The EconomistAugust 1st 2020 BriefingAlphabet 152
1tion unto itself, featuring a plethora of pro-
ducts that together form what is called the
“online ad stack”: services to sell, buy and
serve ads, and measure their effectiveness,
all automatically. In all of these areas, Goo-
gle is as globally dominant as it is in online
search. Its market share in some parts of
the ad-serving stack exceeds 90%.
On the surface this might suggest that
Alphabet, like most big tech firms, is a
“one-trick pony”, in the words of Michael
Cusumano of mitSloan School of Manage-
ment. In fact, it is a herd of ponies, some of
which look rather more like full-grown
Shires. Nine have more than a billion users
globally (see chart 2). Every day people
make an estimated 6bn search queries on
Google and upload more than 49 years’
worth of video to YouTube. More than
300bn emails are said to be sent every day
and if only one-third originate on Gmail—a
conservative estimate—then a stack of
print-outs would be 10,000km high.
And there is more. “Other bets”, as Al-
phabet’s financial statements refer to its
non-core businesses, now number 11, each
with its own capital structure. These in-
clude Access (offering fibre-optic broad-
band), gv(which invests in startups), Veri-
ly (a health-care firm), Waymo (a developer
of autonomous cars) and X (a secretive
skunk works engaged in all manner of
moonshots). Commercially these ventures
seem only loosely connected with the core.
What links them to the main business is in-
formation processing—and specifically
these days artificial intelligence (ai),
which powers everything from search to
Waymo’s self-driving cars.
Early on, the founders decided that to
enable the company to grow with startup-
like speed regardless of its actual size, they
would create a singular organisational mix
of institutions they knew best: the inter-
net, the open-source-software movement
and Stanford’s post-graduate programme,
where the duo came up with Google’s origi-
nal search algorithm in 1996.
Like the internet, Google was envisaged
as an ever-expanding collection of groupsof engineers linked by a common language
and common goals, most prominently to
“organise all the world’s information”. Al-
phabet, too, is a network of networks held
together by technical standards. It grows
horizontally by adding yet more networks.
To keep hierarchies flat, Mr Brin and Mr
Page briefly went so far as to abolish man-
agers altogether, though the experiment
had to be dialled back. A compromise was
to give managers a minimum of seven di-
rect reports to limit the time they have to
loom over each underling. They also had
limited time to accost the two bosses, who
at one point got rid of their personal assis-
tants to make it harder to book time with
them, forcing executives to ambush them
whenever they appeared in public to get a
sign-off on decisions.Cosmic ambitions
Google resembled a big open-source pro-
ject by being an open book, at least inter-
nally. Any employee could freely access all
internal information except for sensitive
user data or company finances. All code,
project documents, even a colleague’s cal-
endar, were fair game. Workers were en-
couraged to use one of Google’s plethora of
messaging tools, such as mailing lists (of
which there are now more than a million).
They were also expected to ask tough ques-
tions at weekly company-wide town-hall
meetings with the founders, called tgif,
for “Thank God It’s Friday” (now held on
Thursdays to allow Googlers around the
world to participate without having to get
up on Saturday morning). Grievances were
to be kept within the company’s walls.
Leaking, particularly to the press, was a
sackable offence. But the place was also
meant to be playful; hence the playground-
like offices, ping-pong tables and the like.
From Stanford Mr Brin and Mr Page bor-
rowed the idea of letting people follow
their passions. Google employees were al-
lowed to spend 20% of their time working
on what they thought would most benefit
the firm, even if that often led to them
working 120%. They also often set theirown quarterly goals. Recruiting and pro-
motion were similar to academia, too. Can-
didates were graded like phdstudents and
decisions about who should move up the
corporate ladder were taken by a commit-
tee of peers from across the company, rath-
er than individual managers, who often
promote people they like rather than those
who would do the best job.
Having created most of this unique
structure in 2001 the founders recruited
Eric Schmidt, a Silicon Valley veteran who
understood both managers and technolo-
gists, to help implement it—or, as they
themselves put it, to provide “adult super-
vision”. To shield the setup from potential
shareholder pressure, the three of them
built a legal moat around it. Google was one
of the first Big Tech companies to opt for
dual-class shares, which gave the original
shareholders ten times the voting power.
Although Messrs Page, Brin and Schmidt
together held only a small stake, they re-
tained an outsized 38% of voting rights.
The founders warned in “An Owner’s Man-
ual” for Google’s shareholders, published
before the firm’s initial public offering in
2004, that new investors “will have little
ability to influence its strategic decisions
through their voting rights”.
Mr Page took over from Mr Schmidt as
Google’s ceoin 2011 (though Mr Schmidt re-
mained Alphabet’s executive chairman un-
til 2018), before handing over to Mr PichaiFromMenloParktomiddleage
Google/AlphabetSources:Bloomberg;Bernstein;TheEconomist *ToJuly28th †Forecast12001501005001.0.0.0.0
201918171615141312111009080706052004Market
capitalisation,
Revenues,$bn $trnApr1stGmaillaunchedFeb8thGoogle
MapslaunchedSep23rd
AndroidlaunchedOct9th
Buys
YouTubeMar11th
BuysDoubleClickMay22ndBuys
MotorolaMobilityNov1stBuysFitbit
← Sep 4th 1998 Google founded (pending)Aug10th
AlphabetcreatedDec 3rd Larry Page and
SergeyBrinstepdown *
Aug 19th Initial public offering †Apr 3rd Eric Schmidt
steps down as CEOEU fines
$bn2.7 5.1 1.MillennialswillnotbemonetisedSources: Bernstein; company reports *Excludes “other bets”2PhotosDrivePlay StoreMapsChromeAndroidGmailSearchYouTube0.50 1.0 1.5 2.Google, users by platform, 2020 or latest, bn160140120100806040200Alphabet,revenuesbysegment,2019,$bnCloud OtherGoogle OtherbetsSearch Advertising services YouTube160140120100806040200Alphabet,revenues*byregion,2019,$bnAsia-Pacific OtherAmericasUnited States Europe, Middle East and Africa