"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."
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.
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.
Class C - 0 Votes (GOOG)
Class A - 1 Vote (GOOGL ~4% higher cost per share)
Class B - 10 Votes (Not publicly traded)
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.
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.
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.
In this model, the big shareholders get to dilute risks in these ventures, while retaining the ability to exponentially increase their personal wealth.
It's not that one-dimensional . Their company does have resources that enable them to do things you and others cannot do.
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.
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.
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.
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?
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).
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.
The Google guys are smart. You don't do something like this without a long term strategic aim.
> 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.
In the short term, it doesn't. But it may be preparation for something in the longer term that does.
Separating Fiber is important for other reasons, most notably, saving themselves from conflict of interest/anti-trust lawsuits.
I really wonder about this though. Conglomerates have a mixed track record  and from where I sit, it's not clear Larry/Sergey are better capital allocators than the public markets.
 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.
If this was in preparation for spinning Fiber off, sure.
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?
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.