Gadgetory

so yesterday Google announced that it's going to become alphabet yeah alphabet is this big holding company and Google's still gonna just inside it with all you know Gmail search Android everything you associate with Google but all the Google's stock is now in the alphabet stock and it's gonna become part of much bigger holding company and that holding company owns Google but also has Auto it also has calico and all the other editions own all the Google X stuff got it so what does Google get out of this why does it want to separate out all of its different pieces yes so one of the things that's been happening in the background sort of for the past year and a half now is Google's been doing increasingly ambitious projects that are kind of not really related to the core things this is the Google X stuff we've been talking about there's been a lot of news about these you know contact lenses they're developing and project loon and investors have always been sort of nervous about them they don't really see how they're gonna make money a lot of investors would prefer Google just sort of stick to making money on search the way it's good at making money and so a lot of this is about kind of modifying those investors and saying you know if you want just the core Google it's here you can so you can see it's still profitable and if these other entities you know if they don't work out if they implode we can shut them down if they become wildly successful we can spin them off independently and also if we need more funding for them that funding doesn't necessarily have to come from Google it can also come from outside you know outside rounds they can IPO independently and they'll each have their own CEO I mean so is there any sense that Google is doing this like purely to preempt you know regulatory issues or all these countries been looking to potentially break up bits and pieces of it I don't think so in part because a lot of if you were gonna break up Google you you it's still Google that you would be breaking up right let's smaller core Google it still has all the products that people would be looking at and also I don't think I mean Google's facing a lot of serious regulatory fights most notably in Europe with the right to be forgotten and sort of the whole track and cookie issue um but there hasn't really been any serious issue to take monopoly action against it you think you're potentially splitting up you know Google versus these inner delivery companies like loon and fibre does that play into it at all those are all so tiny though I mean I think the percentage of people even in the US that are actually getting Internet through Google Fiber is so tiny compared to the whole that it would be very difficult to I mean I think it would be like you know saying Amazon's movie studio is it is a monopoly because they're gonna take over the film industry which maybe someday but for now there's still a very small fish in that particular pond so um I don't think it's regulatory also you know a lot of people thought it was tax like a tax break thing which I think has not borne out as we look closer at the at the corporate structure and documents um I think honestly it's just there has been this division for a while between the stuff at Google that has to do with making money and the stuff that has to do with the future of the business and the future of the world and that divisions been kind of growing more and more particularly as Larry Page and Sergey Brin has kind of drifted away from the day-to-day core businesses and I think basically what we saw yesterday and what we're seeing going forward is that's now a formal division within the company but it's a loom fiber this biotech stuff these are the wildly ambitious ideas that could one day make a ton of money in the future right so yeah you know how does Google balance funding them currently yeah and and still appeasing investors who are now I mean they're getting a better idea of what's going on with them right yeah I mean the punch line is they're sort of gonna keep doing whatever they want this isn't they're still gonna keep pouring Google money they still have most of the control here yeah yeah and so they they're not you know investors want them to shut down these projects or a lot of investors do and they're not doing that they're not gonna stop pouring profits from search into these companies because they believe in them and they still believe in them but the structure lets them become a little bit less of a blank cheque so if they need you know a ton of more money for self-driving cars and they say well you know this is gonna become profitable but we need maybe you know a hundred million dollars before it becomes profitable that doesn't necessarily have to come out of Google itself it can come out of a separate funding round and all those projects can be self-directed ok so who's gonna be able to do a better job of building up these individual brands and initiatives that right now are very disparate throughout Google I guess yeah and one of the things we've seen that's been kind of a problem for Google X has been you know they want okay so for instance Project loon is we want to make a balloon that provides Internet access okay so now you've made the balloon we have the prototype we know we can do it what do we do next do we become an independent company do we become a Google division how much do we really need to and there's sort of this question of how you take the next so what I'm wondering is loon and fiber I feel like those tie into Google's core product that ties into ad revenue if people are getting Internet it may be a strainer yeah they're gonna be using more Google products right or at least presumably so yeah you know how do they keep that integration if that's part of maybe what the business is what is on there's still all the same company I mean so I think you will still see people moving from the core Google to these other projects you'll still see technology from Google going back you know in and out back forth but I also think to some extent there's this question of was loon ever actually gonna help search revenue I mean I think that's kind of an open question that's certainly something that shareholders were told and I think it's something there and they were sort of intensely skeptical of and so part of what we're seeing now is Google something like loon no longer has to justify itself in terms of search revenue it has to justify itself as part of this larger alphabet organization so where does Google go now that everything is split up yeah I mean I think the really interesting thing to watch here won't be the core Google but it'll be these outside projects one good example is nest which was acquired by Google a couple years ago and you know its CEO Tony Fadell you know last week he was CEO of nest and which was owned by Google and you know once this whole merger is done he'll still be CEO of nest as now part of alphabet um but I think after the restructuring someone like the Tony Fadell has a lot more options suddenly he can raise money outside he can IPO he can just do a lot of things that he couldn't when he was still kind of justifying necess existence to the core Google profit alphabet can really treat these like individual businesses they don't have to be yeah part of search revenue somehow they could to speed businesses unto themselves yeah and I think that's I mean fundamentally Google hasn't committed to doing anything with any of these projects but I think what it means is the independent entities aren't just sort of under the Google umbrella anymore now they have a lot more options about where they can go and when we start to find out more about how these different areas of Google or alphabet are doing yeah I mean I think when Google decides well when alphabet decides to tell us about them that's the weird thing so what they said in the initial announcement was they're gonna they're gonna announce Google profits separately from alphabet product so if you just subtract the Google numbers you'll be able to see all the other ones lumped together and I think something like nest is a good example of it may decide to say hey guys we're making all this money we're gonna we're gonna report in s profits to be as these individual companies that's what I think it's something like I mean we see we saw this with Apple with you know how many Apple watches did you really sell and they decide it for a while like we're not gonna tell you that yet we'll tell you that later it's kind of the same deal where Google may just not tell you how much money you know the other alphabet projects are making or swallowing up but at some point they could decide to you never know which is something that was less likely when they were all just under the umbrella of Google X so and maybe this is going back a bit yeah their Google's breaking out all these companies that are you know potentially just losing them money is that not easy I mean I think a lot of the yeah they're just like throwing money into it there's this ventures I mean I think the thinking within Google has always been these are going to be one of some of these are gonna be the core of the company 20 years from now after search revenue maybe isn't enough to carry an organization of this size because the technology landscape is constantly changing so these are our longshot bets on the future of the company and now I think they're longshot bets on how does it keep people from being scared that they're just throwing away money until that happens that like one day the idea that these will replace or search or you know should search dry up yeah well I think the concern I mean in some sense they're just a scary project Center and keeping scary projects I think the concern for some of it was all of the money that was ever gonna be poured into Google's self-driving car project had to come from Google search revenue and that was always going to be a drain on shareholders whereas now that looks like less of a blank check and making the commitment of hey guys we're gonna build a self-driving car because Larry and Sergey really believe in it that's less scary to people who are just kind of there for the search right so you think this is gonna give Google more flexibility this is probably a net positive yeah I mean I think the other interesting thing will be to see what happens to what is now Google understand our pitch high because I think it starts to look I mean I think it's still a very ambitious project and I think things like Android one are still really exciting it'll be exciting to see where they go but you have to kind of wonder you know now they don't have the excitement of we're gonna build these huge internet balloons we're gonna be you know making drone wind turbines and so how does that company stay exciting and I think he's got a lot of answers to that