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Why Google Became Alphabet




The company that yesterday was known as Google is now a collection of separate companies, owned by a new holding company called Alphabet. The “Google” brand is the largest of those companies, and it includes search, advertising, maps, apps, YouTube, and Android. The company’s less related endeavors – the biotech research project Calico, the Nest thermostat, the fiber internet service, the “moonshot” X lab, Google Ventures, and Google Capital — are all now separate companies housed under Alphabet.

Why? And will it work?

The Google founders are already being called Warren Buffets-in-training. But as always, the company defies easy comparison. Google is not becoming Berkshire Hathaway, at least not exactly. It’s trying out something else entirely. Largely in an attempt to placate investors while preserving the founders’ unique theory of what their company is.

The restructuring is clearly a response to Google’s stagnant share price and investor unease.  My argument has long been that Google’s current theory of value creation is essentially to funnel its vast profits from the search and advertising business into the hiring of strong talent, and then to give employees wide latitude to explore and pursue whatever they wish.  This is embodied not only in the pattern of rather unrelated investments and acquisitions, but in policies about hiring, salaries, and 20% free time.

Investors have been uneasy about this is strategy, but Larry Page and Sergey Brin have also composed a corporate governance regime that insulated them from much shareholder pressure for change. Eventually, with growth in search advertising slowing, investors’ dissatisfaction manifested itself in a stagnant stock price. And in recent months the company has taken steps to reign in some of its investments, slowing growth in expenses, and also tightening the reigns on the 20% free time policy. These were the beginnings of a shifting direction at Google.

Analysts had their own problem with Google’s structure: its bundle of businesses was extremely difficult for them to evaluate. The primary challenge for analysts has been that the performance of the main business was not transparent—the financial returns of the search engine and advertising business could not be observed separately from the investments in all of the new businesses.  The new structure ensures that there will be, at a minimum, independent accounting numbers produced for the Google business, and perhaps for the others as well.

Investors will inevitably push for more. The market’s response has so far been positive, with the stock price up 6%. And I suspect it will also have a longer-term performance impact, as greater transparency of both its cash flows and investments prompts greater discipline and accountability. But I doubt this move will fully pacify the uneasy investor. While this new organizational form increases transparency, that transparency only further illuminates the disconnect between Alphabet’s various businesses. It simply highlights the question of why the various businesses are bundled together. Investors are still buying the whole collection of projects, only now they’ll be able to see clearly just how much search advertising is subsidizing the rest.

As for the comparison to Berkshire Hathaway, there are some parallels. Berkshire

Hathaway is a publicly traded company that is run like a private equity firm. It, like Alphabet, is a portfolio of very unrelated businesses. However, the important distinction is that Berkshire Hathaway’s businesses are generally cash producers and Berkshire’s task is to improve on the cash they already generate. Alphabet will be more like a cash cow coupled to a venture capital firm, investing in early stage and in some cases highly capital-intensive new ventures.

Berkshire Hathaway has assembled a group of investors who are confident in its theory of value creation. That’s the challenge that Google-as-Alphabet still faces. Who wants to simultaneously invest in a search engine, longevity research, thermostats, and drones? The new structure will make that investment proposition more transparent, but the company still needs to convince investors, as Berkshire has, that their theory of value creation makes sense.


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More information is leaking out about just how Google is planning to re-enter the Chinese market with a mobile search engine application that complies to the country’s censorship laws.

The Intercept first broke this story when a whistleblower provided them documentation detailing the secret censored search project (codenamed Dragonfly). According to them, an overlooked Google acquisition from 2008 — — has been quietly laying down the foundation for the endeavor.

In order to run a business in China, tech companies are required to obtain a Internet Content Provider license from the Chinese government. As it’s difficult for foreign businesses to obtain this license, Google has long partnered with Chinese IT company Back in the early years of, Google actually operated directly off of’s license, even claiming the Chinese company was temporarily running its search engine. Facing intense scrutiny from the Chinese government and the media over this license arrangement, in 2007 Google formed a legitimate joint venture company with — the Beijing Guxiang Information and Technology Co.

Because of the necessity of that license, Google has maintained that joint venture and has been operating in China under the name Beijing Guxiang Information and Technology Co. ever since. Even after the shut down of, Google’s Chinese advertising enterprise has been operating under the joint venture company as well as, low and behold, A whois search of the domain name, which provides a record of the current domain registrant information, pulls up Beijing Guxiang Information and Technology Co. as the registrant organization.

A significant number of Google employees are reportedly none too happy about Google’s project complying with Chinese censorship laws. This most recent news, that the company has long been collecting data for a moment just like this, surely won’t make morale among these workers any better.

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Google is reportedly planning to relaunch its search engine in China, complete with censored results to meet the demands of the Chinese government. The company originally shut down its Chinese search engine in 2010, citing government attempts to “limit free speech on the web.” But according to a report from The Interceptthe US tech giant now wants to return to the world’s biggest single market for internet users.

According to internal documents provided to The Intercept by a whistleblower, Google has been developing a censored version of its search engine under the codename “Dragonfly” since the beginning of 2017. The search engine is being built as an Android mobile app and will reportedly “blacklist sensitive queries” and filter out all websites blocked by China’s web censors (including Wikipedia and BBC News). The censorship will extend to Google’s image search, spell check, and suggested search features.

The web is heavily censored in China, with the country’s so-called Great Firewall stopping citizens from accessing many sites. Information on topics like religion, police brutality, freedom of speech, and democracy are heavily filtered, while specific search topics (like the 1989 Tiananmen Square protests and Taiwanese independence) are censored completely. Advocacy groups report that censorship in the country has increased under President Xi Jinping, extending beyond the web to social media and chat apps.

The whistleblower who spoke to The Intercept said they did so because they were “against large companies and governments collaborating in the oppression of their people.” They also suggested that “what is done in China will become a template for many other nations.”

Patrick Poon, a researcher with Amnesty International, agreed with this assessment. Poon told The Intercept that if Google launches a censored version of its search engine in China it will “set a terrible precedent” for other companies. “The biggest search engine in the world obeying the censorship in China is a victory for the Chinese government — it sends a signal that nobody will bother to challenge the censorship any more,” said Poon.

In a statement given to The Verge, a spokesperson said: “We provide a number of mobile apps in China, such as Google Translate and Files Go, help Chinese developers, and have made significant investments in Chinese companies like But we don’t comment on speculation about future plans.”

According to The Intercept, Google faces a number of substantial barriers before it can launch its new search app in China, including approval from officials in Beijing and “confidence within Google” that the app will be better than its main rival in China, Baidu.

Google previously offered a censored version of its search engine in China between 2006 and 2010, before pulling out of the country after facing criticism in the US. (Politicians said the company was acting as a “functionary of the Chinese government.”) In recent months, though, the company has been attempting to reintegrate itself into the Chinese commercial market. It launched an AI research lab in Beijing last December, a mobile file management app in January, and an AI-powered doodle game just last month.

Although this suggests Google is eager to get a slice of China’s huge market of some 750 million web users, ambitions to relaunch its search engine may yet go nowhere. Reports in past years of plans to bring the Google Play mobile store to China, for example, have so far come to nothing, and Google regularly plans out projects it ultimately rejects.

Notably, relations between China and the US have worsened in recent weeks due to trade tariffs imposed by President Trump. The Interceptreports that despite this Google staff have been told to be ready to launch the app at short notice. The company’s search engine chief, Ben Gomes, reportedly told employees last month that they must be prepared in case “suddenly the world changes or [President Trump] decides his new best friend is Xi Jinping.”

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A booming welcome worthy of a Vegas boxing match is being delivered over the PA as attendees at the Distributed blockchain conference gather to hear the gospel of “unlocking the global power of decentralized business.”

However, if the half-full auditorium is any indication, it’s a message that needs a few more converts.

“Blockchains are not a faster way to do anything.”

Frankly, it was refreshing. To not have a thousand different confused voices yelling about a society remade in Satoshi’s image while simultaneously shilling useless tokens felt like a luxury.

But before the speakers delivered their words of caution, we were treated to what could only be described as a trailer for the wanna be action movie that is the world of cryptocurrency. Because in this industry, even serious projects need a hype track.

And, to be fair, when you’re talking billions of dollars in market cap, apparent irrational exuberance may not be so irrational after all.

Thankfully, however, we were soon brought back down to earth.

“Blockchains are not a faster way to do anything,” Brian Behlendorf of Hyperledger told the crowd gathered for a panel discussion covering the “global state of blockchain.” He doubled down, adding that “they’re a technical solution to what is really a market structure problem.”

So, no, blockchains aren’t going to save the world — no matter what PR firms tell you.

Behlendorf wasn’t the only one attempting to manage the expectations of any cryptocurrency true believers in the audience. Emmanuel Abiodun, of Oracle’s Autonomous BlockchainCloud Service, dumped some water on those trying to tokenize the universe.

In need of some suggestions.

In need of some suggestions.


“I don’t think a lot of these tokens are solving fundamental problems,” he observed. “It’s actually creating a more complex society than I can envisage.”

And yeah, requiring the purchase of a 21st century Itchy and Scratchy Money equivalent as a prerequisite to participating in society does sound like a rather inefficient way to go about things.

To hammer it home, Abiodun emphasized that Oracle’s goal is to stay away from cryptocurrencies altogether. It’s probably a smart move — though IBM and its blockchain socks may disagree.

Keep those toekens warm.

Keep those toekens warm.


Overall, day one of the two-day Distributed conference managed to accomplish something most in the blockchain and cryptocurrency space would never dream of: communicate realistic expectations.

The conference organizers, presenters, and attendees all appeared genuinely interested in exploring what blockchains could mean for their respective businesses — without all the false promises and bullshit so endemic to industry.

Good for them. And who knows, maybe in the end a cool head is what it takes to get to the moon.

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