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Why Google is becoming Alphabet, explained in 400 words


Google CEO Larry Page is an ambitious man. Not satisfied with founding one of the world's biggest and most influential technology companies, he's now plotting to spend billions of dollars in Google profits on new ventures that are far removed from Google's original search business.

To do that, Page and co-founder Sergey Brin are planning to give Google a new parent company called Alphabet. Alphabet will own Google plus a variety of other companies. These include technology businesses like Nest (which Google bought in 2014) and Google Fiber (which provides home internet access in certain cities). It will also include more radical efforts like Calico, a company that's trying to increase human lifespans. Each of these businesses will have its own CEO and business strategy. And Alphabet will include new ventures that Page and Brin conceive in the coming years.

Clearly separating Google from other ventures could give the CEO of each company the ability to focus on their unique areas of expertise.

Not much will change from the perspective of a Google user. Products will continue to use their existing brands — there won't be an Alphabet search engine or an Alphabet smartphone OS. Google will get a new CEO, Sundar Pichai, who has been at Google for a decade. He was promoted to be Page's top deputy last year, putting him in line to be CEO.

Like many founders, Page and Brin are more excited about launching new ventures than they are about managing existing ones. The new structure will allow them to periodically create new projects and then hire others — such as Pichai and Calico CEO Arthur Levinson — to handle day-to-day operations of individual companies.

Page and Brin's ambitious plans for Alphabet are made possible by Google's unusual corporate structure, which gives the co-founders a majority of the voting power. As a result, they have wide discretion to do as they please with Google, without worrying about what shareholders want.

Profitable companies often face pressures to return cash to shareholders through dividends and buybacks, but Page is making clear he has no intention of doing that. Instead, he is creating Alphabet because he believes he can invest Google's billions of dollars in annual profits more effectively than Wall Street can.

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