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Re: Google Morphs Into Alphabet
Most the commentary on this is about it trying to structure itself to be better loved by Wall Street.
But if that is the case, why now? Do they feel growth going to zero in the next recession?
Recently they have dialed up CPCs on branded keywords to reach for incremental revenues & have also got more aggressive with YouTube autoplay and YouTube pre-roll ads. But given the ad density of search results on Bing and Yahoo! Search (let alone AOL or Ask.com) I think Google could probably ad yet another ad unit to their desktop search results. And outside of hotels (which they already aggressively monetize) they are just putting their toe into monetizing other local vertical markets.
My (admittedly cynical) view of this is this is a way for them to make more acquisitions they wouldn't be able to make in the current regulatory landscape. So long as they claim to have a firewall and separate operating entity for each line then they can keep buying up the raw materials of the web. This would make it easier to acquire a Twitter, Yelp, Zillow or eBay. I could also see them acquiring an entity like Mediaocean as a parallel to their DoubleClick acquisition. Another advantage to them doing the portfolio thing is it allows them to get more aggressive with partial acquisitions in advance of full ones & to strategically take stakes or dump stakes from certain providers as part of their biz dev deals.
Google announcing they are investing in something (after they have already done so) can pump the stock. Even them namechecking someone buying their ads is good for a huge ramp job on that other company's stock.
They can be a Berkshire Hathaway which has strong performance data on any web connected business (AdWords, Chrome, Android) which can be leveraged into their investments. And Google is already providing some search data to at least some banks in Spain - why not leverage it themselves? Better yet, with their ad quality scores & relevancy algorithms they can guarantee outcomes. Look at how Google investment Thumbtack overtly used egregiously spammy link building techniques and had their rankings restored in under a week, while algorithm updates to Panda or Penguin can take a year or more to roll out - with penalized businesses operating on limited web traffic and cashflow until the next update eventually comes.
And if regulators demand Google be broken up they can respond "as a diversified conglomerate, we already have firewalls, but we understand your concerns. We would be willing to move YouTube (or whatever else) into its own operating entity." It would seem like a resolution, yet offer no actual concession, while green lighting further acquisitions and bundling.
For a concise, readable summary of iTulip concepts developed over the past 16 years and a vision of a challenging next decade and how to navigate it, read Eric Janszen's book "Post Catastrophe Economy".
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