Google is going to split into smaller companies governed by a new entity: Alphabet

If you ask anyone about what they use the Internet for, the word Google is sure to pop up. Google is a company that has pervaded popular culture, and is a tool in the arsenal of every netizen. Its influence has been so extensive that it warrants for an inclusion as a verb in dictionaries. 

Google is the biggest Internet Company, and is one of the few prestigious companies that survived the dot-com bubble disaster. However, despite it being one of the most influential companies in recent times, it has to keep innovating, like any other company.

This has the unfortunate effect of unnerving investors, who don’t want Google to squander away its profits in pursuit of moonshot projects, as Google likes to call them.

Today, in lieu of the above scenario, Google announced a major-restructuring that would change Google as we know it. Here’s the gist of it: Google would split into multiple smaller companies governed by a single large conglomerate: Alphabet.

Google Search, , Android, YouTube and Maps would be grouped together in a single company: Google. The rest, including  Chrome, Google X, Ventures, Capital, Life Sciences and many other Google divisions would spin off into their own smaller companies.

Each smaller company would have its own CEO, and its management structure would be akin to that of an independent company. And these smaller companies fit together as cogs of a larger entity, and this entity is named Alphabet, which is a conglomerate consisting of all these companies.

Alphabet would be managing the finance distribution and general governance of all these companies. As part of the restructuring, Larry Page would become Alphabet’s CEO and Sergey Brin would become its President. For the new Google (With just Maps, Android, Search and YouTube), Sundar Pichai would step in as CEO. This was to be expected as Sundar Pichai has been getting control of more and more divisions over the years and this was just the logical next step.

Now you might be wondering how exactly does it benefit Alphabet, since the newer conglomerate is similar to the old Google, with the only difference being that each division is a separate company. Well, the advantage is that even though they are a part of Alphabet, for all intents and purposes, each division would be treated as a separate company. The main revenue sources (Maps, YouTube, Android and Search) would be separate from moonshot projects, acquisitions and other divisions, thus satiating investors.

Also, since each division gets its own management team, Google can actually innovate better and turn its projects into reality faster. For instance, earlier, when Google X was a part of Google, its projects couldn’t move fast enough since the focus was on Google’s core businesses. Now, since Google X is a separate company, it can hire independently and move faster to bring those moonshots to life.

There may be disadvantages to this model too however, since before innovations made in one division was soon adopted across other divisions. When the divisions themselves are separate, could they communicate effectively?

Investors apparently are happy about the restructuring, since Google’s stock jumped 5% after the announcement.

What do you think? Is this a better Google, that has a clearer view of its goals or is it not going to work out, with poor communication and finance management?

 

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