On Monday, Google announced its biggest move as a company in 11 years: All of its services are being transferred to a new operator called Alphabet (www.abc.yz).
The company's upgrade to separate entities under Alphabet allows for "greater scale of management, as we can run things independently that are not very related," the announcement said.
Page and Sergey Brin will be at Alphabet as CEO and Chairman respectively, and they named rising Google star Sundar Pichai as CEO of the search engine. Of course, each company will have a CEO, and Page and Brin will oversee, support, and innovate across all of the portfolio companies.
But beyond better management and focus, there is another explanation for this move: Branding
The 12th law of marketing described by Al Reis and Jack Trout in their classic guide to marketing, and in the 22 Immutable Laws of Marketing, is “The Law of the Extension Line.”
Reis and Trout advise companies to resist pressure to expand their brand equity.
Not to spread themselves too thin and not to try to be everything to everyone.
This also applies to product lines: Expanding a product line into unproven areas is risky. While most companies believe that the power of a brand will help sell new products, often the new product hurts the old one. And the brand is tarnished in this way.
Google is not an ordinary company.
What is the Google Brand? Google's mission is to “organize the world's information and make it accessible and useful.”
And the company's second rule is "It's better to do one thing really, really well."
Google explains: “We do search. With one of the largest research teams in the world focused solely on solving search problems, we know what we do well and how we can do it better.”
But how does it explain non-search services like Gmail and Google Maps? Google ties these products to search:
“Our dedication to improving search helps us apply what we’ve learned to new products like Gmail and Google Maps. Our hope is to bring the power of search to uncharted territories, and help people have greater access to and use even more of the ever-expanding information in their lives.”
OK, it looks like Google has managed to tie these related products together. Search affects how you find an address on a map, and the new Google Photos certainly has its place under that branding.
But how can one explain Calico, a Google company “for health, wellness and longevity”? Or a glucose-sensing contact lens? You simply can’t. Google has expanded far beyond the promise of its original brand name.
So Google essentially had two options:
1. To develop its brand name from “organizing the world’s information” to something broader enough to encompass all of Brin and Page’s projects.
2. To keep Google focused on its true brand name and move away from anything that doesn’t fit.
Besides, how can it connect self-driving cars to Gmail? This is where Alphabet comes in.
This is why Page and Brin had to create a new holding company, Alphabet, with a new brand.
They had to make sure that this brand was broad enough and reflected their vision of making the world a better place through bold innovation projects.
With information from VB
