• Magdalena Gołębiewska

Google - there is much more here than search. And what the f.. is Alphabet Inc.?

Google has expanded far beyond its original claim to fame as a search engine. The company, founded in 1998 by Sergey Brin and Larry Page, went public in August 2004. In 2015 the company organised all of its businesses under the name Alphabet, Inc.

In its financial reports, Alphabet breaks down its results in two categories:

  1. Google

  2. Other Bets.

Google is the only reportable segment of the two since the Other Bets do not meet the quantitative threshold for reporting, according to the company.

Since the very beginning Google has really aggressive M&A strategy. In 2010 and 2011 company acquired, on average, more than one company per week!


Alphabet owns more than 200 companies, including those involved in robotics, mapping, video broadcasting, telecommunications, and advertising. The company is growing through acquisitions, but it is also increasing revenue and profits in each of the companies it owns. In cases where an acquisition or existing business stops growing, Alphabet will either cease operations, fold it into another business, or sell it outright.


Takeaways

  • Google, through its parent entity Alphabet, Inc., owns more than 200 companies in a wide range of sectors.

  • Google has been known for its aggressive acquisition strategy, snatching up start-ups that look interesting or which present some competitive challenge to one of its businesses.

  • YouTube, Adsense, and DoubleClick are among the best acquisitions to date for Google, in terms of the revenue it has brought in for the company over the years.


Useless but interesting facts

  • Google was originally named BackRub by founders Page and Brin who linked their own personal homepages to it to get "backlinks."

  • The number of acquisitions made by Google in 2018, the smallest number since 2009.

  • In 2010 and 2011 company acquired, on average, more than one company per week!


Google Companies


The companies and products inside Google include:

  • its advertising business (known simply as Ads),

  • Android,

  • Chrome,

  • Commerce,

  • Google Cloud,

  • Google Maps,

  • Hardware (including GoogleHome, Nest, and Pixel),

  • Search,

  • YouTube.


These businesses generate most of their revenue through advertising, app sales, in-app purchases, digital content products, hardware, and licensing and service fees.


For the first nine months of 2018, these Google businesses combined to generate $97.1 billion in revenue, according to the company's 10-Q. Advertising represented $83 billion of that total.


Other Bets


Other Bets is a combination of multiple operating segments that are not individually material. These businesses include

  • Access,

  • Calico,

  • CapitalG,

  • Chronicle,

  • GV,

  • Verily,

  • Waymo,

  • X.

These business segments generate revenue primarily through the sales of internet and TV services through Access as well as licensing and R&D services through Verily. For the first nine months of 2018 Other Bets generated $441 million in revenue for Alphabet.


X: Taking Moonshots

Google also develops companies in-house through X, formerly known as Google X. X is described as a "moonshot company," with a focus on creating new companies that identify major societal issues and attempt to find tech-based solutions. If these companies are deemed worthy, they "graduate" out of X and begin a life of their own. This could mean they get folded into an existing Alphabet sector, become an independent company within Alphabet, or even get spun out on their own. The most recent graduate of X is called Chronicle, a cybersecurity platform designed to help business understand their own security data better and identify cyber-threats before they happen. The company is now an independent business within the Alphabet. Google's driverless car program was also borne out of X before it was merged with Waymo.


New Initiatives

Google announced at its annual developer confab, I/O, on May 8, 2018, that it would integrate artificial intelligence with almost everything, from writing emails to computer chips. 

Google introduced new ad-buying tools on July 10, 2018, that highlight a growing push to let machines fine-tune ads and determine where they should run. Jerry Dischler, vice president of product management, shared in a blog post that machine learning is at the heart of the company's latest updates. These advancements strive to help advertisers keep up with changes in how consumers interact with devices.


Acquisition Strategy

Alphabet continues to acquire companies that bolster its strengths in

  • online advertising,

  • cloud computing,

  • hardware.

In 2018, it acquired 9 companies across these areas for undisclosed sums of money. The company has proven to take chances on non-profitable companies and give them time to mature, as it did with YouTube. It is also willing to divest of businesses or strategies that do not play into its core strategies.


Key acquisitions (summary)


1. YouTube

In October 2006, Google announced that it had acquired the video-sharing site YouTube for $1.65 billion in Google stock and the deal was finalized on November 13, 2006.


2. Double Click

On April 13, 2007, Google reached an agreement to acquire DoubleClick for $3.1 billion, transferring to Google valuable relationships that DoubleClick had with Web publishers and advertising agencies.The deal was approved despite anti-trust concerns raised by competitors Microsoft and AT&T.[13]


3. Motorola Mobility

On August 15, 2011, Google made its largest-ever acquisition to date when it announced that it would acquire Motorola Mobility for $12.5 billion[14][15] subject to approval from regulators in the United States and Europe. This purchase was made in part to help Google gain Motorola's considerable patent portfolio on mobile phones and wireless technologies, to help protect Google in its ongoing patent disputes with other companies, mainly Apple and Microsoft, and to allow it to continue to freely offer Android.The merger was completed on May 22, 2012, after the approval of China.


4. Waze

In June 2013, Google acquired Waze, a $966 million deal. While Waze would remain an independent entity, its social features, such as its crowdsourced location platform, were reportedly valuable integrations between Waze and Google Maps,


5. DeepMind Technologies

On January 26, 2014, Google announced it had agreed to acquire DeepMind Technologies, a privately held artificial intelligence company from London. DeepMind describes itself as having the ability to combine the best techniques from machine learning and systems neuroscience to build general-purpose learning algorithms. DeepMind's first commercial applications were used in simulations, e-commerce and games. As of December 2013, it was reported that DeepMind had roughly 75 employees. Technology news website Recode reported that the company was purchased for $400 million though it was not disclosed where the information came from. A Google spokesman would not comment of the price.The purchase of DeepMind aids in Google's recent growth in the artificial intelligence and robotics community.


The whole list (probably incomplete) can be found here.


Sources: Investopedia and Wikipedia.


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