Industry experts say Alphabet, which separates the profitable parts of Google’s business, highlights the company’s weakness, but can also be good for branding and product development.
Yesterday, Google laid out plans for corporate restructuring, with different facets of the business separating underneath a new company, Alphabet. What does this mean for the search giant’s advertisers?
Alphabet is “mostly a collection of companies,” according to Google chief executive (CEO) Larry Page. Google remains the largest of those companies, of course, but this means the brand’s massive portfolio will be soon separated, with “the companies that are pretty far afield our main Internet products contained in Alphabet instead.” Each area will be run by a different chief executive (CEO); the new streamlined Google will include search, ads, apps, maps, YouTube and Android.
Fred Dintenfass, SEO lead at Isobar, thinks the inception of Alphabet is equal parts Google’s desire to reorganize and external pressure from investors. He says that Google Inc – what’s now just Google – is the only aspect of the company that really makes money, and now it’s separated from less-profitable facets.
“Looking at revenue, [Google gets] less and less of their money all the time from search engine results pages themselves,” Dintenfass says. “In terms of ad revenue, they seem to be diversifying more and more between sites within their network and AdSense, as well as YouTube and DoubleClick, so I wonder if they’re continuing to focus on search, or if they’re going to focus on the products that make more money outside of search results.”
While it’s too early to tell what will come of the new Google, Dintenfass thinks it’s interesting that the operation is headed by Sundar Pichai, the chief product officer.
“I think the focus on product is important and shows that Google plans to improve products, not just monetize them,” he says.
According to Dr. Aleksi Aaltonen, assistant professor at Warwick Business School in the U.K., the holding company structure will help Google, making it easier to sell off its less successful assets. At the same time, he doesn’t think the reorganization helps solve the company’s core problem.
“Innumerable acquisitions made by the company over the years and bold ventures to new industries have so far failed to create commercial success at the scale of its search advertising business,” Aaltonen says. “Google is commercially still a one-trick pony, whereas for instance, Apple has brought the iPod, iPhone and iPad to the market since Google launched its search engine.”
While the separation highlights Google’s inconsistent financial successes, Thomas Ordahl, chief strategy office at global branding firm Landor, sees that as a good thing. Ordahl thinks Alphabet will result in stronger branding.
Like Dintenfass and Aaltonen, Ordahl says it’s too soon to say what Google’s future holds. But with Google branching off, the greater focus will ultimately make things clearer – and better – for advertisers.
“I think as Google stretches, it becomes less clear in the marketplace what it is,” Ordahl says. “[This change] simplified what Google is, which should help preserve the brand value for Google, and then they can put all the other stuff under Alphabet.
“It just can’t be a passive holding company,” he adds. “There has to be some rationale for why it exists; that’ll be interesting to see.”
This article was originally published on http://searchenginewatch.com/sew/news/2421646/whats-going-to-happen-to-google-advertisers.
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