The real reason for Google’s Alphabet announcement: Branding

On Monday, Google announced its biggest move in 11 years: All Google stocks are being transferred to a new holding entity called Alphabet (www.abc.xyz). Google is being slimmed down, “with the companies that are pretty far afield of our main Internet products contained in Alphabet instead,” according to Google cofounder Larry Page’s official announcement.

Spinning off life science, venture capital, and other units into separate entities under Alphabet allows “more management scale, as we can run things independently that aren’t very related,” the announcement said. Page and cofounder Sergey Brin are going to run Alphabet as CEO and President and have appointed Google’s own rising star Sundar Pichai CEO. Naturally, each company will have a CEO, and Page and Brin will provide vision, support, and innovation for all portfolio companies.

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But beyond better management and focus, there is also a branding explanation for this move.

The 12th rule of marketing outlined by Al Reis and Jack Trout in their classic marketing guide, The 22 Immutable Laws of Marketing, is “The Law of Line Extension.” Reis and Trout advise companies to resist the pressure to extend the equity of their brand. Don’t spread too thin and try to be everything for everyone. This applies to product lines: Extending the product line to unproven areas is dangerous. While most companies believe that a power of a brand will help sell new products, often the new product hurts the old one. And the brand gets tarnished along the way.

Google is no ordinary company. But it understands and tries to apply basic marketing laws.

What is Google’s brand? Google’s mission statement is “to organize the world’s information and make it universally accessible and useful.” And the second rule in the company’s “Ten things we know to be true” (AKA “Ten Things”) is “It’s best to do one thing really, really well.”

Google explains: “We do search. With one of the world’s largest research groups focused exclusively on solving search problems, we know what we do well, and how we could do it better.”

How does that explain non-search services like Gmail and Google Maps? Google links 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 previously unexplored areas, and to help people access and use even more of the ever-expanding information in their lives.”

I can buy that. Search does affect how one finds an address on a map. The new Google Photos certainly has its place under this brand.

But how does one explain Calico, a Google “health, wellbeing and longevity” company? Or a glucose-sensing contact lens? You simply cannot. Google has been extending too far beyond its brand promise.

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To stay true to its band, Google essentially had two choices:

1. Expand its brand from “organizing the world’s information” to something broad enough to contain all of Brin and Page’s projects — something along the lines of making the world a better place through innovation.
2. Keep Google focused and true to its brand, but spin off whatever doesn’t fit.

But if you spin off all these random projects, from delivery drones to contacts, what will connect them all?

That’s why Page and Brin had to create a new holding company, Alphabet, with a new brand. They needed to make sure this brand is broad enough and reflects their vision of making the world better through bold projects and innovation.

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Not to worry; the Google branding team is already hard at work. Just read the announcement:

• “We … said that you could expect us to make “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses.”
• “From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have.”
• “We did a lot of things that seemed crazy at the time … We are still trying to do things other people think are crazy but we are super excited about.”
• “We are excited about … getting more ambitious things done, taking the long-term view, empowering great entrepreneurs and companies to flourish, investing at the scale of the opportunities and resources we see, improving the transparency and oversight of what we’re doing.
• And hopefully … as a result of all this, improving the lives of as many people as we can.

Let’s hope this brand succeeds, because if Alphabet keeps to Google’s other core principle, “Do No Evil,” the flexibility of a new brand will enable it to experiment a whole lot more. Hopefully, we will all reap the benefits.
Ari Applbaum is president and cofounder of Venture1st, a firm that provides marketing services, business consulting, product develeopment, and funding to startups.