Case: Google has acquired several promising businesses over the years. Unfortunately, they come from a diverse set of industries that don’t reflect Google’s immediate interests. With the new reorganization and formation of Alphabet Inc, how does it help Google’s brand architecture, including other subsidiaries?
In October 2015, several non-core subsidiaries under the Google banner were restructured under Alphabet Inc. including Google itself. At the time, these subsidiaries included – Calico, Chronicle, GV, CapitalG, Verily, Waymo, X, Loon and Google Fiber.
The reconfiguration of Google and the resulting new parent company – Alphabet, is indicative of the ambitious growth strategy that lies ahead.
“Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead. […] Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related”, said Larry Page.
Possible Brand Strategy
The fact that the businesses are diversified and unrelated is reason enough to avoid confusion when it comes to managing the Google brand. The problem would have only compounded with time. This is because Google has built substantial equity with internet products. It’s what we expect.
Brand equity is raised when a product or service means ‘something‘ to ‘someone‘ as opposed to being ‘anything‘ to ‘anyone‘. Google has ascended to becoming ‘a verb‘ in modern conversation. It cannot be understood in any context other than internet products. In order for it to extend its brand, there must be a clear and relevant product-market fit. Its foray into hardware was based on leveraging the internet.
So let’s have a look at the new brand structure that Alphabet has created. When companies are reorganized and Google’s portfolio is slimmed down, we see product groups that are more in sync with the Google we know. Nest by the way, while not obviously relatable to the rest of the stable, leverages the internet to deliver its USP. It was recently merged with Google’s hardware division, the one that manages Google Home devices, Chromebooks, Pixel Phones, Google Glass etc.
In 2018, Google topped Apple as the world’s most valuable brand at $302B and became the 3rd most reputable company worldwide with an index score of 77.7 (data source: Statista).
When one is presented with the thought of a self-driving car or biotechnology, drone delivery or even capital funding, the original associations turn blurry, thereby reducing the understanding of what the brand has come to be. By allowing Google to focus on what it is known for and does best, it will continue to build equity within that domain.
In addition, each other subsidiary in the original portfolio now has the opportunity to step out of Google’s shadow and build equity and personality of their own. At the same time, disassociating themselves from Google would also mean distancing themselves from any negative connotations that Google might have picked up.
We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha‑bet (Alpha is investment return above benchmark), which we strive for!
By creating Alphabet inc. leadership has followed the ‘house of brands’ strategy, a parent company that operates in the background investing less in its own brand-building but dedicating resources to each subsidiary within its portfolio to further their interests in related markets (similar examples include P&G, Walt Disney, Mitsubishi Corporation or Unilever).
Brand architecture is very important not only for internal purposes but for external understanding of the business. The simpler the architecture, the easier it is for people to process. In this particular case, Google’s equity is not stretched. It therefore owns a clear position and set of expectations. Sister companies now have the opportunity to create their own unique brand. Something they would struggle with under the old structure. Also, this portfolio architecture allows the parent company, Alphabet, to make strategic bets in industries unrelated to the initial core business.
The Alphabet name is not unique. There are companies around the globe that share the same name, chief among them is the BMW Group’s fleet management division. But, given the exposure, scale and portfolio of this giant, its claim to ownership, recognition, and association won’t be difficult.
It is an exciting time for Google and Alphabet Inc. The restructuring not only makes brand sense but also lends itself to financial and legal opportunities.