In August, Google announced that they would be creating a holding company called Alphabet, effectively rebranding and becoming a conglomerate with ‘Google’ reverting to its largest subsidiary.
Alphabet would also own a variety of businesses including Nest (home automation), Calico (bio-tech) and Google X (self driving cars, innovations) signalling it was no longer just a search engine business running some innovations projects.
Less than a month later on September the 4th, Google will be celebrating its 18th birthday. Is the close timing of two such momentous milestones more than coincidence? History says yes.
With all the ups and downs of the tech industry, it’s easy to forget that it’s been 18 long years since Google came onto the technology scene and changed it forever with its unique search algorithm and innovative advertising-based model. From search, to email, to maps to mobile, Google have evolved and invariably led the rest of the industry.
But now, at 18 years old and no longer the young and energetic start-up it once was – what’s next?
Does Alphabet symbolise the next step in reinvigorating Google’s spirit of innovation? Or is it just a knee-jerk response to a business that’s starting to realise it’s getting old, as Zune and Bing was to Microsoft in the early 2000s?
Often, technology companies uncannily mimic humanity. As a start-up, the lack of experience and preconceptions about how things are supposed to be allows them to effortlessly run rings around their larger and more established competitors – much like how kids can learn new languages or attempt seemingly difficult physical manoeuvres without too much thought.
However, as they get older, the knowledge and experience gained also becomes bureaucracy and politics, and what used to be innovation is now operations and “sticking to what you’re good at” to keep the cash flowing. And at some point, like human beings, comes a sudden need for change to stay young and relevant, with “relevancy” being defined by what is currently cool and fashionable in the tech world.
Almost all tech companies of a certain age have gone through this type of mid-life crisis phase, with various degrees of success and outcomes.
Microsoft’s mid-life crisis came in 2000 when it tried to replicate the success of Apple and Google with “me-too” products, even though its core business of selling Windows software was still sound and profitable at that time. When Apple got rave reviews with their iPod, Microsoft responded with Zune. When Google started attracting attention over the possibilities of the Internet and search engines Microsoft created Bing search.
Neither of these products are considered successes, and today, Microsoft has slowly faded out of relevancy in the tech space, with Apple’s iPhone – a single product – producing more sales, at $40.28 billion, than everything that Microsoft produces combined at $26.5 billion, in the 2nd quarter of 2015.
Google was founded on the success of its search algorithm and tie-in to the advertising industry, which in the early 2000s was a business model that was unheard of. Banner ads were primitive and spam-like while most technology businesses made money from selling software, or hardware.
So when Google came along and sold advertising on the back of collecting data, the industry and the business world at large was awed by this innovative young start-up darling for doing something different and succeeding. To the founders, the employees, and the business, this attention kept Google young and fresh and “cool”.
Today, their big data/advertising model is now considered the default model for most tech and Internet companies and instead, the fashionable topics in Silicon Valley revolve around future tech such as clean energy, wearables and biotech.
When Google announced changes to YouTube with its 360 degrees videos or the latest “material design” update to Android nobody paid too much attention – but as soon as Elon Musk of Tesla starts talking about Hyperloops, implementing supercharger networks or space travel he gains international acclaim as the “real life Iron Man”.
This redirection of attention and relevancy in the technology industry must have some sort of psychological effect on the founders, leadership and employees at Google.
That said, the move to Alphabet does have the potential to make Google into something bigger – by positioning Google as a smaller part of a larger whole. Regardless of the actual profitability or long term sustainability of these businesses, it does provide a change in perspective not only for the media, public and investors looking in, but also for the employees to better understand where Google sits in the overall vision of where the founders wants it to be.
The structure itself is an effective message – Google provides technologies for the future (that just happen to include search).
So if Google is indeed suffering from a mid-life crisis, they can take some comfort in the deeds of a few heavyweight peers.
Microsoft’s aforementioned failed attempts resulted in Xbox, and of course, without Apple’s mid-life crisis in the early 90s we wouldn’t have iPod, iPhone and iPad and the underpinnings of modern mobile technology and paradigm.
About the author:
Paul Lin is the CEO of Empirical Works, one of Australia’s leading enterprise mobility companies. He has built apps and mobile solutions for some of the world’s biggest brands including Jim Beam, Skoda, Levi’s & Weight Watchers.