates.
Microsoft is also one company, so creating products to compete with each other is unheard of. Alphabet has the ability to do that; after all Nest has its home automation platform ‘Works with Nest’, while Google is developing its own ‘Weave’ communications protocol.
In fact, Nest seems uninterested in Google’s efforts with the Internet of Things; when it announced new products earlier this year, it failed to mention Google’s new ‘Brillo’ platform.
By creating Alphabet, Google will move its more experimental and innovative efforts out of the old company and into new divisions; such as Google X and Nest.
As the company’s experimental arm, Google X is working on projects that could one day benefit the custom install industry with new technologies.
One of its projects could help installers with projects in remote locations; which often lack a decent internet connection, or in some cases any internet at all. Project Loon is being developed to deliver a fast internet connection without wires; from a hot air balloon.
It’s a difficult, costly project though. The balloons are designed to be constantly on the move beaming an LTE signal down to the ground from above the weather, inside the stratosphere. Their reliability may not be as dependable as a wired connection.
Without the split from Google, investors could demand that some of the risky projects like this be canned in favour of more profitable ventures.
Outside of Google X and Nest, Google’s other companies may also benefit installers. Most notably, Google Ventures and Google Capital.
While Google has already invested millions of pounds in start-up companies; without having to justify each individual investment, the company is now free to spend even more cash.
Nest first received investment from Google Ventures back in 2011, but it took until 2014 for Google to finally acquire the smart thermostat manufacturer.
That is not the only investment to benefit the custom install industry either; Google Capital has spent $38m (£24m) investing in Innolight, a Chinese company making high-speed optical transceivers, while Google Ventures has spent $70m (£45m) investing in a company looking to reduce electric conversion losses.
As a conglomerate, Alphabet can now acquire companies that have nothing to do with Google; and it can compete with its partners.
Alphabet is now free to make a TV running Android, without facing repercussions from the likes of Samsung or Panasonic – as Google would not be involved. It’s this freedom to create products and enter markets that it was otherwise limited on due to partnerships that could be the key to Alphabet.
While that is what could change, some have noted that Alphabet could simply be for accounting purposes. Which means the average installer and consumer can expect the status quo to remain.
Aphabet Soup originally appeared in Essential Install Magazine