Google Inc. - The ALPHA of all Tech giants

The search giant and tech conglomerate, Google Inc., recently surprised the investment world by announcing a major corporate restructuring through the creation of a parent holding company, ALPHABET. Under this restructuring, the founders Larry Page and Sergey Brin will resume CEO and President roles of Alphabet, respectively, and Eric Schmidt will be its Executive Chairman.  

Under the umbrella, the various innovative and super-ambitious projects will be mostly run independent of each other through the hiring of CEOs for each project – allowing for a better management scale and clearer accountability and understanding of revenue streams for the investor community. This also shows how truly massive Alphabet is. Let’s break down its army group of companies:

Company 1: CALICO Labs

Through Calico, ALPHABET will continue to push research and development to harness advanced technologies ‘to increase understanding of the biology that controls lifespan’. The mission of this company is to use the knowledge acquired to devise interventions that enable people to lead longer and healthier lives. A large sum of funding is already in place and the company is aggressively  partnering with several top scientists and some of world’s best health institutions & laboratories to conduct research into the biology of aging to identify potential therapeutics for age-related diseases.  Revenue streams under this will come in the future.

Company 2: NEST Labs:

Around the beginning of 2014, ALPHABET acquired NEST Labs, founded in 2010 by former Apple engineers, for approximately $3.2B. NEST Labs is a home automation company manufacturing sensor-driven, Wi-Fi-enabled, self-learning thermostats and smoke detectors. Right before the acquisition, NEST Labs was shipping 40,000 to 50,000 of its learning thermostats per month. By this estimate and under Google’s renowned search ecosystems, Nest Labs could easily be shipping over a million thermostats per year now. Under the buffer of cash from Alphabet, NEST Labs has also expanded its portfolio by producing phone-integrated smart proactive smoke sensors, and by acquiring upstart Dropcam, a provider of easy-to-use and configure Wi-Fi webcams and security trackers with cloud-based storage, in a $555M cash deal. It is a bet Alphabet is putting for the next ten years. 


Company 3: Google Ventures

Through its fat cash-pile, Alphabet has been providing venture capital funding to more than 300 ‘bold new startups’ in various industries including commerce, enterprise & data, life science & health, consumer, and mobile. So far the venture has poured over $2 billion into 300 of them. In addition to funding; the company backs this portfolio of companies with support in design, engineering, recruiting, marketing and more. Some of the well-established and fast-growing companies that Google Ventures has stake in include:

• UBER - Largest online transportation network that connects riders to drivers.
• HomeAway - Largest direct competitor of AirBnB.
• JET - The Costco version for members-only online shopping.
• RetailMeNot - The world’s leading digital coupon market place.
• 23andMe – Personal genetics company dedicated to helping individuals understand their own genetic information through DNA analysis

Company 4: Google X (Solve for X)

Located about a half a mile from Alphabet’s corporate headquarters in Mountain View, California, this is its most secret company dedicated to making hyper-ambitious technological breakthroughs and advancements. Often described as “solve for X”, the company has some of the world’s top scientists and researchers pursuing audacious projects such as driver-less cars, balloon-powered Wi-Fi networks called Project Loon, virtual reality glasses, drone-delivery program called Project Wing, a smart contact lens that measures glucose in tears, Al & Robotics including most advanced double and quadrupedal robots in the design phase for U.S. military through Boston Dynamics - acquired by Google X in December 2013, and many more that are not publicly disclosed yet. These are all in research and trial phases for now, and the tech giant is super bullish on how these secretive projects will disrupt and redefine some of the current practices in transportation, defense, health, communication, and several more industries.  

Company 5: Google Capital

This is a growth equity investment fund backed by the cash-pile & knowledge of Alphabet, and focuses on emerging, long-term technology trends that are leading or are poised to drive disruption in their respective markets. Unlike most growth equities, the tech giant does not only focus on investment capital, but also how the whole Alphabet ecosystem works with its bucket full of companies, and hence leveraging all types of economies of scale. Some of the leading venture firms in its bucket include:

•         Survey Monkey - leading provider of online survey solutions.
•         Glassdoor -  a jobs and career marketplace with anonymous reviews
•         CommonFloor - India’s leading real estate platform.
•         DuoLingo - language education platform powered by machine learning.
•         FanDuel - daily fantasy sports provider for NFL, NBA, NHL, MLB and  more.
•         Auction.com - online real estate marketplace for small and large investors.
•         Lending Club - a peer-to-peer lending company. 

Company 6: Google Fiber

Free internet is around the corner. This is the destroyer of the sluggish TV & internet providers such as Time-Warner, AT&T, COX, Verizon, Direct TV, and Comcast -- If you have your money invested in them, stay away. Google Fiber is simply an internet and television service provider with internet speed of up to a blistering 1Gigabits per second (or 1,000 Megabits per second). To put it in a perspective, the current average internet speed in the U.S. is 10 Megabits per second. Under Google Fiber service plan, users have three options: a free internet option, a 1 Gbps internet option, and an option including TV service in addition to the 1Gbps internet. As of March 2015, Google Fiber had 27,000 TV subscribers. The service is currently available in Austin, Kansas City, and Provo, Utah. Nine other American cities are in the plan for implementation. There is a lot of political red tape they have to go through, but there is no doubt Google Fiber will be the dominant player and disrupter with time on its side. 

Company 7: Google (Android, Search, YouTube, Apps, Maps, Ads)

This is the home-run and core business of Alphabet.  89.5% ($59.06 B) of its revenue in 2014 came from advertising through its collection of free Android, Search, YouTube, Apps, & Maps. Under the corporate restructure, Alphabet will retain its core business under Google, which now has its own new CEO, Sundar Pichai. Via the famous and extremely user-friendly ‘google.com’ search page, the company continues to generate billions of dollars in revenue through its two part advertising program, Google AdSense and Google AdWords. The site generates 89 percent of U.S mobile organic search market and has a share of 64% of all search queries.

is Google’s fastest growing monster equally competing with Facebook in terms of users and content. It has more than a staggering 1 billion users, every 24 hours people watch hundreds of millions of hours and generate billions of views, 300 hours of video are uploaded to the site every minute, and it is localized in 75 countries and available in 61 languages. As the recent trend of cord-cutting continues across the living room spaces of millions of homes, YouTube will continue to dominate the living-room entertainment closely competing with Netflix. Morgan Stanley suggested the site could generate $20 billion in revenue by 2020. I personally spend more time streaming YouTube videos than Netflix in my living room space and have noticed more ads coming through its TV app. No wonder they have dedicated its own CEO, Susan Wojcicki.

Android is also a dominate player in the mobile operating platform ecosystem - way ahead of its close competitor,  Apple’s iOS. As of Q4 2014, Android had a 76.6% market share and iOS 19.7%. Google gives Android away for free to smartphone makers like Samsung and HP. “The idea has always been that giving Android away for free will put the Web into more people’s hands and that will lead to more mobile Web searches and clicks on Google’s search ads.” Android also has the highest number of developers (388,000) making Google Play Store the richest ecosystem of apps.

The most highly detailed and yet very interactive online maps, satellite imagery, terrain, 3D buildings of many countries come from Google. These also come under the free service category as the company offers to everyone with a simple purpose of selling consumers’ attention span to businesses through its AdWords.  In addition, the company has been mining large structured and unstructured data, for future projects like the recently  announced Project Sunroof, on landscapes and homes of literally everyone.

In addition to the army group of companies discussed above, Alphabet also has hundreds of constantly engaging apps and services including: Gmail, Google+, Google Hangouts, Bloggers, Google Docs, G Talk, Google Domains, Google Drive, Panoromio, Picasa, Google Voice, Google Classroom, and Google HelpOuts. It is a super ambitious conglomerate with insanely tremendous & growing wealth of capital in human intelligence, big data, cash, and established ecosystems to take it to the one Trillion dollar valuation within the next few years.

Alphabet is large, powerful, aggressive, well-diversified, and most intelligent. Long term investors in the tech space without Alphabet (GOOG/GOOGL) in their portfolio are FOOLS.