The Economist 07Dec2019

The EconomistDecember 7th 2019 Business 69

“G

oogle is not a conventional com-

pany,” declared Sergey Brin and Larry

Page as they took their firm public in 2004.

“We do not intend to become one.” On De-

cember 3rd they bowed out as, respectively,

president and chief executive of Alphabet,

Google’s parent and the world’s fourth-big-

gest listed firm. Their creation remains un-

conventional in some ways, if not in oth-

ers. They leave a mixed legacy for Sundar

Pichai, a career Googler in charge of its core

search-engine business, who assumes

both roles.

Messrs Brin and Page lived the Silicon

Valley dream. Their solution to the pro-

blem of indexing the growing world wide

web grew out of government-funded re-

search at Stanford University, and was

honed in a friend’s garage. Google was

founded in 1998. Today it handles over 2trn

search queries a year, and produces the An-

droid operating system that powers 80% of

the world’s smartphones. It has shaped the

age of the internet and mobile computing

in the way that Microsoft helped define the

age of the desktop pc. Its revenues have

grown from $3.2bn in 2004 to $136bn last

year. Its market capitalisation has nearly

doubled since 2015, to $910bn.

Its internal culture is famously casual

(visitors were often astonished when

meetings were interrupted by volleyball

games on the central lawn). It has set the

tone for a generation of startups, says Ka-

rim Lakhani of Harvard Business School.

Yet Google was also quick to embrace pro-

fessional managers. In 2001 it hired Eric

Schmidt, a veteran executive, as ceo. Mr Pi-

chai likewise offers what Mr Brin once jok-

ingly referred to as “parental supervision”.

The firm has grown conventional in

other ways, too. Its dominance has attract-

ed the gaze of regulators. Like other power-

ful firms, it has hired legions of lobbyists to

fight its corner, but with only limited suc-

cess: from Brussels to the Beltway, politi-

cians rail against its power and attitudes to

user privacy. The eu has fined it $9bn. Anti-

trust investigations loom on both sides of

the Atlantic.

Its employees are growing restive;

20,000 walked out a year ago over the

firm’s handling of sexual-harassment

cases. Those still wedded to Google’s once-

official credo, “don’t be evil” (ditched in

2018), have condemned decisions to offer a

censored search engine in China (also

binned) or work with America’s armed

forces. It has sacked staff involved in

unionisation efforts. Several said this week

that they will file charges with regulators.

Perhaps the two founders wanted to

palm these problems off to someone else.

Perhaps they want to focus on the pet pro-

jects—from self-driving cars to human-

like artificial intelligence and life-exten-

sion technology—which Alphabet has

cross-subsidised from its ad business. Mr

Brin is seldom seen these days; Mr Page did

not turn up for Alphabet’s annual share-

holder meeting this year. Mr Pichai is seen

as a safe pair of hands. However, since

Messrs Brin and Page retain control via a

dual-class share structure, his freedom will

be circumscribed. Small wonder its share

price moved little on the news.

Although Alphabet rakes in billions, it

remains a one-trick pony. Ads bring in over

80% of revenue, little changed from 2015.

Its share of the online-ad market is down a

bit; that of smaller rivals, such as Amazon,

is up a lot. Microsoft has successfully rein-

vented itself as a cloud-computing firm

after Bill Gates stepped down in 2000; it is

now worth more than Alphabet. Page-Brin

bets on futuristic technologies are intellec-

tually thrilling, but have yet to pay off. How

long will investors’ patience last? 7

NEW YORK

What next for Google’s parent after its fathers depart?

Alphabet

Turning a Page and a Brin

Search and ye shall find

Sources: Datastream from Refinitiv; Bloomberg; “Using massive online choice experiments to measure changes in well-being”, by E. Brynjolfsson et al., PNAS, April 2019; StatCounter

Total returns, August 19th 2004=100

United States, monetary compensation

needed to accept loss of online services

Median survey response, 2017, $’000 per year

Alphabet financials, $bn Worldwide mobile operating system

market share*, %

*Based on web page views

2004 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

0

500

1,000

1,500

2,000

2,500

Google buys YouTube

First Android phone

Chrome browser released Waymo self-driving car project launched

Google quits China

Schmidt steps down as CEO

Google becomes Alphabet

“Don’t be evil” motto dropped

Alphabet (Google)

NASDAQ 100

$27bn

Market capitalisation

Purchase of DoubleClick

Market capitalisation $910bn

0

50

100

150

2004 10 15 18

Revenue

Net profit^05101520

Search engines

Email

Maps

Video streaming

E-commerce

Social media 2009 11 13 15 17 19

0

20

40

60

80

100

Android

iOS

BlackBerry

Series 40

SymbianOS

Other