Late Monday afternoon, Google shook up the tech landscape by changing the name of its corporation to Alphabet. Its core advertising and media business—which includes YouTube, digital advertising, Maps and Android—will continue to be called Google. At first glance, it's a bizarre marketing move, but experts say the new structure won't hurt Google's brand.
"This takes a brand that has become so popular it is now a verb and wraps it in a noun the world can immediately understand," said Toby Southgate, worldwide CEO of Brand Union. "It's brilliant."
As part of a corporate reorganization, Google is dividing up its business into different buckets that will live under an umbrella company called Alphabet.
While the media and advertising business will keep the Google name, other facets of the company that aren't big moneymakers like Nest, Google X (the company's "moonshoot factory" spearheaded by Astro Teller) and its investment branch, Google Ventures, are essentially distancing themselves from the Google name and will be lumped into Alphabet.
The holding-company model is intended to give investors and analysts transparency into how much the company makes in revenue compared with how much it spends on side projects like drones, self-driving cars and wearables. The structure is also designed so that each arm of Google's business can grow into its own brand.
"By positioning itself as a giant incubator of ideas, Google will allow individual companies with unique names, unique cultures and unique brands to grow under the Alphabet umbrella," said Ben Hordell, partner at DXagency.
John Marshall, Lippincott's chief strategy and client officer, contended that the new name will spark more innovation. "This bold brand-architecture strategy speaks very loudly, almost shouting, 'a lot more innovation to come.'"
At the same time, the new model will force Google to shed more light on smaller projects it's developing, including failures like Google Glass.
"Google will be forced to become a better manager of its investments and innovations, as its new technologies will need to be able to support themselves in the market rather than be artificially buoyed by the Google brand name," said David Gaspar, managing director of DDG.
Google co-founder and CEO Larry Page will transition to Alphabet in a co-CEO role with another co-founder, Sergey Brin, as president. Meanwhile, Sundar Pichai, who was previously svp of products, will take over as Google's chief.
For those who have followed Google's trajectory of product development over the years, the name Alphabet makes a lot of sense. Code names for its Android operating system updates have rolled out alphabetically since 2009.
"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!" Page wrote in a blog post. "We also like that it means alpha bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products—the whole point is that Alphabet companies should have independence and develop their own brands."
Meanwhile, it's unclear how much of a difference the new structure will actually make for Wall Street. In an email to investors yesterday, Pivotal Research analyst Brian Wieser said, "It may be overly optimistic at this point to hope for discrete business unit breakouts for the display network business GDN, YouTube, other Doubleclick-related activities, Google Play, Android, etc.
"Further, it remains to be seen whether or not key cash flow items such as capital expenditures—which are not commonly broken out by companies with multiple reporting segments, but which are particularly critical for Google—will be disclosed at the segment level."