Alphabet: Spelling Lemonade in the Harvard Yard
August 19, 2015
Talk about Mad Magazine and I think of the Harvard Business Review. For me, working through an issue, scanning the Web site, and listening to the stunning HBR podcast deliver a trifecta of amusement.
Consider “Alphabet Isn’t a Typical Conglomerate.” The write up is an explanation of how darned great the LingTemcoVought-ization of the Google is. Two companies. Google does the “all the world’s information” defined by online advertising; the other—Alphabet or Alpha bet or Phab— does the math and science fair projects. I know. I know. I should be excited about Loon balloons, self driving autos which even Volvo is working on—What, Volvo for goodness sakes), and solving the thorny problem of eternal life in a recreation of Juan Ponce de León’s epic adventure. I call him Ponce the Pointless.
Does Ponce remind you of anyone? Maybe a senior Google — oops, Alphabet — manager?
The write up focuses on such Harvard Yard favorites as a long time horizon, the importance of a company as a “talent magnet” from which start ups poach wizards, a “wake up call” to outfits like Amazon and Facebook, and a “catalyst to unleash the next wave of Google caliber companies in different industries.”
Sounds great. What could possibly go wrong as long as the ad revenue continues to burble.
Here in Harrod’s Creek, where the mine drainage gurgles into the pond which one attracted ducks, we think about revenue, organic revenue, lots of filthy lucre. The idea is that investments should have an upside for stakeholders. I am reluctant to point out these minor details:
- Google’s core business model was the online advertising approach of GoTo.com which became Overture which Yahoo bought. Prior to the IPO, the Alphabet kids worked out a deal with Yahoo to sail unencumbered into IPO land. Why worry about that legal settlement now? Google’s money machine was not exactly an original idea.
- Since the days of Backrub and fiddling around with the Clever system and method, the Google has not created a revenue stream which can lessen the firm’s dependence on online advertising. The vaunted innovation of Google applies to Chubby and Big Table, but in the diversification of revenue there has been much smoke and very little fire. Why will another corporate reorg unleash substantial new revenue streams? Hope springs eternal I suppose. What’s the problem with 95 percent of Phab’s revenue coming from online advertising? What could possible go wrong other than Facebook’s annoying presence?
- Google’s technological innovations do not seem that original to me. The death thing has been done and the departure of Amir Parviz, the nanotech protein wizard, progress seems slow. The tethered balloon seems tame compared to ultra light aircraft endlessly circling. The self driving car? Did I mention Volvo?
To sum up, the Alpha bet or the Phab folks may be doing the knee jerk “let’s buy Motorola” jive. How did that work out anyway? Long shots are fun. Long shots excite experts. Long shots are math and science club projects on a grand scale.
Why not do something slightly more exciting than sell online ads and deliver irrelevant search results? There is no need to make alpha bets and suggest that the idea is just Phab-ulous.
The Harvard Business Review, on the other hand, is finding a way to present lemonade with a twist of spin. That’s a good use of the alphabet. Will the European Commission get with the Phab0ulous new program?
Stephen E Arnold, August 19, 2015
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