Ben Thompson of Stratechery:
Page may be abandoning day-to-day responsibilities at Google, but he has no intention of abandoning Google’s profits. Alphabet’s plan to report Google’s results on a standalone basis will likely reveal that the search-and-advertising company investors have bought stock in is, absent the financial blackhole of Google’s moonshots, doing even better than most suspected. Unfortunately for said investors the additional clarity will only serve to illuminate just how much money is not being returned to shareholders and is instead being spent by Page and Brin on what they think matters.
Thompson is the first person I agree with who has succinctly put the Google/Alphabet change.
A lot of people have been throwing out random guesses of tax issues or personnel changes, or other restructuring mumbo jumbo. I tend to agree with Thompson and believe the change was made in large part to help delineate these big ideas from an extremely successful business as well as the different sources of revenues the companies within Alphabet have. Page and Brin don’t want to have to focus on Google but rather the large acquisitions that they believe can help change the world. Separating this out may help relieve some of the pressure of using Google’s profits all while still actually getting to use them.
That right there gets exactly to my mixed feelings about Alphabet and the formalization of Page and Brin’s role as sole investors of Google’s profits. I care about changing the world too, but I tend to think that said change is more often wrought through market mechanisms that reward the productization of audacious R&D.
I don’t think Thompson is wrong in this thinking, and he points out some of Google’s own exceptions himself. Having two people deciding where all of Google’s profits are allocated can be a dangerous thing without checks and balances, especially in the minds of the stockholders. However, with a company like Google, err Alphabet, that has the spending arm for these big idea acquisitions as well as a giant talent pool where they can get the best of the best working on these projects, why not shoot for the moon?