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G is for Google (googleblog.blogspot.com)
2228 points by dkasper on Aug 10, 2015 | hide | past | web | favorite | 562 comments



Wow, they are doing letters? Really? Letters? Hey is Eric Schmidt still in the building somewhere? Ask him how well Planets worked out for Sun Microsystems.

Interesting strategy, hard to second guess from the outside of course. Sun's motivation was to figure out whether the other parts of the company could stand on their own[1], it also makes it less fiscally complicated to discharge an entire group into the void. Think HP selling off the Agilent half of itself.

Generally though this sort of move is a way of containing and then "fixing" cost problems. Divestiture is so much easier once you've created the framework of a whole organization around each chunk. It can also be weirdly inefficient, at Sun each of the "planets" paid in a sum of money to IT (Bill Raduchel's organization) for "Corporate IT support" except that Corporate IT didn't work for them, they were just the only vendor you could use to get your IT services, so what you ended up with was really crappy IT work that you couldn't shop around for. It was maddening. But the 'collection of companies' design pattern requires either that you have your "service providers" that everyone uses (HR, IT, Legal) which gives little incentive for quality service, or everyone gets their own version which means a lot of excess overhead and duplicated work.

I could think of at least two other ways Google could have re-organized without bringing that pain upon them, and as Eric lived through it at Sun as well I'm sure he has an opinion.

Oh, and having one of the sub-companies get the world's #3 brand? I wonder how that works out.

[1] Answer "No" for SunSoft, "Yes" for Sun Hardware, "No" for Sun Labs.


Ha -- the Sun planets experience was the first thing that occurred to me as well. In my experience, the planets model was a total, unequivocal failure at Sun -- and the answer to the question of whether those companies could stand on their own was actually "no" for all of them (SME, SMCC and SunSoft all needed one another; the value came from what they delivered together). And Sun customers should blame the planet model for one of the worst decisions in the history of a company that had plenty of contenders for the distinction: unbundling the compilers from the operating system and separately monetizing them. But at least SunSoft, SMCC and SME came to realize that they had shared interests -- in stark contrast to JavaSoft which actually thought it was a separate company (never mind the unending welfare checks from SMI). Sun was a company prone to tribal warfare; as it turns out, dividing the company into tribal homelands did nothing for national unity.

In terms of what's happening here with Google/Alphabet, I imagine that there is some desire to see if some of these companies can make it independently while still being able to make transfer payments to support those that can't. The problem, of course, is that this builds much more explicit resentment from those that are profit-centers towards those that are cost-centers. It will be interesting to see how this works out, but hard to see how this is a stable state; it seems that shareholders will demand that businesses be spun out entirely -- or that the whole thing will have the fate of Google+ and be quietly folded up three years from now...


> this builds much more explicit resentment from those that are profit-centers towards those that are cost-centers

An additional bit of trouble, coming from the way Google's current profits are made, is that the profit centers are mainly perceived as less glamorous than the cost centers, which seems likely to only add to the resentment. It becomes much more explicit then, that the people doing the various bits of gruntwork needed to keep AdSense working (hugely profitable, but full of jobs like "sales" and "click-fraud arms race") are funding the people getting on the news for drones (not profitable, but cool). Not impossible to manage, and I'm sure they've thought about it, but does seem challenging.


That was definitely true at Sun as well. At one point, Arthur van Hoff told me with a straight face that "every E10K Sun sold was because of Java." This was in early 1998 -- and it was categorically (and demonstrably!) false. We at Sun who had the filthy task of actually making money were looked down upon by those who were responsible for spending it -- and represented one of the ultimate failures of the planet model, in my opinion.


I can't see why anyone would object to that kind of arrangement. The whole reason we do the boring stuff is because it pays for the exciting stuff. If exciting stuff could pay for itself, nobody would ever do anything dull.


If the dull stuff compensated for the lack of prestige with cash (for example), that might be true. But in reality, the low prestige tends to go with low pay, low promotion opportunities, and low recognition.


and that's why you need open allocation in a huge company. keeps everyone honest and allows economy of work to balance effort and pay.

if you don't balance people not wanting to do the low grunt work, you'll only get inexperienced or low rank employers to do it which is extremely hurtful in the medium run (say not in a year, but you'll definitely notice within a decade)


Some things I've been thinking about

a) Is this about firewalling disappointments and legal problems from Google's core business from the new things that will drive it for the next 20 years?

b) Will they spin out Google's Europe operations in to a separate company so EU regulatory actions have minimal impact on the rest of thier business?

c) Are there other changes they are worried about to the ad business? Proposals to change the tax status of advertising deductions (US) would hit their bottom line hard, even if it if their ad auctions algorithms continue to behave as shill bids.

Will be interesting to see how this changes the main Google business, for better or worse.


To be clear I think all of that resentment is already in place and this is an attempt to bring it into the light and better manage it. I remember hearing Amazon folks thought AWS had nothing to do with Amazon and was a huge capital suck and they hated it. Now of course it's probably 30 - 50% of their valuation. Thats one way to get the "core product" folks to warm up to experimentation.


> And Sun customers should blame the planet model for one of the worst decisions in the history of a company that had plenty of contenders for the distinction: unbundling the compilers from the operating system and separately monetizing them.

Hear, hear.

The only thing Sun did that is the running for being even dumber is blowing Solaris x86. They released a pretty (for the time) awesome Solaris x86 product back in 1993, but never really got behind it. I had a Solaris 2.5.1 x86 workstation at work in 1997, and even then, my then-boss Scott Swanson was saying how Sun had blown it in terms of taking over the x86 server market.

I mean, even into the year 2006, Red Hat was telling me if their kernel crashed on a RHEL box, I had to set things up so the core file would go out over the network, instead of somewhere on a local disk. Sun had solved problems like that long, long before.


Aaaaaaaggh. Solaris x86. I know of at least one firm with 30-40,000 instances of RHEL that had been a Solaris shop. The firm tried Solaris x86, Sun essentially abandoned the platform and the firm's internal engineering board said "Never again." I'm sure that story played out again and again. What a colossal mistake.


Ugh, yes. For those who don't necessarily have the context: in January 2002, Solaris management elected to "defer" shipments of Solaris 9 on x86.[1] Technically, it was not EOL'd (and support was never removed from the operating system) -- it was merely "deferred." Of course, everyone (rightly) inferred this to be the death of Solaris x86. We in Solaris engineering knew that this was entirely asinine (and that x86 was handily outperforming SPARC) and we continued to test x86 and assert that it function (that is, if you broke x86, it remained grounds for work to be backed out)[2]. In October 2002, thanks to the work of Solaris x86 activists outside the company and Solaris engineering inside the company, the decision was reversed[3] -- but the damage was done.

The only upside (such as it was) was that the loss of trust helped accelerate the argument internally to open source the operating system, which we finally did in 2005 -- a system that lives on today in illumos.[4][5] So in the end, Solaris x86 (like many Sun technologies) represented both the company's worst (capriciously killing it) and its best (open sourcing it, giving it eternal life). Nothing about Sun was simple!

[1] http://www.cnet.com/news/sun-delays-solaris-9-for-intel-chip...

[2] http://www.theregister.co.uk/2002/06/07/sun_to_reprieve_sola...

[3] http://www.theregister.co.uk/2002/10/04/sun_to_unbundle_sola...

[4] http://www.slideshare.net/bcantrill/fork-yeah-the-rise-and-d...

[5] https://www.youtube.com/watch?v=-zRN7XLCRhc


An alternative model is Samsung (and several other Korean chaebols), where upper management decided that the individual companies would be hurt by trying to act in the interests of other Samsung companies, and should act in the market on their own - e.g. how Samsung's components (touchscreens, SoCs) are sold to Apple, their mobile division's great competitor. This kind of heads-I-win, tails-you-lose strategy is enabled by the high level of autonomy lower-level groups have.


I don't think it's quite comparable though. This is chopping off companies with essentially no synergies with the core business, which are kept in a single monolithic entity. If anything the association is often negative, with the assumption that the only reason Google owns a business (e.g. Nest, Fiber) is to hoover up people's private information.

Now, there would be insane ways of splitting the company. Say putting building and operating data centers into a separate company from the company using the data centers to run services. Or splitting Android or Chrome into a separate company that'd then be funded by selling the default search engine setting to the highest bidder. If that kind of thing happens, it'd be women and children first into the lifeboats.


Agreed. And I hope that does happen. This is the best chance for Google to clear out the air around all the privacy and transparency issues it has been tackling. However I do wonder if that indeed is the plan.

For example, Google would not want to miss on the data from its Fiber or Auto or Nest projects say. It is too valuable to not include as part of a user's profile.

If anything, I feel it can lead to just making the situation even more muddy. What happens to all the Terms and conditions? Privacy policies? Would they, or even can they, stay merged?


For one thing, they're specifically keeping Labs as part of Alphabet directly, rather than as a sub-company. That seems like recognition that experiments shouldn't have to immediately pan out or immediately become self-sustaining.

For another, they've said nothing about how they plan to handle IT and infrastructure. Though that'll certainly be interesting; they'd be foolish not to take advantage of the Google datacenter and cloud services to accelerate new projects, for instance.


The recent release of kubernetes into the public domain seems to align with this. Add to that Google's cloud services and you have infra that can be used by the independently spun off orgs.


Well, yes, but Sun was more than the sum of its parts. Alphabet is actually less than the sum of its; Google is a highly profitable ad business that's still showing nice growth. The rest is a hodge-podge of startups and fantasies that provide neither revenue nor profit and have little chance of ever doing so. Most of them don't even have products. There's no reason to think that what is being taken out of Google was helping its business in any way, yet the market right now is willing to pay big option premiums on the remote chance of some future success. So what is now Alphabet would be worth more if Google were spun out entirely to its existing shareholders, because they'd get whatever Google is plus whatever people are willing to pay for the imaginary stuff. As a whole, it's just Google less a lot of its profits. None of this was true of Sun.


Technically, that's the definition of "the sum of its parts". The others are absolutely intended to have revenue and profits. Fiber already has revenue, and the potential upside on self-driving cars is astronomical. Non-G Alphabet is not a charity. It's just not (yet) a cash cow.


On the other hand, Semco is an example where this kind of thing worked really well. Their model of empowering employees, allowing innovation and splitting the company into a large number of micro-businesses had dramatic impact and turned the company around.

Maybe the differences is that they did this to encourage diversification and innovation, not to manage it.

https://hbr.org/1989/09/managing-without-managers


For some reason, people really do like to try the internal market approach. It's not only on IT, companies do that with legal, accounting, any kind of creative sector (like marketing), engineering... I'm yet to see somebody try that with top management - might be a nice experiment.

Internal markets are a really nice and well tested way to gather all the flexibility and agility of a corporate environment, while losing none of the risks, transaction costs and antagonism of a real market. It's a sure way to move your company forward!

But, rants apart, I read the article as Google creating something similar to Lucent Labs, not as separating bureaucratic divisions.


Sounds like a form of the ChargeBack system for IT. It makes bean counters happy, but spreads misery every place else.


> spreads misery every place else

this is actually why bean counters exist!


I guess Alphabet is meant to be the PG of tech products?



That is an absolutely horrible visual presentation of information.


How would you do it instead?


nested boxes in a heatmap-style arrangement


Disrupting The Conglomerate.


Does it matter if it's letters or planets? What worked for one might not for the other and vice versa.


At least they didn't call themselves Googlesoft or Gapple, in an attempt to define themselves in terms of their current rival-of-the-decade like Sun did.


I think you're taking the concept behind the name a little too literally...

They're not going to collect one company per letter just so they can have an "alphabet" of 26 companies. The name just implies that they have a collection, a variety, a spectrum of companies.


The alphabet is better than planets because you can always throw in more Unicode letters, while those damn astronomers took away a perfectly good planet!


I don't get it.


It's hard for a company like Sun to have a collection, a variety, a spectrum of companies, when busy-body astronomers feel compelled to reclassify your favorite planet as a "dwarf" out from under you.

http://www.cbronline.com/news/sun_microsystems_announces_plu...

But Alphabet has a long way to go beyond the 26 English letters, before they run out of funny diacritical Unicode letters with umlauts, accents, slashes, ligatures and dingbats.


Right, that's what I was saying. The point is obviously not to collect one company for each letter. When they have 5 companies that start with G, are you really going to look at them and say "LOL I TOLD YOU SO"? The name just means variety, not a specific naming plan.


[deleted]


Don't misunderstand me, it isn't dislike, its amazement. Some things really do well under multiple companies, think BASF or Siemans where the core that holds them is something common to all the sub-companies. But historically tech companies do not prosper in that model, and generally for a similar reason, there isn't anything in common between the companies except maybe there are smart and talented people working there.

The original Sun vision was that Sun Hardware would sell SPARC architecture machines running any OS, SunSoft would sell Solaris for any type of hardware, Sun Labs would license their innovative research rights to anyone who wanted to productize them. Except ...

Nobody really wanted to run their OS software on Sun hardware because SunSoft had an inside track on what was coming out. Sunsoft couldn't really make Solaris on x86 just as powerful as it was on SPARC because it would undercut Sun's HW arm, and Sun Labs? They could never really license a technology to a Sun competitor without the other two companies vetoing it. The whole reason FirstPerson was created (the shell company that was developing Oak which became Java) was to keep the politics and other constraints off what could be done with the software. And when the group told Sun it was going to ship first on "Chicago" (aka Windows 95), Scott McNealy blew a gasket.

Pretty much everyone I've talked to about that decision in depth thought it was a net negative for Sun and that had we had a chance to do it again, they would do something different. And since Eric was right in the middle of that, I would have expected him to advise Larry and Sergei that it wasn't the best choice. And maybe he did, and maybe they have a scheme that will avoid the problems Sun had. I'm surprised though that they chose that route.


The difference I see is that Google isn't unbundling their core businesses from each other; we're not getting something like Sun splitting SPARC and Solaris.

Search, Android, Chrome, YouTube, Maps, etc. are all staying under Google. The stuff that's going under other Alphabet subsidiaries is the stuff that's totally disconnected from Google's core businesses, like Calico, Life Sciences, etc.


Joel Spolsky's Strategy Letter V is something that I think is interesting in this Sun conversation

> Sun is the loose cannon of the computer industry. Unable to see past their raging fear and loathing of Microsoft, they adopt strategies based on anger rather than self-interest. Sun's two strategies are (a) make software a commodity by promoting and developing free software (Star Office, Linux, Apache, Gnome, etc), and (b) make hardware a commodity by promoting Java, with its bytecode architecture and WORA. OK, Sun, pop quiz: when the music stops, where are you going to sit down? Without proprietary advantages in hardware or software, you're going to have to take the commodity price, which barely covers the cost of cheap factories in Guadalajara, not your cushy offices in Silicon Valley.

http://www.joelonsoftware.com/articles/StrategyLetterV.html

By keeping Google as one, presumably around search, Google has a shot at avoiding the same fate.


Joel has always seen things from Microsoft's point of view. And we are actually living in the world he mocked: both hardware and software, on the server side, have been largely commoditized.


He didn't mock the world, he mocked Sun's strategy and it played out exactly like he said causing Sun to die off.


One could say Sun read the tea leaves of the industry correctly, they just didn't couldn't shed their history quickly enough to execute on it. Cloud services are the new proprietary and Sun had begun building that shortly before Oracle came knocking.


Sun got its dream come true (and `the network is the computer', too), but it lost as a company.


Awesome insight and backstory about one of SV's iconic companies, so thanks for sharing. Maybe the new Alphabet structure, despite similar failures at Sun and other tech companies, is the best option for maximizing innovation even though it also carries a high probability of failure (an "alpha" bet if you will, hah). Or maybe they did devise an ingenious scheme to neutralize the shortcomings of the Planets model, but it would be pretty cool if they didn't and are knowingly exposing themselves to risk and ridicule in the name of innovation.


I fully expect that they have thought it through. And I do presume that Eric shared all of the pitfalls that befell Sun when it tried Planets. So yes, no doubt the idea is fully vetted from that perspective. Given the pain for Sun, and Eric's direct experience of the same, I am surprised that this is the path they are taking.


If their goal is to maximize the odds of innovation, not minimize the odds of failure, which path would you advise? And please share more Sun stories. These were entertaining and informative. It should have been Sun leading the cloud revolution, but that's the Innovator's Dilemma for you. :(


I'm enjoying all your Sun reminiscing in this thread, very interesting.


Actually reading the first few paragraphs of the form 8(K) was more illuminating than the blogpost.

"Under the new operating structure, its main Google business will include search, ads, maps, apps, YouTube and Android and the related technical infrastructure (the “Google business”)"

"In connection with the new operating structure and upon completion of the Alphabet Merger (as defined below), Larry Page will become the Chief Executive Officer (CEO) of Alphabet, Sergey Brin will become the President of Alphabet, Eric E. Schmidt will become the Executive Chairman of Alphabet, Ruth Porat will become the Senior Vice President and Chief Financial Officer (CFO) of Alphabet and David C. Drummond will become the Senior Vice President, Corporate Development, Chief Legal Officer and Secretary of Alphabet. Larry, Sergey, Eric and David will transition to these roles from their respective roles at Google, whereas Ruth will also retain her role as the CFO of Google."

http://www.sec.gov/Archives/edgar/data/1288776/0001288776150...


I find it also interesting the non - Google companies:

Businesses such as Calico, Nest, and Fiber, as well as its investing arms, such as Google Ventures and Google Capital, and incubator projects, such as Google X, will be managed separately from the Google business.

Fiber is the most notable to me - seems they see this as more than an experiment and are looking to expand.

YouTube not separating is an interesting one to me, I expected that to be separate.


I interpret it as keeping the ad machine separate from everything else. If product decision impact ad revenue, they stay in (G)oogle. Everything else moves to different arms.

My guess is this serves 3 benefits:

1 - Less turf wars.

2 - Better visibility to investors on where the money is.

3 - Ability to spin off pieces as needed.

Many companies resist this type of visibility because they don't want a Carl Icahn to come in and demand a spinoff. The share structure of Google/Alphabet precludes this from happening.


Transparency is easier when you have control (Class A versus Class C shares). I'm surprised more largish tech companies haven't followed along to not be at the whim of WallStreet and other short-term outlook players.


Here's the thing... Many companies are actually poorly run. For most of them, Wall Street does the dirty work of forcing them to relinquish their money to more productive efforts. (Think of all the bloated monopolies who used to have fleets of corporate jets and crazy perks) No extreme is right or wrong.


Aren't the Class B shares the major voting shares, with 10x as many votes per share as Class A (10 vs 1)?


Correct:

Class C - 0 Votes (GOOG)

Class A - 1 Vote (GOOGL ~4% higher cost per share)

Class B - 10 Votes (Not publicly traded)


I still can't believe that investors are willing to trust Larry and Sergey in perpetuity(same goes for Zuckerberg and there are many other corporate doing this gambit).

Sure, I like all the weird sideprojects, but what happens when they decide to build a 100B Monolith on a moon? If you happen to own Class C shares, you have no say.

If you own Class C and to some extent A shareholders get a raw deal.

The Class B holders have their cake and eat it too.

It just feels morally wrong that someone owning 20% or 15% of company controls 50+% of the votes.


Here's my take... It's not a moral decision, it's a financing decision. Larry and Sergey (and their initial backers) made a decision to put this structure in place. Everyone is free to decide to invest or not invest in it. Conventional theory suggests that investors don't like these types of arrangements, and these provisions weigh down the price of the stock. Therefore, the original owners had to accept a smaller valuation based on this.

This isn't a morality thing, it means that the Class A common stock holder are more like bondholders (who put in money without votes) with upside, rather than full owners. But all of them were well informed about this when they put the money in.

This is not to say that we should all invest in Class A shares, just that this structure is one way of many to invest in a company, and people who don't like it can put their money elsewhere.


> It just feels morally wrong that someone owning 20% or 15% of company controls 50+% of the votes.

Shareholders don't really "own" a company in the traditional sense. They own a specific package of claims against the company in the event of dissolution, voting rights, etc. In the simple case of a company with one class of shareholders, the analogy between owning X% of the shares and owning X% of the company is fairly close, when you have differentiated share classes that analogy is less close.

And shareholders own because they choose to acquire the stock under specific terms. If they don't like the terms, they can just not accept the deal that would give them the stock. I don't see how its morally wrong that someone that bought a set of claims that don't include voting rights, or include smaller voting rights than some other set of claims, has exactly what they bought.


Can Class B shares be traded privately between individuals? Or do they have conditions attached (right of first refusal back to founders/company, etc)?


Shares of class B can be converted 1:1 to class A and sold.


Ahh! Very interesting if they lose all of the voting rights in the process.


I think the idea was to keep anything related to ad revenue all together under Sundar, and Youtube is definitely a part of that.


Or "web services" in general.


It seems to me that Google is now the software arm and everything else is spun off into its individual niches.


Fiber is the hint about what this really means. Capital intense businesses like ISPs or car companies are expensive to operate and the financials would drag down Google.

In this model, the big shareholders get to dilute risks in these ventures, while retaining the ability to exponentially increase their personal wealth.


This reorganization makes no difference on the financials. The release explicitly stated the company is trading at the conglomerate level.


Right, this is about power. Specifically, it makes clear that Larry and Sergei are now in the capital allocation business. When you buy a share of Alphabet, you are buying shares in Larry and Sergei's opinion about what should be done with money. If you think they're much better at spending money than you are, this is a great opportunity. If you don't, it isn't.


>> If you think they're much better at spending money than you are, this is a great opportunity. If you don't, it isn't.

It's not that one-dimensional . Their company does have resources that enable them to do things you and others cannot do.


Well you're still mostly investing in the growth potential of Google's existing businesses. Don't forget that Alphabet still completely owns all the money-making businesses of Google.


Wrong. You cannot have your profits and let someone reallocate them for you too.

You would be right if you owned a controlling interest, but you don't. Because you don't, all the profits of the money-making businesses go where Larry and Sergey want them to go. That's not (necessarily) going to be your pockets. If you owned a controlling interest, you could throw them out if you're unhappy with their performance as capital allocators, but you don't and you can't. So those profits are worth little or nothing to you, both now and in the future, because you aren't entitled to receive them.


> So those profits are worth little or nothing to you, both now and in the future, because you aren't entitled to receive them.

You invest in a company assuming it will increase its value over the time you hold your fraction of ownership. Parent isn't saying you're entitled to dividends, but was observing that the decision to buy Alphabet stock will likely mostly be made on the expectation of the money-making businesses continuing to grow, and only minor-ly on the hope that one or more of the ventures takes off and significantly increase company value.

Perhaps I'm reading it wrong but I didn't see an expectation of dividends in the parent's comment.


This is only true if:

a) Neither executive nor any member of the board has any concept of fiduciary duty.

b) They can keep any mismanagement out of audited financial statements.


Malice is not required. All they have to do is be wrong.


That was already clear.


Yes, I guess the ones that are getting affected are the Google (not Alphabet) employees, since now it must be much more complicated for an engineer working on a Google project to be transferred to something more sexy such as the Self Driving Car. Disclaimer: I don't work at Google and don't know anybody who does, so I might be totally off.


i guess the employees will now also get a clear feel who of them is "maker" and who is "taker" :)

By the way - who is inheriting the piles of money accumulated in the tax heavens? I think that is another elephant in the room. The GoogleX+Fiber+... is obviously a money hungry black hole, so would they be able now to redirect/invest this money from abroad straight into hat loss generating business without incurring the taxes?


Only if it is invested offshore. If it comes back to the US, it will be taxed. Same situation as before.


While you are right in your comment, in so far as what you have written, the implication that [this] "reorganization makes no difference on the financials" is not strictly speaking true.

Going forward, this re-organization may very well allow capital allocation to be done at various legal entities a-la project or structured finance. That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders.

This is relevant in the larger context for asset intensive, long-time maturity investment areas --like fiber, self driving cars, etc -- that have fundamentally different economics than the core business (search/ads/youtube etc).


This is a good point in an otherwise PR- and spin-heavy announcement. If Google plans to pursue capital-intensive projects a la Fiber, it'd be better to have those separated to allow use of (much cheaper) debt capital collateralized by very narrow slices of the business. Is this what you mean by "project finance"? I've heard that term before but not sure what it means.


> That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders.

How would this make any difference for the costing of projects (or businesses, now)? In terms of risks and returns. Its not like new businesses under Alphabet will be boostrapped, they'll still be the same drain/boon on resources that they always were.


Not if they allow sub-ventures to be financed semi-independently.


It will have an impact - they will break out the Google Financials in Q4 & overall be more transparent about the different projects.


It will when Google is manufacturing cars, or is joint venturing with a car company to manufacture them.

The Google guys are smart. You don't do something like this without a long term strategic aim.


What about this post from a month ago https://news.ycombinator.com/item?id=9889942

> There is no strategy. The thought of Google having a central product management strategy -- and successfully executing it across many teams -- is hilarious to people who work there. It's chaos that outsiders try to read into.

This is a consequence of bad internal economics and incentives. Google PMs and engineers are incentivized to create new products and ship them by quarterly deadlines (perf/promo cycles) rather than align their teams towards a cohesive user experience. Thinking this way would occasionally cause teams to, gasp, not build a product they wanted to build. Everyone needs to ship something, ideally something new. After all, you don't get promoted for deciding not to build something. I've seen awful products/implementations go out the door and get killed or reimplemented soon thereafter. And people still list these as "achievements" on promotion packets (and they get promoted despite the product failing!).

The company is kind of trying to address this by changing promotion criteria, but it's culturally ingrained and won't change for some time.


It's one anon's opinion based on their observation and may not be reflective of a larger reality.


There was speculation on the last Tesla call that they're going to do another equity round (to which Elon said he couldn't comment). Would be interesting if this was part of the strategy, as Tesla is extremely capital intensive at the moment with the gigafactory and other manufacturing spend. Google almost did acquire Tesla before it's successful Hail Mary in 2013, so the idea isn't without merit.


> This reorganization makes no difference on the financials.

In the short term, it doesn't. But it may be preparation for something in the longer term that does.


Google could go public though, right? (The new Google)


No they need the cash it produces to finance the rest of the businesses.


They could get that through dividends even if Google went public.


It wont as they dont need it to Google Fiber on the other hand need capital investments so probably will.


I don't think there would be a difference on financials. Alphabet is worth exactly as the old Google, and is currently operating exact same businesses.

Separating Fiber is important for other reasons, most notably, saving themselves from conflict of interest/anti-trust lawsuits.


No it isn't. Clearly Google's management believes the new structure is accretive to shareholder value otherwise they wouldn't have done it.

I really wonder about this though. Conglomerates have a mixed track record [1] and from where I sit, it's not clear Larry/Sergey are better capital allocators than the public markets.

[1] Brealey & Myers "Corporate Finance" has a good section on this topic, comparing big Asian conglomerates like Samsung, LG, Yahama, etc. to American public companies over time.


Regulatory costs can be an huge drain on long term profits, and I'd count anti-trust as a regulatory cost.


Nope. If there's an antitrust issue (I'm not saying there is), it's still all the same company to the DOJ. Google is too visible to play that particular shell game and get away with it.

If this was in preparation for spinning Fiber off, sure.


Which might make sense. Perhaps more broadly, they see the advertising entities as a whole that is complete, e.g. the value of these is strong, and not likely to be anything more than incremental (in the case of Youtube, that increment is still likely thousands of percents) nor to need any capital or debt for the foreseeable future.

Fiber, cars et al could be spun off, which would create share holder value without dividends, and allow these units to leverage debt rather than capital. Cars, Fiber, the WiFi balloons, could all be spun off at a point where they need capital and debt, and not drag down Alphabet.

Fiber with an IPO and access to debt as its own needs dictate might grow a lot faster than fiber waiting for capital from Google.

Maybe that is Google's plan: get them ready for IPO, then set them free and take an interest?


>Calico

A clean line between Calico and the advertising business can only be a good thing. Hopefully this means they can get on with analyzing every genome they can get their hands on.


I wonder if that'll include Google Fi, and if that'll be separate or go into the same subsidiary as Fiber.


What they are really saying with all of this is..."We are moving all of our profitable businesses under one umbrella that will be reported separately, and putting all of our money-losing businesses under another, in hopes that investors will basically ignore the unprofitable stuff and only focus on our profitable businesses.". Apparently the moonshots are diluting results from the mainstays, and they want a higher stock price, so they are going to report them separately. I'm not sure why they have to form a whole new corporate structure for that though; they could just break out the numbers in their reports.


Or they're saying "so that the adults who supervise moneymaking won't bother the moonshot meetings at abc.xyz and spoil the fun with all their blather about next quarter's earnings".


Or they're saying "We're personally tired of the boring but profitable business of selling ads. Let's replace ourselves and focus on the cool stuff."


Or they're saying "Let's getrid of 'Don't be evil' thing and do something evil with different name"


Or so that once there's good news from a spinoff, they'll be able to announce it. A small profit there would get lost in the bigger revenue streams under the old model. Remember how the media kept running "How long can Google afford to subsidize Youtube?" stories well after Youtube turned profitable?


So if Larry Page is King Azaz of Dictionopolis, then who is his mortal enemy, the Mathemagician of Digitopolis?

https://en.wikipedia.org/wiki/The_Phantom_Tollbooth


From the abc.xyz source code:

Sergey and I are seriously in the business of starting new things. Alphabet will also include our X lab, which incubates new efforts like Wing, our drone delivery effort<a href="http://www.hooli.xyz/" target="_blank" class="hidden-link">.</a>


I wondered if the reorg would have any impact on the stock price. Given this joke, now I really wonder.

Are we sure it isn't April 1st? Are we sure this press release isn't a hoax?

This is so wild I'm having trouble believing any of it.


It's an easter egg. It's a pretty common thing Google does.


it's not an easter egg, just click the 'more' link


The Hooli link is an easter egg. Hooli is the evil company (a parody of Google) in the show Silicon Valley.


It's a hyperlinked period with the class "hidden-link".


One thing I've heard is that this would help them in terms of taxes, allowing them to write off projects that don't make money, although I'm not entirely clear on how Alphabet would accomplish this.

That would be no joke if that was a reason to do it.


The first thing I thought of involved the regulations and other troubles that Google was facing in the EU. Those troubles seemed to summarize as "Google is too big and is taking advantage of its large market share". Alphabet looks like it'll fracture the google businesses more, which might help reduce the issues they're facing in the EU.

But that's just my best guess


Well, Google is already quite fractured in the EU - it has something like 20 subsidiaries, one in most EU countries[0] ?

That is also a common (mandatory?) setup, for multinational companies to have a local subsidiary in every country where they operate. I guess institutions like the EU must be handle that and focus on the activity independently of the fine details of the company structure, so that the restructuring would not really help or hinder.

[0] http://www.sec.gov/Archives/edgar/data/1288776/0001193125070...


>> The first thing I thought of involved the regulations and other troubles that Google was facing in the EU. Those troubles seemed to summarize as "Google is too big and is taking advantage of its large market share". Alphabet looks like it'll fracture the google businesses more, which might help reduce the issues they're facing in the EU. > Well, Google is already quite fractured in the EU - it has something like 20 subsidiaries, one in most EU countries

Seperation at the marketing end for ad services, or for purposes of tax optimisation, does not really alleviate any of the antitrust concerns. It's the services that matter. Google's main ad business and search being in the same company for example.

So the current EU subsidiaries would not have an effect on the EU investigation, but this current plan might.


IANAL, but it seems unlikely. The Alphabet move doesn't appear to be splitting out the components the EU regulators appear to care about (search, ads, maps) from each other. If regulators are concerned about the effects of personal information consolidation, that's not changing.


couldn't they do that now anyway with all being under the same entity. I don't think this helps with taxes (at least not in this regard).

Either way, WOW!


I see. I wasn't entirely clear on it, and I guess the source I got it from wasn't either.


Alphabet is only missing a startup accelerator, why wouldn't Sergey and Larry now focus on earlier stage themselves? All those ambitious things can be achieved better by a lot of startupa competing in parallel.


y is for ycombinator - a startup accelerator owned by google - hmmmmmmm


A - AirBnb U - Uber P - Pinterest or Palantir (they need to work hard) May be they should create a sub companies for the collisions.

Btw, i was thinking Amazon A2Z was doing this virtually.


V is for Ventures and Capital

W is for Wing

X is for X Lab

Y is for ...


Yolo


Youtube


Nope, Alphabet spells YouTube with a G.


Gootube is Alphabet's new Soylent competitor.


Yo.


>... any impact on the stock price.

It's up 5.88% (or $26bn) in after hours trading.


It seems to me that their domain name (https://abc.xyz/), and maybe even the corporate name, was chosen to imitate Hooli XYZ.


Pardon my ignorance, but what's hooly.xyz? Google's innovation lab?


http://hooli.xyz is a company on the HBO show "Silicon Valley" - modeled after, and parodying Google.


There's an Easter Egg on the site where one of the periods is a link to http://www.hooli.xyz . So yeah it was a nod to that for sure.

edit: The easter egg is on abc.xyz not the blogspot announcement.



404!!1


hm, that's a new http error that i'm not familiar with


Google can't be Hooli! Facebook is already Hooli... just compare the Nucleus logo to the React logo...


Is it any coincidence that Facebook released http://nuclide.io?


.xyz domains are selling at 90% discount, in case anyone is interested.


Wouldn't you have to pay the full price next year?


Yaa, $1 for a domain like hooli.xyz or Google, I mean Alphabet ( https://abc.xyz ). I'll try it out.

Just snapped up prefi.xyz, suffi.xyz, picka.xyz, icebo.xyz, equino.xyz, mailbo.xyz, postbo.xyz, rolode.xyz, soapbo.xyz, toolbo.xyz, lunchbo.xyz, letterbo.xyz, chatterbo.xyz for about $15 total for all of them.

I skipped on conve.xyz, laryn.xyz, proli.xyz, and surta.xyz, which were all open a few minutes ago.


Glad to see innovation in action. This is the kind of stuff that makes the web worse - domain squatting.


Perhaps, but domain squatting also produced the incentive to diversify gTLDs, something that would have taken much longer otherwise? I'm not sure.


Which is also generally considered a bad thing.


> Glad to see innovation in action.

Thank you!

I sent in a registration for proof.com on February 3, 1996, but missed out on it by a few hours to some other dude. Never again!

Just snapped up remar.xyz, networ.xyz, noteboo.xyz, payche.xyz and a few more.

Went on a geometry/graphics kick and snapped up stuff like plotting.xyz and intercepts.xyz as well.

I don't make the rules, I just play by them.


Thankfully the proliferation of gTLDs is increasing the supply and lowering the value for squatters like you. You screwed up in 1996, and you're screwing up again now, but hey, it's your money.


> I don't make the rules, I just play by them.

We all make the rules.


The rich boys are speculating on everything. I don't see anything wrong with poor boys taking a chance on an domain name? Yes--I don't like squatting, but when you have huge companies buying up huge blocks of names; I actually encourage the little guy to buy a few, and hope?

The rich boys always seem to get the best names first?

(I do wish when domains expired, the domain company wouldn't have first shot at buying the expired domain? Why are they allowed to do this? It doesn't seem fair? Maybe, I got the protocol wrong?)


[deleted]


Hooli XYZ is a reference to the HBO show Silicon Valley. It has no relation to Google (other than that Hooli is basically a fictional parody of Google). Looks like some developer added that to this press release as an easter egg.


I feel Google shouldn't stop trying to pretend they are still cool hype startup, that just come up as fake. I also feel from a PR perspective it might in fact hurt their image.


I like when random people try to pretend that they've defined cool, who has it, and what constraints it puts on their behavior.

EDIT: hartator disingenuously changed the content of his comment to be more measured. The original comment was "I like when Google tries to pretend they're still cool".


[deleted]


Use https://abc.xyz/ not the blogspot post


They gonna fail cause they don't own the .com ¯\_(ツ)_/¯


"Unless you're so big that your reputation precedes you."


How can I upvote this to heaven? Made my day :-)

I could write that I spilled my coffee, except I don't drink coffee.


On the Internet, nobody knows that your dog doesn't drink coffee.


Hahaha, you're welcome a lot of other people's comments tanked cause they mentioned that... I wonder why... ¯\_(ツ)_/¯


I wonder how it'll affect their SERP ranking


It's not an aged domain, so it'll tank in the SERPs. I can offer $50 for it. Payment via Paypal ;)


So all google divisions are now individual companies inside a conglomerated called Alphabet where Larry is the CEO and Sergei the President. Sundar Pichai is now the new CEO of Google. Is that right? Why do you think they are moving this way? Regulations? Taxes? What about Eric Schmidt?

I don't know much about trading, but look at that "after hours" spike! http://postimg.org/image/ho5ecyr99/

EDIT: All google subsidiaries are now subsidiaries of a conglomerated called Alphabet. Google is a subsidiary too. Google stock will now be Alphabet stock.


I didn't read it that way. All of Google's subsidiaries are subsidiaries of Alphabet, as is Google. But divisions inside of Google (Android, Youtube, &c) remain Google.

The big news is that Larry and Sergey are stepping back into a more Warren and Charlie kind of role, and Sundar Pichai is taking over as CEO of Google.

My question is, what does "slimmed down" Google mean?


> My question is, what does "slimmed down" Google mean?

It means Google minus all the parts that are now their own direct subsidiaries of Alphabet.

Which, previously, were all part of Google. Hence, "slimmed down".


A lot of things they were getting in to like cars just didn't fit.

It's going to remove the 'is this a thing Google should be getting in to?' question when evaling ventures/acquisitions.


I wonder where platforms (the HW company inside of Google that builds all their machines and switches) ends up. If they make it their own 'letter' (H is for Hardware?) then they could potentially have it build data center hardware for other companies. That would be interesting.


Related to my response to another one of your comments, this would be a VERY Samsung move; I don't know if they'll do it, though. Depends if they see their infrastructure hardware more as a competitive advantage for their internet-services business or as a marketable product in itself.


Per the SEC 8-K, technical infrastructure falls into Google proper.


> My question is, what does "slimmed down" Google mean?

It looks like they're taking all the experimental research stuff out of Google and making them direct subsidiaries of Alphabet instead, particularly projects that aren't directly related to the Internet.

The article talked about Life Sciences and Calico, and I have to wonder if other stuff like the self-driving cars are going to become direct Alphabet subsidiaries as well (then again, maybe not: I assume the self-driving cars are tied closely to Google Maps).


Google X as a whole is going to become an Alphabet subsidiary; presumably if that takes off it will get spun off into its own Alphabet company.

A more focused company that's moving to the top level of this hierarchy is Nest.


I think in this case it just means the new slimmed-down Google won't include X, Calico, Wing, etc...


I think it just means the Google division will no longer contain the parts that have been spun off. There may be others but from the announcement that looks like: Life Sciences, Calico, Ventures and Capital, and X lab. Later on in the announcement they call Google "slightly slimmed down" which seems like a bit of an understatement.

Presumably they hope that something outside of the new google division will blow up and make the divisions a bit less lopsided.


Remember the "more wood behind fewer arrows"? That's slim Google. Alphabet is Larry & Sergey missing the more arrows.


> what does "slimmed down" Google mean?

Hopefully less likely to run afoul of antitrust regulation.


Less employees is how I interpret it. Lay-offs.

I have no reason to suspect this, that's just how I usually interpret wording like that.


Most certainly not the only reason why and possibly not even the most important, but the EU has started to load up on the anti monopoly against Google recently, with talks about breaking it up in Europe (similar to the Microsoft case in the US some years ago, although it didn't go through and in this case it would only split in EU).

http://www.theguardian.com/technology/2014/nov/27/european-p...

> The European parliament has approved a motion calling for tougher regulation of internet search, including suggesting breaking up Google as a solution to its dominance in Europe.

That certainly wasn't a done deal nor even agreed that's what the commission would really aim for, but the heat was mounting and Google's move cut them short just in case.


But isnt this consolidation instead of separation? Or are they creating this entity so that they will keep Google intact even if they are ordered to separate?


This makes it easier to spin off a Google EU corporation, owned by Alphabet, built specifically to manage the intricacies of EU law. Google EU would just be another subsidiary, that perhaps licenses its technology from Alphabet or Google US.


If you compare GE to Google, or Samsung to Google, then Google doesn't seem to have an absurdly diversified portfolio. But GE doesn't have a back-end that can facilitate easily realizing marketplace advantages in jet engines based on what they've done in light bulbs. Google can do exactly this. And the EU has taken notice. It would make sense that this is the primary underlying issue, even if the move is primarily proactive.


the level of constructive criticism here just blows me away. my god what an amazing community


My own guess: it allows upcoming management/leadership to exercise more independence in the various divisions of "Google". Further, People like titles, and it's hard to share them.


A very good point. Didn't look like Sundar Pichai was going to oust Larry Page as CEO anytime soon. This gives everyone the ability to continue their upward mobility (and responsibility), with increased independence from aligned (but separate) businesses within Goog--er, Alphabet.

IOW, Nest reports to Alphabet, and so does Google. Both are aligned, but separate.


I'd assume it was a move to make failure easier. Sclerosis is the natural fate of large corporations but variation and selection is an obvious way to help with that.


The danger of conglomerates that give so much freedom to their subsidiaries is that said subsidiaries start actually competing against each other and hurting the business overall.


Danger? You mean benefit? Companies not succeeding themselves even as they fall from relevance is a massive reason why large companies fail.

Look at Blackberry, they had an internal project working against the rest of the company (namely Android on Blackberry hardware) that could, had it been allowed, saved the company. Instead Blackberry are either going to be purchased OR go bankrupt.

Honestly internal competition is an argument for doing something like this, not against it.


Sony took internal competition too far in the 90s and created a situation where they developed severe internal NIH syndrome and wasted a whole lot of resources with different divisions re-implementing things. The system produced some of the most revolutionary and iconic consumer electronics ever before it went off the rails. The danger I was referring to was repeating Sony's mistakes.


My current blackberry device runs android apps. So the project seems to have been a somewhat of a success.

The company appears to still be alive and still has a few billion dollars in the bank despite now years of people saying that they're going bankrupt. I wish I was 'going bankrupt' like Blackberry.

Blackberry seems to have secured a solid niche position in mobile security, despite losing the majority of their mobile phone business to more end-consumer electronics driven companies (primarily samsung & apple).


And Nokia let the bigger, older Symbian division to keep the smaller Maemo/MeeGo division to ever reach any relevance.


> The danger of conglomerates that give so much freedom to their subsidiaries is that said subsidiaries start actually competing against each other and hurting the business overall.

Google seems to like competing against themselves, so I'm not sure that's something that they are particularly worried about.


Stack ranking is already this times 10.


The intent is faster speed, greater independence and run like leaner startup. Also, additional career paths for employees, especially for the senior folks aspiring to be CEO.


Historically conglomerates are not known for speed and lean structures. I am curious how they plan to pull that off.


True story. Rather than speed, I'd say independence is the goal. Warren & Charlie (BRK) have proven that this model works - purchase great companies, then let them continue to do their thing (albeit with more resources). All roads report up, but Dairy Queen doesn't wind up run by the same person as GEICO on the executive level.

So long as Sergey and Larry (& Co.) keep from micro-managing, I think this structure will be enormously beneficial. I can't see how someone running Google's web properties would be able to move quickly when also having a hands-on responsibility for developing a self-driving car and a glucose-sensing contact lens.


Why do you think they are moving this way?

It's a twist on "adult supervision". They have put an adult in charge of making money. Meanwhile, Larry and Sergey get to keep playing around with all sorts of exotic projects that may or may not eventually make money.


I hope Eric Schmidt won't manage Google Talk / Hangouts anymore. Then there will be a chance of fixing this mess back.

UPDATE: Hm. Judging by downvotes, some folks here liked the fact that he killed XMPP federation of Google Talk and didn't propose Hangouts as an alternative open protocol. What an achievement.


To summarize (correct me if I'm wrong):

- Google will now be operated as a subsidiary of a new company called Alphabet.

- Alphabet will be publicly traded under the same symbols as Google is now traded.

- Stock will just transfer as-is.

- Sundar Pichai is now the CEO of Google.

- Larry and Sergey will run Alphabet as CEO and President, respectively.


Its probably simpler to think of it this way:

* What was called "Google" will now be called "Alphabet", with Larry and Sergey as CEO and President.

* Much of the core business of the old Google will be operated in a division/subsidiary of the new Alphabet called "Google", of which Sundar Pichai will be CEO.

* The rest of the old Google's business will be in other units of Alphabet.


They are refactoring. Google is being updated to make some of its sub-classes into new top-level classes (sharing some characteristics with Google) and retain the rest as sub-classes. But to do this it must create a new parent class (for Google, and all of the other newly promoted classes) which is the new Alphabet class.

Obviously s/class/company/g modulo plurals...


More of a composition model instead of sub/super classes.:

* Alphabet has-one Google * Google belongs-to Alphabet * YouTube belongs-to Google * Google X belongs-to Alphabet


That is in no way simpler.


Obviously, that's subjective.

I find it easier to think of it as a name change and the creation of a new subordinate entity within the old organization with its own CEO than to think of it as creating a new entity above Google, and transferring lots of functions from Google to the new superior entity, transferring all stock in Google to stock in the new superior entity, and changing the leadership of Google.


The original question was to correct the comment if it was wrong, not to state the content in a simpler form!


One more thing, Google will be named to Gisco.



That's amazing, better than the hooli.xyz Easter egg mentioned elsewhere in the thread.


abc.wtf looks like it really is Microsoft:

http://whois.domaintools.com/abc.wtf

  Created on 2015-08-10
  IP Location 	United States - Washington - Redmond - Microsoft Corporation
  ASN 	United States AS8075 MICROSOFT-CORP-MSN-AS-BLOCK - Microsoft Corporation


Read the whois. NZ is New Zealand, no?


Good point. The whois says Wellington, NZ. I don't know if it is related, but Microsoft does have an office in Wellington. :)

http://www.microsoft.com/en-nz/contact.aspx


Google seriously didn't register abc.wtf? WTF.


Is this purely a function of sharding liability across a conglomerate of businesses? It seems like concentrating Google's ad revenue in a smaller, more efficient business unit is a nod to Berkshire Hathaway's method of business.

I can't recall this sort of thing happening in my lifetime, so it will be really interesting to see how this plays out. I also wonder how this would be treated if Google didn't have the crazy corporate structure they have now (where public shares are essentially non-equity and non-voting).

http://economix.blogs.nytimes.com/2014/04/02/the-many-classe...

Edit: I am reasonably certain this is a tax and liability optimization strategy. It allows their more risky units to operate with separate liability from their cash cow.

Edit 2: I'm actually surprised the stock value hasn't tanked because most of the future potential of Google just got moved outside of the company. How much of Google's future value was based on X? I would say a non-trivial amount of the stock price is the anticipation of future profits, which are now no longer a part of the company the stock is intended to index.

Edit 3: Disregard Edit 2, I misread the release the second time through and assumed X was not part of the company :).


I've seen a lot of comparisons to Berkshire. Not every large conglomerate is Berkshire.

Berkshire is composed of pre-existing businesses that were themselves successful before being purchased. They are not experimental ventures that need to be subsidized. It is exactly the opposite: money is plowed into the strongest businesses. They each generate excess cash, and it is easier to reinvest that cash in some places than others. The conglomerate structure makes it possible to put the cash where it gets the best returns without having to pay taxes or transaction fees.

Alphabet has none of these properties, except the ability to allocate capital tax-free, but they already had that as Google.


Berkshire is pretty explicit about using the firehose of cash that their insurance businesses throw off, as well as the huge amounts of premium float they have, as capital for their other more profitable businesses.


Sure, but Berkshire is also explicit about the fact that they only acquire pre-existing "remarkable" businesses.

They may benefit from the firehose, but were already self-sufficient without it.

That’s in stark contrast to the Google/Alphabet model, where there’s no way driverless cars could exist independent of the adwords firehose.

It’s waaaay more speculative. On the order of VC investing. Rather than Berkshire’s value investing.

It’ll be interesting to see how this plays out.


Isn't 96% of Google profits from search ads only? They 've done a million ventures since then, still remain ad-funded.


Yes. Because the Google part isn't being spun out to the shareholders but remaining a part of the conglomerate, this does nothing for the shareholders. The sea change would be if new-Google were a separate listed company returning its earnings to its shareholders. Instead it's a separate private company returning its earnings to Larry and Sergei to blow on whatever BS they want... just like it was yesterday.

About the only thing this changes is that ex-Google is now explicitly acknowledging to the public markets what everyone already knew: it's a conglomerate, only unlike other conglomerates, it has only a single viable business.

Yawn.


spot on!


> its shareholders

they did nothing to create the algorithm, what right do they have to whine?


Ever hear of work for hire? If you want all the rewards for yourself, you don't sell shares in your company.


There's a pair of stock tickers that disagree with your assessment of the value of selling shares in that company. It seems to have worked out pretty well for everyone involved.


Current sources of value != future sources of value.

The price of Google's stock is based on forward-looking prospects, not on current metrics.


Actually, the price of Google's stock is based on expectations of future demand for Google's stock. It has little or nothing to do with the expectations of profits or the ability of the shareholders to receive them. This is true of all listed companies, and the more liquid their shares, the more true it is.


i m pretty sure its based on expected profits, or it would have flopped given the performance of all these prospects.


Re: edit 2: the stock holds all the stuff it held yesterday, right? The stock is now for alphabet.


Yep, I misread it the second time through, sorry!


What tax benefits this move might have is my question as well. It seems like if this were purely about internal organization they could have effectively reorganized Google in the same way without making Alphabet (although I'm not an executive so I could certainly be missing something here).


Google stock is converted to Alphabet stock. X moves from Google to Alphabet. No change in future value here.


Here's why I think Google's transformation into Alphabet was not a wise one.

As Google cofounder Larry Page, now CEO of the holding company Alphabet, that will have as its main subsidiary Google, the search company, said earlier today:

>As Sergey and I wrote in the original founders letter 11 years ago, “Google is not a conventional company. We do not intend to become one.” As part of that, we also said that you could expect us to make “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses.” From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have.

Well, if Google wants to keep spending investor money into "speculative" areas, what could be dumber than reporting its financials as "Google: hugely profitable" and "other random stuff: huge cash drain"? It will just make investors all the more sensitive to the fact that Google's search business is basically what makes money, and everything else is - for now, at least - a huge cash drain.

Raising awareness to Google's - oops, Alphabet's - business unit's individual financials will attract attention of the likes of Carl Icahn, who's raided Ebay in the past, and who'll engage in open challenging of Page and Brin's capital allocation decisions. It will definitely not compensate for the advantages of having Sundar Pichai take on greater responsibilities as Google chief, etc.

Not at all a wise move.


Why do they care what Carl Icahn or any other investor thinks? Page and Brin control the voting shares. The biggest risk is bad PR or a public perception of failure, not any substantive challenge.


Investors already thought/knew this. Listen to any of the earnings calls from the last year and you'll see what I mean.


  Its actually very wise move. Now they can ipo out other businesses to get capital investments for something like Google Fiber without diluting the control they have over Google. 
   This is an extremely good move the more I think about it. They will retain control of the  main company but sell shares or give stock options to get talent and capital.


As an investor in Google, I am pleased that they will continue to try to create new things, and not just cash in on search, etc. (Well, as long as they don't pull another Reader.)

On the plus side (so to speak), if G+ had been factored out maybe the forcible integration would have been slowed.


It seems as though Google (Alphabet) is splitting its business divisions into:

1) Google - a company comprised of reliably profitable products that run at massive scale (search, video, mobile, mail etc), and they know that Sundar Pichai can manage this

2) Everything else - these are high risk ventures with possibly enormous pay-offs. This is a breeding ground for positive black swans which Google are keen to expose themselves too.

To borrow Nassim Taleb's nomenclature, Google is splitting into mediocristan (1) (bounded variance - existing products [like YouTube] are predictably profitable) and extremistan (2) (Calico - if a major breakthrough in combating aging related diseases is made it will be both unpredictable and hugely materially beneficial)

>> We will rigorously handle capital allocation and work to make sure each business is executing well.

This sounds like the business restructuring will allow Sergey and Larry to apply just as much capital as they see fit to the extremistani business divisions. In other words they would like to control their exposure to possible consequential rare events in a simple fashion: by controlling a very simple set of parameters - i.e. how much cash each business division gets.


Does this mean that running high-risk project inside Google started to damage the reputation of Google? Many (most) of the moonshot projects failed (which is normal), and I have the feeling that these events had a somewhat bad fallout on the image of the whole company (questioning its invicibility to some extent, mostly in the eyes of the press).


I think you're right. Google was devolving into a fragmented corporation with no direction or vision. Alphabet helps the Google brand by de-fragmenting it and turning it into the "internet services" arm and putting Google X, Life Sciences, etc etc into their own, protected, sandboxes.


> Does this mean that running high-risk project inside Google started to damage the reputation of Google?

I don't think it hurt the consumer reputation, and it can't be about the investor reputation, since those things are still inside the entity (Alphabet) that investors will care about (at least, until a way to invest in the new "core" Google directly is offered, which may be part of the long-term plan -- it would explain why they indicated that they will report Google's financials separately within Alphabet's.)


Things like the self-driving car don't really fit the Google brand or corporate structure.


Is there a list of moonshots failed?


Wave, Plus, Glasses at least.

If we are to include less ambitious stuff, Google Video, Orkut, Chromebooks (never went far), Reader, Google Code, Dart, nothing much came out of Morotola, etc.

And let's see were those "self driving cars" will go, market-wise...


Google Video was merged into Youtube

Orkut was wildly successful in Brazil and India, until they stopped building it for Buzz and Plus

Reader was hugely successful, which is why the outcry on its closing

Chromebooks are doing great, atleast on Amazon, the world's biggest retailer.

Dart pivoted into a compile-to-JS language, but is still alive

Motorola streamlined it's product lineup under Google and is doing fairly okay for Lenovo

Calling above items as failure is inaccurate. None of them were moonshots btw.


> Dart pivoted into a compile-to-JS language, but is still alive

Dart started as a compile-to-JS language for web use with a VM for server use, with an browser-hosted VM for development with a long-term plan that compile-to-JS might not be necessary on the web.

And its still a compile-to-JS language for web use with a VM for server use, with an browser-hosted VM for development use.


Google Video, and Orkut, were complete failures and no longer exist. Successful products don't disappear without a trace. If they are closed by management when they otherwise might have succeeded, that is failure.

Reader was a failure according to Google itself, which closed it due to supposed lack of interest. Once again, if the decision to close it was an error by your criteria, then they failed.

The rest I would agree with.


Of course if we go back to the original question, Orkut and Reader were hardly "moonshots" in the first place (and Google Video was arguably just a standard project launch).


Google's own canonical example of a moonshot is Android. By that definition, Orkut and Reader qualify just fine.


> Google's own canonical example of a moonshot is Android

Is it?

> By that definition, Orkut and Reader qualify just fine

If everything is a moonshot, nothing is, etc.

AFAIK both projects were just 20% time projects scaled up to three or four people[1]. A "moonshot" is obviously a wishy-washy term, but opportunity for success doesn't seem to be sufficient to call something that.

[1] http://massless.org/?archive=2007/05/about-google-readers-bi...


> Is it?

Yes. They first used the word when referring to Andy Rubin's departure from Android.


If you watch a video on youtube today it's actually hosted on googlevideo.com or something (i know because uBlock). I assume they threw the youtube backend away when they bought it :) So in that sense google video is still alive, just a different name.


I wound not read too much into domain names. I notice when I log into gmail it goes to accounts.youtube.com.


> Orkut was wildly successful in Brazil and India

If you are Google that reads as "Orkut only got traction in Brazil and India, hence failure". Maybe they could have sold it to some smaller company, but they tried to move the customers to their other services instead.


> Reader was hugely successful, which is why the outcry on its closing

Umm, no. Reader was not hugely successful. Users loved the idea of using Reader but they did not actually use it.


Chromebooks are pretty popular. The first generation wasn't very good but the more recent ones are selling well.

Reader was very popular relative to the size of the RSS reader market.

Google bought Motorola for the patent portfolio and sold off the rest, so I'm not sure how that was a failure. Motorola also turned around their mobile division with the Moto X under Google (over 100% increase in mobile sales due to the Moto X and company line of products)

I remember Orkut being very popular in Asia for a while.


All of that I wont argue with, except the characterization that reader was a success because Google owned the market.

I dont see how G closing down reader could have that count in the success column, especially considering how much bad blood it bred for G (and how little effort it would have likely meant to maintain it.)


Reader was the living kernel of what could have potentially been a successful Google social network.


Orkut was heavily used in Brazil (and India, according to Wikipedia).


Aren't Chromebooks the best selling laptop on amazon or something?


They are. They're really well used in the education sector now too, for good reason.


Yes, they sell decently, but do no represent any profit for Google (which gives the OS for free).

It's around 5-6 million units sold anually, but, as Google themselves said, Google don't make any money of off them.

Samsung, Acer, etc, who produce the units do, but again, in total it represents a tiny slither of laptop profits due to the small margins. Most Chromebooks (70%) go to the education market as cheapo laptops.


I would imagine that Google indirectly profits by having more users using Google as their default search engine and by encouraging the world to rely more on the web.

Edit: Also, in the past Google would pay Firefox to have its users use Google as the default search engine and Google gets the equivalent of this for free with each Chromebook sold.


If direct profit generation is the measure of failure for Google then they've failed at basically everything except for advertising.


Even taking indirect advertising profit into question, they've failed at basically everything.

E.g. with all the billions developing Android, buying Motorola etc, they still make the large majority of mobile ad money on iOS devices!


Yes?

They suffer from the gulf state problem where they make so much money from one thing that nothing else will ever be important enough to really be successful.


Thankfully revenue streams are more complex than just, "Did we make more money than it cost to produce this unit sold?" in a vacuum.

It's 2015 and companies compete for user timeshare, not dollars.


Reader was the top web application in its market for almost a decade. I'd like to have that kind of failure.


Maybe the only Google "failure" to have people protest its closure: http://www.tbd.com/blogs/tbd-arts/2011/10/occupy-google-read...


You can achieve it very easily if you don't have profits.

E.g. you can open a web application selling $10 for $5 today and I guarantee you it's gonna be a huge success.


wave and plus hardly count as moonshots. they're about as boring as projects get.


None of them are moonshots, I thought that the moonshot part is the one under the X Labs Umbrella

Dart and Chromebooks failures? Since when


Since Dart never went anywhere adoption-wise, and even abandoned plans for its own VM in browsers (not to mention its purpose obsoleted by the announcement of WebAssembly -- since devs will be able to use ports of much more established languages for web programming).

And since Google-made Chromebooks never sold well, and those by third parties (Acer, Samsung, etc) don't make much money for their manufacturers and no money at all for Google, and all constrained to the niche educational market (schools buying them for their students).


> since devs will be able to use ports of much more established languages for web programming

Sure, they'll be able to use any language they like, as long as it's C or C++. :)

There is currently no story for using any high level language (read: language that uses GC) like Ruby or Python as a web language by way of WebAssembly.


>There is currently no story for using any high level language (read: language that uses GC) like Ruby or Python as a web language by way of WebAssembly.

Actually that's part of the whole point of WebAssembly -- as Eich put it. It's not just to speedup emscripten style ports of C/C++ programs.

Eich's words: "Bottom line: with co-evolution of JS and wasm, in a few years I believe all the top browsers will sport JS engines that have become truly polyglot virtual machines".


I understand that's his goal, but I believe actually getting there is quite a ways off and may ultimately never happen. Of course, you can never say never on the web, but going from supporting C/C++ to supporting, say, Ruby or Python is a pretty fundamental change in how the system works.


If you can use C or C++, why could you not use interpreted languages (including those with GC) whose implementation is in C or C++?


GC and runtime.

A modern GC is a large, complex beast. Python, Ruby, Lua, etc. all have their own implementations of them, and those implementations are specific to the semantics of those languages. (For example, Python's early finalizers. Ruby's FFI, etc.) That's a big blob of code for you to push down the wire with your application every time the user hits your site.

Also, that GC doesn't know how to play nice with the browser's own GC. If you have an event handler that has a reference to some Ruby object that in turn has a reference to some DOM node, neither GC can trace through that path and tell when those objects can be collected. That means you get memory leaks.

On top of that, the language implementation itself is large. The Python executable on my machine is 2 MB. Do you want to add another 2 MB to your app? Is Python enough better than JS to justify forcing all of your users on their crappy mobile networks to download that before any interactivity begins on your page? What about when you start using the additional 45 MB of standard library that comes with Python?

Also, how do you make those standard libraries work in a browser? Who is going to rewrite them all to stop using the native OS libraries they currently use and instead rely on APIs that are available in JS?

That's not to say this is an insurmountable problem. But my belief is that it's a big enough headache to outweigh the benefits you would get from writing your app in another higher level language.

Now, if your language can compile to JavaScript and has a decently small runtime library, that's a different story. At that point, you're back to only one GC and relatively little overhead for your language's semantics and core libraries. It means you don't have to worry about a large existing standard library that #includes everything under the sun.

This is why I think CoffeeScript, ClojureScript, Dart, etc. are feasible. But I don't think anyone will be writing web apps in Ruby or Python anytime soon. Languages that look syntactically similar to them (Opal, Red, Pyjamas, Brython, etc.), sure. But the real deal where you can have some app that does, I don't know, "import requests" and have it actually work in a shippably-sized web app? I think that's going to be a much harder path.

It's a great goal for the WebAssembly folks to work towards, but it's an aspirational goal.


Search for "The Google Graveyard". Someone made a thing about all the stuff Google killed off.



Wave and Plus were not moonshots

It would be a good thing explain why the downvotes


They were absolutely pitched as huge ideas that would change everything we know about email and social networks. Bearing the scars of their public failures, Google started calling new projects moonshots to shape perception of the programs as chasing ideas, while preemptively deflecting any criticism of their readiness or desirability to large markets. They are not materially different from moonshots except in presentation.


What huge ideas? Social network inside a browser was never a new idea, no matter how hard Google was pitching.


Circles for different messages to different groups, as well as the universal profile for logging into all your favorite Google services. It's not my fault these were harebrained ideas, but they were presented as revolutionary. The ideas are still arguably revolutionary (Slack delivers where Wave failed) but Google's execution was lacking. Same fundamental issue facing so many of their other programs.


Hyves in NL had the 'circles' thing before Facebook even existed, let alone before Google went public with G+.


And the Russians dreamed of going to the moon but that's the rub with consumer products - the market has to accept them for it to be an accomplishment. Google thought they'd found the magic recipe and pitched it as something for everyone that was a huge breakthrough. Being first with features or flows doesn't matter at all. The only thing that matters is making it relevant to users' lives, which all parties failed at. Circles is a bad model for a mass market.


Hyves had big acceptance in NL at some point it was one of the largest websites here, Facebook ate their lunch.


They were absolutely moonshots. Reforming the entire way we do realtime communications? Reforming the entire way we do social interaction? Total moonshots, they just failed, but if they succeeded they would be billion dollar businesses.

BTW, the best result of wave is hackpad, IMHO.


Wave was supposed to completely blow away email.

Plus was intended to eat Facebook's lunch.

They were both huge moonshots.


I think the implication about a moonshot is that nobody has been to the moon before the moonshot. The thing about Facebook's lunch is that lunch happens ever day at noon.


> They were both huge moonshots.

Unfortunately, they used https://en.wikipedia.org/wiki/N1_(rocket) for the rockets.

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