THERE’S MORE TO GOOGLE THAN MEETS THE EYE

Google started out and became famous as a search engine. However, the Google empire now includes at least ten businesses that are market leaders in their own right. Read on if you’d like to know more about Google.

Is it Alphabet or Google?

Google was incorporated in 1998 and listed on the Nasdaq stock exchange in 2004. The company grew incredibly quickly, and numerous new businesses were started and acquired. Up until 2015, all of these businesses were part of Google although many of them had nothing to do with the original search engine.

In 2015, the company was restructured. A holding company called Alphabet was created. Alphabet’s main subsidiary is Google which still houses all the well-known web businesses. Alphabet’s other subsidiaries are all the businesses that are not related to the web business.

Google’s web businesses

Google’s search engine is still the company’s main product. The associated advertising business, AdSense, is the biggest revenue generator in the group. In fact, it is the biggest advertising business in the world and generates well over $100 billion a year. This revenue has funded all the other Google businesses, which in turn increases the size of Google’s audience.

The other massively successful product is YouTube. Google doesn’t disclose how much each business segment makes, but it’s estimated that YouTube generates over $10 billion a year for Google. If YouTube was spun off as a separate business, it could be worth over $100 billion.

Google also owns Android, the operating system that powers about 75% of the world’s smartphones. Android earns revenue in several ways, most notably via app sales in the Play Store.

Gmail started out as a simple email client but has now become so powerful that many companies run considerable parts of their businesses on it. Gmail, along with apps like Google Docs, Sheets, and others, may not be quite as powerful as Microsoft Office, but they are perfectly adequate for most users. Google Maps, Google Photos, Hangouts, and numerous other apps make the whole ecosystem even more compelling. The addition of Google Drive ties all these products together with a cloud storage solution. These products are all available for free as ad-supported apps, or as part of the subscription-based G Suite.

Google Pixel is a hardware company that manufactures smartphones. While the Pixel has not gained widespread adoption, it does have a loyal following, and it’s estimated that about 5 million units have shipped.

Google Analytics is a leading provider of analysis tools for website owners. It allows users to find out about traffic on their own website, as well as other sites. It also helps users optimize their sites and conduct content experiments.

Other Alphabet subsidiaries

Alphabet Inc’s other subsidiaries are incredibly varied. Some are personal projects for the founders, and others were started to tackle major problems in the world. The following are just a few of Alphabet’s diverse subsidiaries:

  • Waymo is a leading autonomous vehicle technology company. It develops operating systems for self-driving cars and other related technology.
  • Sidewalk Labs is a company that uses technology to improve urban infrastructure and solve problems related to cities.
  • Calico is a biotech company that researches treatments for diseases related to ageing.
  • GV (formerly Google Ventures) is a venture capital fund that invests in other companies.
  • DeepMind is an artificial intelligence research lab and software developer. In 2016, a DeepMind program beat the world champion Go player in a five-game match.
  • Wing is a company developing drones to be used for urban deliveries.
  • X Development is a secretive R&D facility which works on wide-ranging projects. Several other subsidiaries, including Waymo and Wing, began as projects in this lab. 

Google’s failures

Because Google’s ad business is so successful, it has plenty of cash to spend on R&D. The company has a strategy of trying just about anything, and then ruthlessly killing projects that don’t gain traction. In Google’s case, this has meant a lot of projects have failed over the years.

Google+ is Google’s most well-known failure. The social network just couldn’t compete with Facebook. Google has actually had a few failures in the social networking space, including Google Wave, Google+, and Orkut.

Google Answers was similar to Quora but never gained traction. Google Notebook was a note-keeping app like Evernote which was shut down in 2012.

Google’s augmented reality glasses, known as Glass, are often referred to as a failure. However, the product is still around and may succeed eventually.

GOOG VS GOOGL shares?

When the company was restructured, the founders wanted to expand the investor base but maintain control of the company. To do this, they split the shares and created a class of shares that have no voting rights. The shares with the ticker GOOGL are ordinary common shares with voting rights. The shares with the GOOG ticker are identical except that they do not carry voting rights.

In terms of GOOG vs. GOOGL, which to buy, the GOOG shares usually trade at a small discount, but any price movements will be almost identical.

Will Alphabet be broken up?

Regulators and investors are keen for Google and Alphabet to be broken up into smaller companies. This may well happen eventually, but the founders don’t seem to be in a rush to do so.

Many analysts speculate that value will be unlocked, and the many parts would be worth more than the whole. It would also allow investors to make more focussed investments in the parts they like. What happens, remains to be seen but it’s worth keeping an eye open for opportunities to invest in this company.

 

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