Googley Spin-Offs Underwhelm
September 29, 2016
One might think that starting out as a derivative of one of the most successful companies in the world would be a sure path to profits. Apparently one would be wrong. The Telegraph reports, “Alphabet’s Spin-Offs are Struggling to Repeat the Google Success Story.” Readers will recall that Alphabet was created last year as the holding company for Google and its derivatives, like Calico, Google Capital, Nest, Google Ventures, Verily, and X. Writer James Titcomb explains the logic behind the move:
The theory behind Alphabet, when Page laid it out in August, made sense. Google had become more than just an internet services and advertising company, even though the main internet business still made all the money. Google had set up units such as Calico, a life sciences division trying to eradicate death; Project Loon, which is trying to beam the internet to rural Asia with gigantic space balloons; and Boston Dynamics, which is trying to build humanoid robots.
These ‘moonshots’ weren’t able to realize their potential within the confines of a company focused on selling pay-per-click internet advertising, so they were separated from it. Page and Sergey Brin, Google’s two co-founders, left the everyday running of the internet business to their trusted lieutenant, Sundar Pichai, who had been effectively doing it anyway.
Being liberated from Google, the moonshots were supposed to thrive under the Alphabet umbrella. Have they? The early signs are not good.
The article concedes that Alphabet expected to lose money on some of these derivative projects, but notes that the loss has been more than expected—to the tune of some $3.6 billion. Titcomb examines Nest, Google’s smart-thermostat initiative, as an example; its once-bright future is not looking up at the moment. Meanwhile, we’re reminded, Apple is finding much success with its services division. See the article for more details on each company.
Will Alphabet continue to use Google Search’s stellar profits to prop up its pet projects? Consider that, from the beginning, one of the companies’ winning strategies has been to try anything and run with what proves successful; repeated failure as a path to success. I predict Alphabet will never relinquish its experimental streak.