As usually happens when a company announces a rebrand, or an entirely new brand name, lots of people have immediately reacted to Google’s creation of its new parent company “Alphabet” by discussing (and in some cases criticising) the brand name.
Branding is hugely important. Companies pay millions of dollars to branding consultants to come up with the names, logos, and brand vision that will both appeal to customers and stand the test of time.
Alphabet is a slightly different case.
In a blog post, Google co-founder and now Alphabet CEO Larry Page, explained that the goal isn’t to be a big consumer brand with a bunch of related products, but rather that “the whole point is that Alphabet companies should have independence and develop their own brands.”
Page also gave some explanation behind the thinking of the “Alphabet” name:
“We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha‑bet (Alpha is investment return above benchmark), which we strive for!”
But ultimately all of that doesn’t really matter.
This is a “brand architecture” move
Melbourne Business School associate professor of marketing, branding consultant, and Marketing Week columnist Mark Ritson told Business Insider people discussing the Alphabet name and the rights to the web domain, or social media rights “totally miss the point, it doesn’t matter.”
Instead, Google has made an important “brand architecture move.” Just like HSBC, or Unilever, or Diageo, or LMVH; Alphabet is a holding entity. And to that end, it’s simply letterhead. What is more important is not the branded house, but the brands inside that house.
And, let there be no mistake: This announcement is huge and historical.
John Marshall, chief strategy and client officer at brand strategy and design agency Lippincott, says: “In creating Alphabet, Google is bucking a powerful trend in corporate branding — the unification of disparate companies and products under a strong ‘name’ parent brand, such as Apple, GE, or IBM. This move is consistent with Google’s game-changing ambitions. This is the branding story of the year — perhaps, too, the decade.”
Chris Clarke, international chief creative officer at global marketing and technology agency DigitasLBI jokes that Alphabet “sounds a bit like a wedding band” but adds that taking on a Berkshire Hathaway-type holding company model “makes perfect sense” from a branding perspective.
“On the one hand Google is an ad-funded search company, and on the other hand it’s a DNA mapping company, and soon it will be an auto brand. If you seek to do all of these things, having a holding company is a smart move because it allows all those separate parts to breathe,” Clarke added.
It’s also a genius employee and acquisition marketing play
The Alphabet model will also help Google make even more acquisitions than it already does. The company is extremely acquisitive, having acquired more than 150 brands, but now it is likely to acquire and divest even more.
Ritson explains: “This is the ideal approach to do that. It allows a brand significant autonomy, which is attractive to them when they’re being approached. And it allows Google an easier structure for divestment. You can bolt on a brand in a house of brands structure in a matter of weeks. And, similarly, you can get rid of it. The reason companies like Diageo and LVMH have these structures is exactly that point: It allows them to bolt on or spin off brands very easily.”
Internally, staff are likely to be cheering the move (many employees have already shared their excitement on Quora.) Each new business under the Alphabet structure will now have separate management teams, allowing more opportunities for career development. Similarly, it means Google co-founders Larry Page and Sergey Brin are still running the company, but not engaging in the full-time, day-to-day of discussing ad metrics like CPCs and CPMs. They can focus on the bigger picture.
Clarke said: “A holding company structure allows the different businesses to operate independently, which is great for the attraction and retention of talent, particularly as the company moves more down the DNA, science, and automotive routes. Employer branding is a big thing and now each business will have their own autonomy, identity, values, and a new ladder up to heading up a company. It’s a smart move.”
Ultimately, Ritson says Google/Alphabet will become more innovative a company as a result of the re-org.
“There’s a very big link with a house of brands structure and innovation. A single dominant brand can stifle innovation in other parts of the organisation, which is something Google just cannot afford to do. But a house of brands is a strong catalyst for innovation, because different brands can work differently,” he added.
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