A Year of Alphabet: Great for Google, Less So for Moonshots

Reorganizing itself under the umbrella company Alphabet has done wonders for Google -- but less so for a grab bag of eclectic projects ranging from robotic cars to internet-beaming balloons, which are suffering costly growing pains.

A year after Alphabet took shape, Google's revenue growth has accelerated -- an unusual development for a company of its size. That success, however, also underscores Alphabet's dependence on the fickle business of placing digital ads in core Google products like search, Gmail and YouTube video. As a result, it remains vulnerable to swings in marketing budgets and stiffening competition from another equally ambitious rival, Facebook.

Alphabet was supposed to speed the process of turning offshoot businesses into new technological jackpots. CEO Larry Page predicted that separating these smaller "moonshots" from the massive search-and-advertising business would spur innovation by fostering a more entrepreneurial atmosphere.

That hasn't happened during Alphabet's first year.

Making the Shift

Until Page and fellow Google co-founder Sergey Brin created Alphabet (which turns 1 on Sunday), investors complained that Google was spending too much on high-risk efforts. New Chief Financial Officer Ruth Porat, who joined Google in mid-2015, responded by reining in expenses to keep them more in line with revenue growth.

A few months later, Page announced the plan to draw a dividing line between Google and the far-flung forays Alphabet now refers to as "Other Bets." The mishmash includes smart-thermostat maker Nest; the Fiber project, a high-speed internet service; and X lab, where the company is building robotic cars and designing the stratospheric balloons designed to beam internet service to remote areas.

Other "Other Bets" include the biotech firm Verily and medical-research firm Calico, which has been studying ways to stop aging. Alphabet also runs funds investing in startups and mid-sized companies.

Page argued that fencing off Other Bets would make Google "even better through greater focus."

Core...

Comments are closed.