Please do not generate the answer with AI. I need original content. Answer just this question: Why did Google restructure itself and create company Alphabet? What is it hoping to accomplish? Will Alphabet's new structure with independent business units enable it to innovate more?

However, engineers dedicated one day a weck (20%) to proprietary algorithms to organize the knowledge available developing ideas of their own choosing, and they spent the on the internet and serve up targeted search ads. Social net- remainder (10%) on total wild cards such as Project Loon, working software, in comparison, is fairly pedestrian. Addi- an envisioned network of high-altitude balloons that travel tionally, Page and Brin, both exceptional computer on the edge of space to provide wireless internet services to scientists, fell their Page-Rank algorithm, which accounts the people who do not have internet access-primarily for hundreds of variables and considers all available web- those in rural and remote areas. An estimated 33% of the sites, was far superior because it provides objective recom- world's population (2.6 billion people) has never used the mendations to users' search queries rather than subjective internet. Loon appeared to be promising, and as such it endorsements by someone's online friends. As a conse- "graduated" from X Development (Alphabet's R&D lab) quence, they snubbed social networking. Morcover, given and became a standalone unit with its own CEO in the many different projects Google was pursuing at that 2018. Yet, just three years later, Alphabet decided to shut time, the company's top executives ranked Orkut as a low Loon down. Loon CEO Alastair Westgarth explained that priority. Starved of further resources, the social networking despite years of heavy R& D spending and engineering re- sile withered and was eventually shut down in 2014, making sources, the inability to drive down costs low enough to cre- Meta the undisputed leader. ate "a long-term, sustainable business" led to Loon's In yet another effort to catch up with Mela, Google termination. launched Google Plus in 2011. This social networking site Despite Loon's failure, Google has reported that hall of integrated all of Google's services-Gmail, YouTube, its new products came from the 20% rule. These products Chrome, and others-into one user interface. It required include Gmail. Google Maps, Google News, Orkut, and users to sign into its portal, even if they were using just one AdSense. Adsense started as an experiment by two Google Google product. After a data breach, Google Plus was shut engineers: They attempted to match Gmail content with down unceremoniously in 2019. Meanwhile, Meta has 3 bil- targeted ads based on that content. Today, AdSense enables lion active users on its platforms (Facebook and Insta- content creators such as bloggers to serve online ads that are gram)-and Google is unable to access any of the information targeted to the site's content. tied to these users. Not being able to access Mela users' ac- Although Google has a stellar track record for strategy tivities on its social networks limits Google's ability to serve process as planned emergence, it has fumbled its social Largeled ads, which in turn cuts directly into its main line of networking endeavors multiple times. These missteps left business. Meanwhile, Alphabet's CEO Sundar Pichai is still the space open to Mela, now Google's fiercest competitor in hoping for another major breakthrough that will open up a the digital ad space with its Facebook and Instagram proper- new line of business beyond what Google docs. lies. Google's first allempt at social networking goes back to 2002, two years (cons in internet time) before Facebook was founded. Google engineer Orkut Buyukkokten had devel- Questions oped a social network, called Orkut, using his 20% discre- 1. Why did Google restructure itself and create Alphabet? tionary time. Marissa Mayer, then Google's vice president in What is it hoping to accomplish? For additional insights, charge of the project, liked what she saw and provided initial see Larry Page's post announcing the restructuring at support. More engineers were eventually added to further https://abc.xyz/. Orkut's development. Google was astonished at Orkut's 2. early success: Within the first month after its release, hun- Do you think the reorganization is beneficial for dreds of thousands of people had signed up. By 2014. Orkut Alphabet's moonshots, now housed in their own had 30 million users, mostly in Brazil and India. But this business unit with profit and-loss responsibility? Why number paled in comparison to Facebook's more than 1 bil- or why not? Explain. lion users worldwide at the time. 3. Why has Google "failed" to develop other profitable Why did Google fumble its early lead over Facebook? businesses? Is Google's strategy process of planned Google had a huge opportunity to become the leader in emergence to blame? Why or why not? Will Alphabet's social networking because Myspace imploded after it was new structure with independent SBUs enable the acquired by News Corp. Despite initial support, Google's company to innovate more and find the next highly top executives felt that social networking did not fit its vision profitable business beyond online search and advertis- to organize the world's information and make it universally ing? [Hint: Take a look at Alphabet's most recent accessible and useful Google relied on highly complex and annual report.]CHAPTERCASE 11 Part II Alphabet remains a one-trick pony, with its Google unit social graphs and online activities. A user's social graph and bringing practically all the profits (99.7%). Yet, competition online activities allow for micro-targeting of ads, which is in the online advertising space is heating up. Three companies highly effective. For example, Meta can help an advertiser (Google, Meta, and Amazon) hold 65% market share in digi- find 2,000 people who graduated within the last five years tal ad spending, which equates to roughly 50% of the $1 tril- with a degree in engineering, are making over $150,000 a lion spent on advertising globally (in 2022). Sundar Pichai, year, and live in Allanta. Alphabet's CEO, has twin worries: that Google remains With Alphabet's multidivisional (M-form) organiza- Alphabet's only source of profits, and that Google's market tional structure, CEO Sundar Pichai hopes for more radical share in digital ad spending has been decreasing, from 32% in innovation that will turn into highly profitable businesses 2019 to 28% in 2022, with another estimated decrease to 26% like Google. Before its reorganization from a functional to in 2023. In contrast, Amazon's ad business has almost dou- M-form structure, which Alphabet implemented to manage bled, from 8% (in 2019) to an estimated 15% (in 2023). Mela, a set of unrelated businesses, Google had developed many of with its Facebook and Instagram properties, has become a its most well-known products and services through planned viable allernative to Google, and is-with a 24% market share- emergence, in which the impetus for strategic initiatives predicted to almost reach parity with Google in 2023 comes from the bottom up through autonomous actions by (although Meta is facing challenges with Apple's changes to lower level employees. Google organized the work of its its app tracking technology on iPhones; sec ChapterCase 2). engineers according to a 70-20-10 rule. The majority of the Google has data on what people search for Amazon has engineers' time (70%) focused on its main business-search data on what people buy, and Meta has data on people's and ads.where change tends to be revolutionary. People thought we were crazy when we acquired YouTube and Android and launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and to invest for the long term within each of our segments. ... We will not shy away from high-risk, high-reward projects that we believe in, as they are key to our long term success," In keeping with this goal, Alphabet spent over $31 bil- lion in research and development (in 2021), second only to the $56 billion that Amazon spent. Although slimmer and more focused post-reorg, Google continues to generate 99% of Alphabet's revenues, bringing in over $275 billion (in Susan Wojcicki, CEO of Youtube, was one of Google's first employees. 2022). Currently, Google's business lines include online joining the company in 1993. Google had been incorporated a year earlier and set up shop in Susan Wojcicki's parents' garage in Menlo search and advertising, YouTube, Maps, Android, Chrome, Park, California. Wojcicki was instrumental in Google's acquisition of Cloud and Apps Services, and the reintegrated Nest, a Youtube in 2006, during the early days of user-generated video content. smart-home company. Following Google's reorganization into Alphabet with stand-alone SBUs, Wojcicki was appointed CEO of Youtube in 2014. With 2 billion monthly Alphabel houses a number of SBUs that are run by inde- active users, Youtube is the second most popular web destination, pendent CEOs. In addition to creating financial transpar- beaten only by Google's search engine. Youtube generated close to ency and accountability for each SBU, this new $30 billion in revenues (in 2021), mostly in ads but also from its premium offering (no ads) and streaming subscription, which offers more than 80 organizational structure allows Alphabet to retain and de- channels. Youtube remains the clear leader in fueling the creator velop a cadre of top-notch execulives for the various leader- economy. Yet, TikTok is rising fast, and it is slated to become an even ship positions within the conglomerate. YouTube, another more attractive destination for creators, especially for a younger demographic. of Google's successful companies, is run by CEO Susan David Paul Monis/Bloomberg/Gelly Images Wojcicki. To provide resources for each SBU, Alphabet's head office oversees a rigorous capital allocation process so that cach unit can execute its strategy.* Part II of this ChapterCase appears in Section 11.6.EXHIBIT 11.1 Alphabet's Corporate Structure ISOMORPHIC LABS INTRINSIC (drug discovery) VERILY (robotics] life sciences) ACCESS CALICO IInternet service (longevity provider) research) DEEP MIND ALPHABET WING [delivery drones) X DEVELOPMENT GV (R&D lab) learly stage VC fund) WAYMO CapitalG lautonomous Date stage vehicles) VC fund) GOOGLE Google Google YouTube Network Search [AdSense, Adlab, Android Chrome Google Cloud Google Nest Workspace (smart home] AdManager) Perhaps the most notable outcome of Google's restruck remain satisfied with incremental innovation only, as is Luring is its pursuit of business opportunities that went far common among other incumbent firms in the industry.CHAPTERCASE 11 Part I "A" Is for Alphabet and "G" Is for Google "Google is not a conventional company. We do not intend (early stage venture capital fund), and CapitalG (late-stage to become one," wrote founders Larry Page and Scracy venture capital fund). Exhibit 11.1 shows Alphabet's Brin for the company's initial public offering (in 2004). corporate structure. These computer science graduate students turned This sweeping restructuring allowed the company to entrepreneurs, best known for creating the world's most separate its highly profitable search and advertising business successful online search engine, also indicated they would from its moonshots, which are projects that address a sig- make "smaller bets in areas that might seem very speculative nificant problem affecting millions of people for which a or even strange when compared to our current businesses." solution seems impossible when embarking on the project. Some of these smaller bets seemed farfetched at the time, Examples include autonomous vehicle driving technology but they resulted in Google Maps, YouTube, Chrome, and (Waymo) and delaying aging, disease, and death by multiple Android-all of which have billions of users today. To say decades (Calico). At Alphabet, separating out moonshots that Google has been hugely successful is an understate- created greater financial transparency and accountability. ment. Since listing on the stock market, it has managed to outperform the tech-heavy NASDAQ-100 index. Google's market cap crossed the $2 trillion threshold (in 2021), making it only the third company (after Apple and Micro- soft) to reach this milestone. Google proved it was not a conventional company yet again when it split itself into several standalone strategic business units, or SBUs (in 2015). As Google's structure became more and more complex and its number of business lines grew increasingly unrelated (think online search and longevity research), Google's strategic leaders decided to transition from a functional structure to a multidivisional structure. They formed Alphabet, a new corporate entity, to act as the parent company in charge of overseeing these var- Sundar Pichai is CEO of Alphabet. Bom and raised in India, Pichai moved ied SBUs, each with its own CEO and profit-and-loss re- to the United States to pursue graduation edu and an MS sponsibilities. Then-CEO Page said he modeled Alphabet's in materials science and engineering). After a short time in manag consulting. Pichai joined Google in 2004 as a product lead for Chrome new organizational structure after that of Berkshire Hatha and the cloud offering Google Drive. Under Pichai's astute product way. a conglomerate led by Warren Buffett. Page had long leadership, Chrome became the world's most successful admired Buffet for effectively managing a set of unrelated used in two-thirds of all visits to the web globallyj. Pichai businesses. In addition to Google, Alphabet's business units saw Chrome as much more than a simple tool for web navigation, and he laid the foundation for Chrome OS, a super-last operating system that include Waymo (autonomous vehicles), X Development ers. As the Covid pandemic (R&D lab), Deep Mind (artificial intelligence). harged dem Access (internet service provider), Intrinsic (robotics), Apple's MacBooks, and Chromebooks have become a mainstay in mobile computing. After the creation of Alphabet, Pichai was appointed Google's Isomorphic Labs (drug discovery), Verily (life sciences). CEO in 2015, and in 2019 he became CEO of Alphabet. Calico (longevity research), Wing (delivery drones), GV David Paul Morris/Bloomberg/Getty Images 417